GST tax rate
The Goods and Services Tax bill, touted to
be India's biggest tax reform, will simplify
the current system of taxation. The bill will
convert the country into a unified market by
replacing all indirect taxes with one tax. The
current tax regime is riddled with indirect
taxes which the GST aims to subsume with a
single comprehensive tax, bringing it all
under a single umbrella. The bill aims to
eliminate the cascading effect of taxes on
production and distribution prices on goods
Goods and Services tax
It has been long pending issue to streamline all the different types of indirect taxes and implement a “single
taxation” system. This system is called as GST ( GST is the abbreviated form of Goods & Services Tax). The main
expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name
suggests, the GST tax will be levied both on Goods and Services.
What is the cascading effect of taxation?
Cascading effect of taxes is caused due to levy of different
charges by state and union governments separately. In the
current multi-staged tax-structure, the following taxes are
levied by the centre and state separately:
Taxes levied by the Centre include: Income tax, service tax,
central sales tax, excise duty and security transaction tax.
Implications of GST
GST will have a far-reaching impact on almost all the
aspects of the business operations in the country, for
instance, pricing of products and services, supply chain
optimization, IT, accounting, and tax compliance systems
. With GST rate, it is anticipated that the tax base will be
comprehensive, as virtually all goods and services will be
taxable, with minimum exemptions.
This tax structure raises the tax-burden on Indian
products, affecting their prices, and as a result, sales in
the international market. The new tax regime will
therefore, help boost exports.
How Will GST Work?
• In India, GST would work on dual model which will include C-GST
collected by Central Government + S-GST collected by State Government
on intra-state sales. GST registration reform would also feature an
Integrated GST (IGST) collected by Central government on inter-state
sales, which is to-be divided between Central and States Government in a
manner decided by the Parliament on recommendations by GST Council.
• By doing away with several Central and State Taxes, GST would diminish
the cascading effect of tax (or double taxation, whereby the same
product is taxed at the stage of manufacturing as excise, then as VAT/
sales tax on sale and so on..) which is prevalent in the current tax
framework. Being a consumption-destination-based tax, GST tax rate
would be levied and collected at each stage of sale or purchase of goods
or services based on the existing input tax credit method. Current tax
structure works on production-origin-based system i.e. goods and
services are taxed differently on each stage of production.
Challenges for implementing Goods and Services Tax system
• The bill is yet to be tabled and passed in the Parliament
• To implement the bill (if cleared by the Parliament) there has to be lot
changes at administration level, Information Technology integration
has to happen, sound IT infrastructure is needed, the state
governments has to be compensated for the loss of revenues (if any)
and many more..
• GST, being a consumption-based tax, states with higher consumption
of goods and services will have better revenues. So, the co-operation
from state governments would be one of the key factors for the
successful implications of gst
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