How GST will Benefit Indian Economy?

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“With GST, we intend to bring in uniformity in taxes. The message is clear that the ‘consumer is the king’. If we utilize man, machine, material, money and minute (time), we will not need any other policy for economic advancement.” – Narendra Modi, Prime Minister,India

GST?

GST is one indirect tax for the whole nation, which will make India one unified common market.

GST is a single tax on supply of goods and services, right from the manufacturer to the consumer. Credits of input tax paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set off benefits at all the previous stages.

Rate classification for goods

Exempt 5% 12% 18% 28% 28% + Cess
Food grains Cereals , Milk , Jaggery, Eggs, Common Salt, Curd, Unpacked Paneer , Natural Honey , Fresh Vegetables, Atta, Besan, Maida, Vegetable oil, Prasad, Contraceptives Coal Sugar Tea & Coffee Drugs & Medicine Edible Oil Indian Sweets, Skimmed milk powder, Milk food for babies, Condensed milk, Packed paneer , News print , Umbrella, PDS kerosene, LPG. Fruit Juices, Vegetable Juices, Beverages, containing milk, Bio-gas fuel Fertilizers, Butter, Ghee, Mobiles, Cashews, Almonds, Sausages, Agarbatti, Packed coconut water. Capital goods Industrial intermediaries Hair Oil Soap Toothpaste, Pasta,Corn flakes, Jams, Soups, Ice-Creame, Toilet and Facial tissues, Iron and steel fountain pen. Air conditioner Refrigerators, Cars, Cement, Chewing Gum, Custard Powder, Pan Masala, Perfume, Shampoo, Make-up, Fireworks, Motorcycles. Small cars (1% / 3% cess) Luxury cars (15% cess)

Rate classification for services

Exempt 5% 12%-18% 28%
Education Healthcare Residential accommodation Hotel/ Lodges with tariff below INR 1000 Goods transport Rail tickets (other than sleeper class) Economy class air tickets Cab aggregators Selling space for advertisements in print media Works contract Business Class air travel Telecom services Financial services Restaurant services Hotel/ Lodges with tariff between INR 1000 and 5000 Cinema tickets Betting Gambling Hotel/ Lodges with tariff above INR 5000

Only rates of select goods and services have been mentioned here

GST rate on pearls, precious or semi-precious stones, diamonds (other than rough diamonds), precious metals (like gold and silver), imitation jewellery, coins – 3%

GST rate on rough diamonds – 0.25%.

Comparison between the current system and the existing system

Issues Existing Regime GST Regime
Broad scheme There are separate laws for separate levy. For e.g. Central Excise Act, 1944, respective State VAT laws. There will be only one such law because GST shall subsume various taxes as specified above.
Tax rates There are separate rates. For e.g. Excise 12.36 % and Service Tax 14%. There will be one CGST rate and a uniform rate of SGST across all states.
Cascading effect This Problem arises because credit of CST and many other taxes not allowed. This situation will not arise as CST concept is being eliminated with introduction of IGST.
Tax burden Under present scenario, tax burden on tax payer is high. Under this, tax burden is expected to reduce since all taxes are integrated which make it possible the burden to be split equitably between manufacturing and services
Cost Burden on Consumers Due to presence of cascading effect, certain taxes become part of cost. As GST mechanism removes such effect by providing credit, cost burden is reduced.
Concurrent Power At present, there is no such power to both Centre and State on same subject tax matter Both Centre and State are vested with the power to make law on GST by virtue of proposed Article 246A of the Constitution
Compliance Tax compliance is complex because of multiplicity of laws and their provisions to be followed. Tax compliance would be easier as only one law subsuming other taxes need to be followed
Transparent Tax Administration Presently, tax is levied at two stages in broad manner i.e. 1. When product moves out of factory. 2. At retail outlet. GST is to be levied only at final destination of consumption and not at various points. This brings more transparency and corruption free tax administration.

GOODS AND SERVICE TAX NETWORK

Goods and Service Tax Network (GSTN) is a one stop solution for all your indirect tax requirements.

GSTN has been entrusted with the responsibility of building Indirect Taxation platform for GST to help you prepare, file, rectify returns and make payments of your indirect tax liabilities.

Just because it will be a one stop solution for all indirect tax requirements, business will be able to manage tax easily. Unlike current indirect tax, where there are multiple sites backed by provisions and compliances,

It will become lot easier for the assesse and government to track the status of returns and payments with the help of GSTN.

GST Suvidha Providers (GSP):

The GST Suvidha Providers or GSPs are licensed and authorised by the Goods and Services Tax Network (GSTN) of the Government to connect to the GSTN using the published APIs

GSP’s will facilitate taxpayers in uploading securely GST returns in a prescribed format

GSPs can customize products that address the compliance needs of different segment of users

ASP and their role:

ASPs are Application Service Providers.

ASP functionality will be to prepare monthly and annual GST returns basis taxpayer data, enable reconciliation of returns for appropriate and timely credits

ASP functionality will require, domain and sector knowledge to interpret nuances in GST law and rules

ASP will file returns for taxpayers through authorized GSPs

ASP work will be done by CA firms and it is done in ASBK and Surmount Business Advisors.

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