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WHAT IS GST ?

GST stands for “Goods and Services Tax”, and is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level.

  • Its main objective is to consolidates all indirect tax levies into a single tax, except customs (excluding SAD) replacing multiple tax levies, overcoming the limitations of existing indirect tax structure, and creating efficiencies in tax administration.
  • The introduction of Goods and Services Tax (GST) would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, it would mitigate cascading or double taxation in a major way and pave the way for a common national market.
  • From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 16%-18%.
  • Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. Last but not the least, this tax, because of its transparent character, would be easier to administer.

Central Taxes That Would Be Subsumed Within GST

  • a. Central Excise duty
  • b. Duties of Excise (Medicinal and Toilet Preparations)
  • c. Additional Duties of Excise (Goods of Special Importance)
  • d. Additional Duties of Excise (Textiles and Textile Products)
  • e. Additional Duties of Customs (commonly known as CVD)
  • f. Special Additional Duty of Customs (SAD)
  • g. Service Tax
  • h. Cesses and surcharges

State Taxes That Would Be Subsumed Within The GST

  • a. State VAT
  • b. Central Sales Tax
  • c. Luxury Tax
  • d. Entry Tax (other than those in lieu of octroi)
  • e. Entertainment Tax (not levied by the local bodies)
  • f. Taxes on advertisements
  • g. Taxes on lotteries, betting and gambling
  • h. State cesses and surcharges insofar as they relate to supply of goods or services

Features Of GST

  • GST would be applicable on supply of goods or services as against the present concept of tax on the manufacture or on sale of goods or on provision of services.
  • GST would be a destination based tax as against the present concept of origin based tax.
  • It would be a dual GST with the Centre and the States simultaneously levying it on a common base. The GST to be levied by the Centre would be called CentralGST (CGST) and that to be levied by the States would be called State GST (SGST).
  • CGST and SGST would be levied at rates to be mutually agreed upon by the Centre and the States.
  • Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit of SGST paid on inputs may be used only for paying SGST. In other words, the two streams of input tax credit cannot be mixed except in specified circumstances of inter-State sales.
  • GST would apply to all goods and services barring a few to be specified.
  • vii.Tobacco and tobacco products would be subject to GST. In addition, the Centre could continue to levy Central Excise duty and the States to levy sales tax / VAT.
  • A common threshold exemption would apply to both CGST and SGST. Dealers with a turnover below it would be exempt from tax. A compounding option (i.e.to pay tax at a flat rate without credits) would be available to small dealers below a certain threshold. The threshold exemption and compounding provision would be optional.
  • The list of exempted goods and services would be kept to a minimum and it would be harmonized for the Centre and the States as far as possible.
  • Exports would be zero-rated.
  • An Integrated GST (IGST) would be levied on inter-State supply of goods or services. This would be collected by the Centre so that the credit chain is not disrupted. Accounts would be settled periodically between the Centre and the State to ensure that the SGST used for payment of IGST is transferred to the destination State where the goods or services are eventually consumed.
  • Import of goods or services would be treated as inter-State supplies and therefore, would be subject to IGST in addition to the applicable customs duties.
  • The laws, regulations and procedures for levy and collection of CGST and SGST would be harmonized to the extent possible.