Designed to replace indirect taxes imposed on goods and services by the Centre and States, GST aims to achieve overall economic growth. However, many are still not sure about how exactly it will translate for them. Read on to understand the basics of GST.
WORDS: SANGEETA SINHA
IMPLEMENTED from July 1, 2017, GST is an umbrella tax levied on goods and services across India. It replaces all Central as well as State taxes like Central Excise Duty, Service Tax, Additional Duties of Excise & Customs, Special Additional Duty of Customs, and surcharges on supply of goods and services. It also replaces State taxes such as VAT, taxes on advertisements, lotteries, betting and gambling. One of the big tax reforms in India, GST impacts not only businesses but also a common man’s budget.
PURPOSE OF GST
The main purpose of launching GST was to eliminate excessive taxation and to simplify tax hurdles for the entire economy. Different VAT laws in different states were a problem especially during interstate transactions; one needed to comply with 3 different taxes – excise, VAT, and service tax.
The main purpose of GST is to simplify the system for taxpayers by unifying taxes applicable to consumers and suppliers alike. GST brings uniform taxation across the country and allows full tax credit from the procurement of inputs and capital goods which can later be set off against GST output liability.
GST will help in removing ambiguity as the different kinds of taxes applicable to different commodities and services in different states will be uniform across the country depending on the category under which they fall. Government passed four bills to implement GST – Goods and Services Tax Bill, Integrated GST Bill, Compensation GST Bill, and Union Territory GST Bill.
Registration is mandatory for any entity that engages in the supply of goods and services and whose turnover exceeds Rs 20 lakh within India. Registration is a simple procedure which can be done from your home. You need to login to
www.gst.gov.in and follow the procedure to complete your registration.
People who do not pay GST are liable to a penalty of 10% of the tax amount, subject to a minimum of Rs.10,000. Offenders who deliberately evade paying taxes will be levied with a penalty of 100% of the tax amount. However, genuine errors will attract a penalty of 10% of the tax due. Most of the commodities and services that are subject to GST have been categorised under four tax slabs, viz. 5%, 12%, 18%, and 28%.
BENEFITS OF GST
◊ Elimination of Multiple Taxes – The biggest benefit of GST is an elimination of multiple indirect taxes.
◊ Reduce inflation – For a common man, GST applicability means the elimination of double charging in the system. The prices of FMCG products are expected to reduce.
◊ Healthy business – One tax concept will check unhealthy competition among states and this will help interstate business.
◊ Less Documentation – Tax compliance, filing returns, tax payment etc will be simple due to one tax system.