Goods and Services Tax (GST)

Introduction

• The Goods and Services Tax (GST) is a single unified tax system formed by combining numerous Central and State tax levies already in use in India. 
• The majority of domestic indirect taxes, such as excise tax, service tax, and entertainment tax, would be consolidated into one.  
• In September 2016, the 101st Constitution Amendment Act introduced a sub-clause 12A to Article 366 of the Indian Constitution, which defined GST. 

Components of GST

• Central GST (CGST): It is collected by the central government on an intra-state sale. 
• State GST (SGST): It is collected by the state government on an intra-state sale. 
• Integrated GST (IGST): It is levied and administered by the Centre on every inter-state supply of goods and services. 

Features of GST

• GST stands for Goods and Services Tax, and it is a value-added tax that allows for input tax credits and levies taxes only on the value-added during the production of goods and services.  
• GST would be imposed on the supply of products and services, as opposed to the old system of taxing the sale or manufacturing of items or the provision of services. 
• GST is a destination-based tax, meaning it will be imposed at the place where goods and services are provided, as opposed to the old system of origin-based taxation, which imposed tax at the point of consumption. As a result of the new tax laws, the SGST collected will typically go to the state where the consumer of various goods or services offered lives, rather than the state where the commodities are manufactured. 
• The Centre and the States would agree on rates for the central and state GSTs. 
• GST has already been imposed on all products and services, with the exception of alcoholic beverages for human consumption (to bring alcoholic liquor under GST which is a major source of revenue for the states, another constitutional amendment would be necessary).
• Imports of goods and services are considered inter-State trade, and as such, they will be subject to the IGST as well as any applicable customs taxes. 
• The GST Council would be a shared platform with representation from both the federal government and the states.

Advantages of GST

• It removes the cascading effect of taxes which in turn decreases the overall cost of goods. 
• It is more convenient as all the activities like registration, return filling, refund and response, etc. are done online. 
• It has the provision of Input tax credit facilities which allows taxpayers to take the credit of taxes paid on inputs, leading to a common market throughout the country. 
• It will increase the tax base and increase transparency. It will make evasion of taxes harder. 
• Exports will increase as exports will be zero rate to increase their competitiveness in the world market. This facility has been extended to SEZs also.