GST in India – a significant tax amendment

The Goods and Services Tax also known as the GST is defined as the giant indirect tax structures designed to support and enhance the economic growth of a country. The proposed GST is likely to change the whole scenario of current indirect tax system.
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GST in India – a significant tax amendmentInternational Journal of Management (IJM)Volume 8, Issue 3, May–June 2017, pp.53–62, Article ID: IJM_08_03_005Available online athttp://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=8&IType=3Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.comISSN Print: 0976-6502 and ISSN Online: 0976-6510© IAEME Publication GST IN INDIA – A SIGNIFICANT TAX AMENDMENT Gurveen Kaur Satyawati College, University of Delhi, Delhi, India ABSTRACT The Goods and Services Tax also known as the GST is defined as the giant indirect tax structures designed to support and enhance the economic growth of a country. The proposed GST is likely to change the whole scenario of current indirect tax system. It is considered as biggest tax reform since 1947. More than 150 countries have implemented GST so far. Currently, in India complicated indirect tax system is followed with imbrications of taxes imposed by union and states separately. GST will unify all the indirect taxes under an umbrella and will create a smooth national market. The idea of GST in India was mooted by Vajpayee government in 2000 and the constitutional amendment for the same was passed by the Lok sabha on 6th May 2015. Experts say that GST will help the economy to grow in more efficient manner by improving the tax collection as it will disrupt all the tax barriers between states and integrate country via single tax rate. However, there is a huge hue and cry against its implementation. It would be interesting to understand why this proposed GST regime may hamper the growth and development of the country. GST is one of the most crucial tax reforms in India which has been long pending. It was supposed to be implemented from April 2010, but due to political issues and conflicting interests of various stakeholders it is still pending. However, Goods and Services Tax is likely to be rolled out on July 1, 2017. Key words: Direct tax, Indirect tax, GST in India, advantages of GST, disadvantages of GST. Cite this Article: Gurveen Kaur, GST in India – A significant Tax Amendment. International Journal of Management, 8 (3), 2017, pp. 53–62. http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=8&IType=31. INTRODUCTIONGoods and Services Tax (GST) is an upcoming system of taxation in India which will mergemany individually applied taxes into a single tax. It was introduced as the constitution (onehundred and first amendment) act 2016, following the passage of Constitution 101stAmendment Bill. The GST is governed by GST Council and its Chairman is union financeminister of India, Mr Arun Jaitley. GST is a comprehensive indirect tax on manufacture, sale and consumption of goods andservices throughout India to replace taxes levied by the central and state governments. This http://www.iaeme.com/IJM/index.asp 53 editor@iaeme.com Gurveen Kaurmethod allows GST-registered businesses to claim tax credits to the value of GST they paidon purchase of goods or services as part of their normal commercial activity. Administrativeresponsibility would generally rest with a single authority to levy tax on goods and services.Exports would be considered as zero-rated supply and imports would be levied the same taxesas domestic goods and services adhering to the destination principle in addition to theCustoms Duty which will not be subsumed in the GST. Introduction of Goods and Services Tax (GST) is a significant step in the reform ofindirect taxation in India. Amalgamating several Central and State taxes into a single taxwould mitigate cascading or double taxation, facilitating a common national market. Thesimplicity of the tax should lead to easier administration and enforcement. From the consumerpoint of view, the biggest advantage would be in terms of a reduction in the overall tax burdenon goods, which is currently estimated at 25%-30%, free movement of goods from one stateto another without stopping at state borders for hours for payment of state tax or entry tax andreduction in paperwork to a large extent. GST was first introduced by France in 1954 and now it is followed by 140 countries. Mostof the countries followed unified GST while some countries like Brazil, Canada follow a dualGST system where tax is imposed by central and state both. In India also dual system of GSTis proposed including CGST and SGST. Under this system, the consumer pays the final taxbut an efficient input tax credit system ensures that there is no cascading of taxes- tax on taxpaid on inputs that go into manufacture of goods. In order to avoid the payment of multiple taxes such as excise duty and service tax atCentral level and VAT at the State level, GST would unify these taxes and create a uniformmarket throughout the country. Integration of various taxes into a GST system will bringabout an effective cross-utilization of credits. The current system taxes production, whereasthe GST will aim to tax consumption. On bringing GST into practice, there would beamalgamation of Central and State taxes into a single tax payment. It would also enhance theposition of India in both, domestic as well as international market. The Indian GST is expected to represent a leap forward in creating a much cleaner dualVAT which would minimize the disadvantages of completely independent and completelycentralized systems. A common base and common rates (across goods and services) and verysimilar rates (across States and between Centre and States) will facilitate administration andimprove compliance while also rendering manageable the collection of taxes on inter-statesales. At the same time, the exceptions—in the form ...