Goods and Services Tax (GST) is introduced in India from July 1, 2017. According to the Collins Dictionary, Tax means “an amount of money that you have to pay to the government so that it can pay for public services”. It clearly suggests that the money which is taken in the form of tax from the Public shall be used for the betterment of the society, social reformation and to boost the Economic Condition of the country. Therefore, the Indian Government also following the above-said rules by applying the tax on Indian Public.
There are two types of taxes which are allowed by the tax system of India i.e. Direct Tax and Indirect Tax.
It is a type of tax which is levied directly on the Individual or Corporate entity. This tax is Non-Transferable means it cannot be transferred to any other person whether Natural or Artificial (Company/Firm). Some direct taxes are Wealth tax, Income Tax, Capital Gains Tax, etc.
It is a type of tax which is implemented indirectly on the Public through goods and services. The tax is collected by the sellers/service provider of the goods or services then collected by Govt. bodies. It is transferable tax as it is transferred from one person to another person for example Wholesaler to a retailer, retailer to consumer. Some Indirect taxes are VAT, Service Tax, Customs Duty.
After 1st July 2017 GST replaced most of the Indirect taxes in India.
Power to Impose tax under the Constitution
According to the Constitution of India authority have the power to impose a tax on the public for the benefit of Country. Hence, Central Govt, State Govt and Some local authorities like Municipal Committee, etc. have the power to impose the different type of taxes according to their roles and in a prescribed manner. Although, there is a valuable restriction also provided by the Constitution on this power namely Article 265 which states;
“No tax shall be levied or collected except by the authority of law”. Therefore there is a specific law required for imposing any tax which should be passed by either parliament or states legislature. The total gross tax collected by the central govt in 2015-16 is Rs. 14.60 trillion.
GST-Goods and Service Act, 2017
It is an Indirect tax levied on Goods and Services and had replaced most of the Indirect taxes in India. It is defined under the Goods and Service Act, 2017 which was passed by the parliament on 29th Mar 2017. It is levied on each and every value addition, therefore, it is taken as a very inclusive, multistage and destination-based tax.
Trek of GST in India
The journey of GST has started in the year 2000 when a committee was established to draft the law for the same. After 17 years, Lok Sabha and Raj Sabha passed the Bill and on 1st July 2017, the GST law came into effect.
Elements of GST
Majorly, there are 3 taxes which are implemented under this system: CGST, SGST, and IGST.
It means Central Goods and Service tax and collected by Central Govt. on intra-state sales. For Example-If A sales goods within Haryana then CGST is collected by Indian Govt.
It means State Goods and Service tax and collected by State Govt. on intra-state sales. For Example-If A sales goods within Haryana then SGST is collected by Haryana Govt.
It means Integrated Goods and Services Tax. It is collected by the central govt. for any Inter-state Sale. For Example-If A sales goods from Haryana to B who lives in Delhi then the transaction took place here is comes under the umbrella of IGST.
Advantages of GST
- It will remove the Cascading effect.
- It will reduce black money flow.
- One India, One Market, One Tax
- Seamless flow of goods across the nation.
- Ease of doing business.
- Removal of Package of Indirect Taxes like VAT, CAD, SAD, etc.
- Enhancement of Indian Economy.
Effects of GST
Before GST, every buyer including the Consumer paid tax on tax. This is known as Cascading Effect of Taxes.
There are mainly five slabs (0%, 5%, 12%, 18% and 28%) of tax under GST. Also, nearly 50% of Goods and Services comes under 18% tax rate.
According to the Previous Regime, a consumer has to pay around Rs 2,244/- for the Goods which are Manufactured on the cost of Rs. 1000/- but acc. to the current regime he has to pay around Rs. 1980/- for the same.
Registration of GST
Under the GST Regime, Businesses whose annual turnover exceeds Rs. 20 Lakhs* are need to register as a common taxable person. This Process is called GST registration.
There are definite businesses for which GST registration is compulsory as provided in the GST Act, 2017. If the organizations/firms continued the business without registration then it amounts to an offense under GST for which heavy penalties will apply.
GST registration is not a complicated process, it usually takes 2-6 working days for completion.
From the above words, it is clearly reflected that GST is easy to administer, make Indian Products Competitive in Domestic as well as International Markets and also purify the economy of INDIA. We can expect that GST will minimize double taxation and provide easement in taxation for the Industries. No Doubt, Change is never easy sometimes but the Indian Government is trying to polish the table of GST to remove the negative effects of it.
*turnover limit for NE and Hill States is Rs. 10 lakhs.
Ref. GST Act,2017