GST Collections Continue to Surge

Why in the News?

Key Points

Background:

• The 101st Constitutional Amendment Act 2016 created the mechanism for imposing Goods and Services Tax (GST).
• The adoption of GST was made possible by States giving almost all their powers to levy local indirect taxes and agreeing to let the prevailing multiplicity of imposts be subsumed into the GST.
• In the GST regime, States would receive the SGST (State GST) component of the GST and a share of the IGST (integrated GST).

Goods and Services Tax (GST)

• GST is an indirect tax levied on goods and services across the nation.
• The Goods and Service Tax Act came into effect on 1st July 2017.
• Credits of input taxes paid at the succussive stage will be available in the later stage of value addition, which makes GST essentially a tax only on value addition at each stage.
• GST applies on the ‘supply’ of goods or services as against the present idea of the goods manufacture or on sale of goods or on services.
• It is based on the idea of destination-based consumption taxation as against the present principle of origin-based taxation.
• GST is to be applicable to all goods and services except Alcohol for human consumption
• Exports would be zero-rated supplies. Thus, goods or services that are exported will not suffer input taxes or taxes on finished products.

Components of GST

• Central Goods and Service Tax (CGST): CGST is imposed on intrastate supplies by the central government.
• State Goods and Service Tax (SGST): SGST is levied on intrastate supplies by respective state governments.

• Integrated Goods and Services Tax (IGST): IGST is imposed on interstate supplies by the Centre (equal to CGST + SGST combined on supplies made within the state).
  • Any supply of goods or services on an interstate basis typically attracts IGST on the consideration thereof.

• Reasons for Surge in GST Collection:
  • Buoyancy in consumption patterns triggered by economic recovery
  • Increased enforcement action against anti-evasion activities

• At the Centre, the following taxes are being merged in GST:
  • Central Excise Duty
  • Additional Excise Duty
  • Service Tax
  • Countervailing Duty
  • Special Additional Duty of Customs.

• At the State, the following taxes are being merged in GST:
  • Sales Tax
  • Entertainment Tax (other than the tax levied by the local bodies)
  • Central Sales Tax which is levied by the Centre but collected by the States
  • Entry tax and Octroi
  • Purchase Tax

Implementation of GST

• For the implementation of GST in the country, the Central and State Governments have jointly registered the Goods and Services Tax Network (GSTN).
  • GSTN is a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, taxpayers and other stakeholders.
• GST has multiple tax rate slabs for different categories of products – which makes it more complicated than many expected.

Benefits:

• Technology-driven
• Easy compliance
• Uniformity of tax rates and structures
• Removal of cascading
• Higher revenue efficiency
• Increased ease of doing business
• Improved competitiveness for the trade and industry
• Simple and easy to administer
• Higher revenue efficiency
• Shift from the informal to formal economy