A brief insight into GST

Introduction

The Goods and Services Tax (GST), implemented on1 July, 2017. It is a major reform in the history of taxation system since independence. GST was planned to implemented in April 2010, but was postponed due to some of the issues and conflict arises it gets postponed. The main objective to take the GST in existence is to subsume all sorts of indirect taxes in India such as service tax, VAT tax or sales tax, central excise tax etc. GST makes the taxation system more transparent and increase the rate in GDP too. Apart from India two countries Canada and Brazil to implemented the duel GST model. In most of the countries they have one single or unique system of taxation either it is VAT or GST. Goods and Services Tax (GST) a value-added tax imposed on goods and services which are sold for human consumption. GST is paid by consumers and Goods and Services Tax provides revenue for the government. GST in India is implemented with the purpose of “One nation one Tax” and it is one of the very important factors all over the world .it has also made certain differences in the economic structures of countries. It has some limitations too[1].

History

HSN (Harmonized system of Nomenclature) codes, its comparison is with other countries of the world .some of experts and analysts thought that there can be a short-term impact of GST be neutral or it may be negative also. In respect to long run, the GST will be beneficial to all of us it is expected to help the tax evasion and price rises. In India GST is implemented with a purpose of proper tax collection, to reduce the corruption, for easy movement of goods, provide correct tax calculation system while better economic functionality and for reducing tax evasion. In simple words we can say that the goods and services tax (GST) is an indirect federal sales tax which is applied to the cost of certain goods and services[2]. Total 160 countries all over the world adopted GST. In many other countries of the world value added tax (VAT) is taken as a substitute for GST. Goods and Services Tax (GST) is an indirect tax which was came into force in India on 1 July, 2017. It replaced multiple cascading taxes imposed by central and state governments. GST in India is there with the motto of “one nation, one tax”.

What is Cascading Tax?

There were many taxes applicable on goods and services previously in the taxation system of India at both central and state[3] .These taxes include Excise duty, VAT, Service Tax, Sales Tax, entertainment tax, entry tax, transfer tax, luxury tax etc. There were number of taxes imposed on goods and services at different level like sales tax at central level and at the state level too and when this is applying as a tax on tax repeatedly is termed as a cascading tax.

Advantages of GST

1. GST firstly eliminates the cascading effect or Double tax

2. Higher threshold for registration

3. Composition scheme for purpose of small businesses

4. Simple and easy way by online procedure

5. The number of compliances are lesser

6. Defined treatment for E-commerce operators

7. Improved efficiency of organization

8. disordered sector is regulated under GST[4]

Disadvantages of GST

1. Rise in costs due to software purchase

2. Being GST-compliant

3. GST meant to increase in operational costs

4. GST came in between the financial year

5. GST is an online way of taxation system

6. Small and Medium Enterprises will going to have a higher tax burden[5]

Problems with the GST

Amendment in the Constitution

By Implementation of GST it became necessary to perform the Constitutional Amendments for State to imposed Service Tax as well as Central Government has the power to increase revenue from dealers as well as retailers transaction. Central and State Government are accepted this substitute that it is desirable. It is not a big problem in this context but the system will take some amount of time for the amendment constitution. After there is amendment in the Constitution, a separate entry 92C was incorporated in the Union List to empower it to impose the Taxes on services. Modified measures have been taken place under both the Governments before implementing the GST[6].

Administration issue

GST include various types of Indirect Taxes where as revenue will be divided among

Central and State Government. There are various issues regarding the authority that who will have control over it whether central or state as a supreme authority. Then it is conclude that state comes under the centre and central under central govt.

Comparison of GST with other countries

A total numbers of 160 countries have adopted GST. India has highest rate of GST it is at 18% as compared to emerge in market economics. India has two types of GST. Hence called as dual form of GST. Concept of GST is not new as of now the world among 160 countries as on 2016, have adopted this mode for a single tax. In many countries value added tax (VAT) is taken as a substitute for GST. Presently some of the countries are like Australia, Canada, Singapore etc. they have a GST system it remains as a follows of VAT system. In comparison with other (EMEs), India has highest rate of GST it is at 18% like ,China and Brazil they also have their most of commodities falling under the tax rate of 17%, 10% respectively. Some of the developed countries are France, Germany and United Kingdom has higher GST rates which set between 19 – 20%[7].

1. New Zealand: GST in New Zealand was introduced in the year 1986 at a rate of 10%. The rates of GST were changed twice of it later as – 12.5% in the year 1989 and 15% in 2010 . GST at a single rate include food in GST for a full rate. At present this country having highest tax productive.

2. Canada: Canada introduced GST in the form of VAT in 1991 for supplies of goods and services purchased in the country including essential products[8].

3. Singapore: The country introduced the concept of GST in April 1194 at a rate of 3% to make public to accept it and minimize the inflation. The government advises not to raise the tax for upcoming 5 years as it is important decision in saving consumer spending. It also introduced a scheme of compensation under GST.

4. Australia: GST concept first come in the year 1975, it was implemented in Australia after 25 years on July 2000 at a tax rate start from 10%.

Some things differentiate India:

Indian government has make GST for smooth tax collection, to reduce the corruption, easily movement of goods etc.

A difference between GST in India and GST in other countries is, in India there is two types of GST. It called as duel GST[9].

Conclusion

There are many good thoughts while implementing GST in India it must be attain a good result in the upcoming years. i had discussed here about GST and VAT . How it comes what are the aspects of its disadvantages and disadvantages of it. Hopefully GST becomes good for all of us and it blesses us with good things for the betterment of society. GST also have certain limitations in some of the country The paper has given us a brief understanding about GST in India and some other countries of the world. Let’s hope for the betterment. As change is never easy for everyone it takes time. Government is trying hard for proper functioning of GST.

Footnotes: [1] www.iosjournal.org [2] gstcouncil.gov.in [3] www.investopedia.com [4] www.mapsofindia.com [5] cleartax.in [6] m.economicstimes.com [7] www.indiatoday.in [8] www.ijarse.com [9] www.profitbooks.net

Submitted by,

Komal Bhati,

B.A.LL.B. (Hons.),

Galgotias University.