CONCEPT – BASICS OF GST

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 CONCEPT – BASICS OF GST

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• What is GST (Goods and Services Tax) : GST (Goods and Services Tax) is an indirect tax that has replaced many Central and State taxes like excise duty, VAT and service tax. It is a single comprehensive tax levied on all goods and services produced in India as well as those imported from other countries. The new tax regime came into effect on July 1, 2017, after years of deliberation – with the Atal Bihari Vajpayee Government first suggesting it in the year 2000.
• History of GST : Several nations across the world have already implemented GST. To name a few - Canada replaced the Manufacturer’s Sales Tax with GST in the year 1991, Australia replaced the Federal Wholesale Tax with GST in the year 2000 and New Zealand replaced their sales taxes for some goods and services with GST in the year 1986. India implemented its dual GST system (a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST)) in 2017 to cut red tape and increase tax revenues, which in turn would fuel economic growth.

1. The Vajpayee Government, in the year 2000, began talks on GST and set up a committee, headed by Asim Dasgupta, Finance Minister of the West Bengal Government. The committee was given the responsibility of designing the GST model and managing the IT back-end preparedness for its rollout. In Budget 2006-07, Union Finance Minister Shri P. Chidambaram proposed implementation of Goods and Services Tax (GST) by April 1, 2010. The committee of State Finance Ministers, however, only released its First Discussion Paper on the tax regime in November, 2009.

• The new tax regime finally came into effect on July 1, 2017. Here is a look at the timeline of ‘one nation, one tax’ system:

1. 2000: The Vajpayee Government begins talks on GST. An empowered committee is set up, headed by Asim Dasgupta, Finance Minister of the West Bengal Government.
2. 2003: A task force is formed under Vijay Kelkar to suggest tax reforms.
3. 2004: Vijay Kelkar recommends replacing the existing tax regime with GST.
4. 2006: In Budget 2006-07, Union Finance Minister Shri P. Chidambaram proposed implementation of Goods and Services Tax (GST) by April 1, 2010.
5. 2008: The Empowered Committee hands over a report on the roadmap of GST in the country.
6. 2009: The committee presents a discussion paper on GST, welcoming debate. Finance Minister Pranab Mukherjee announces the basic structure of GST.
7. 2010: Finance Ministry commences mission-mode computerization of commercial taxes in states. GST postponed to April 1, 2011.
8. 2011: Congress party introduces Constitution (115th Amendment) Bill to implement GST. After protests by the opposition, the Bill is passed to a Standing Committee.
9. 2012: Meetings held with state finance ministers. Deadline for issues to be resolved set at 31 December, 2012.
10. 2013: In his Budget speech, Chidambaram, makes provision for Rs. 9,000 crore to compensate states for losses suffered due to GST.
11. 2014: Standing Committee clears GST Bill, however, lapses as Lok Sabha dissolves. Finance Minister, Arun Jaitley, introduces the Constitution (122nd) Amendment Bill at the Lok Sabha.
12. 2015: New deadline for rollout of the new tax regime set as April 1, 2016. GST bill passed in Lok Sabha, but not Rajya Sabha.
13. 2016: Rajya Sabha passes the Constitution Amendment Bill. GST Council agrees on four slab tax structure (5%, 12%, 18% and 28%) along with an added cess for luxury as well as sin goods.
14. 2017: Final GST implemented on July 1, 2017. Four supplementary GST bills passed.

• GST BILL : The GST Bill is officially referred to as The Constitution (One Hundred Twenty Second Amendment) Act, 2016. The bill has been aimed at creating an integrated market and subsuming most of the indirect taxes like services tax, central excise, vat, entertainment, luxury, lottery tax, cess implied on goods and services and surcharge etc., into a single integrated tax. Some of the noteworthy points concerning the GST bill are as under:

1. GST is a uniform indirect tax, levied on goods and services produced in and imported into a country. India has four GST rate structure - 5%, 12%, 18% and 28%.
2. State Tax GST has replaced taxes on advertisements, entertainment & amusement tax and luxury tax, among others.
3. Central Taxes GST has subsumed service tax, central excise duty and additional duties of excise (goods of special importance), among others.
4. One of the primary objectives behind the implementation of GST is to eliminate the cascading effects of tax.

• How is GST Calculated : The current GST rates in India are 5%, 12%, 18% and 28%. Businesses, wholesalers, manufacturers and retailers can ascertain their GST amount by using the below formula:
• GST Calculation
• Add GST:  GST Amount = (Original Cost x GST%)/100 Net Price = Original Cost + GST Amount
• Remove GST:  GST Amount = Original Cost - [Original Cost x {100/(100+GST%)}]
• Net Price = Original Cost - GST Amount
• To understand how this works, consider this example: A product is being sold at Rs. 400 and the GST rate on it is 18%. The gross amount of the product will be 400 + (400 x (18/100) = Rs. 472.
• A number of tax calculators are available across different portals that can help you find out the GST. Some of the details that you will be required to input for calculating the GST are return filing month, due date of filing return for the month, filing date, total tax liability during the month and purchases where reverse charge mechanism is applicable.4.
• What are the Benefits of GST : The key advantages of GST implementation are

1. Creation of a unified common market.
2. Tax structure simplified with lesser exemptions.
3. Eliminates cascading effect of tax. Consumer gets the end-product at cheaper rates.
4. Taxpayers will have a common portal (GSTN).
5. Helps build a transparent tax administration.
6. Uniformity in SGST and IGST rates reduces tax evasion to a large extent.
7. Buying input goods and services for production from other states becomes cheaper.
8. Boost to the economy in the long run. Increased supply and demand of goods and services.

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