WHAT IS GST? “Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level.

Present Indian Indirect taxation structure and its Limitations Presently India has a dual tax system for taxation of Goods And Services. The tax system is described by Central Taxes and State Taxes, which may be further described as EXCISE DUTY, SERVICE TAX, VAT AND CUSTOM DUTY. Due to non-availability of tax credit for inter-state transactions of Goods consumer suffers double taxation burden of VAT. 

Elimination of multiplicity of taxes and their cascading effects Benefits of GST GST has been envisaged as a more efficient tax system, neutral in its application and distributionally attractive. The advantages of GST are: Wider tax base, necessary for lowering the tax rates and eliminating classification disputes Elimination of multiplicity of taxes and their cascading effects Rationalization of tax structure and simplification of compliance procedures Harmonization of center and State tax administrations, which would reduce duplication and compliance costs.

IMPACT ON GST Besides simplifying the current system and lowering the costs of doing business, GST will call for a fundamental redesign of supply chains. It will affect how the companies operate their businesses, presenting significant opportunities for long-term revenue and margin improvement GST is also expected to result in a reduction in inventory costs. Dealers would be able to claim a credit for the tax paid on their inventories, leading to improved cash flows. A successful implementation of GST is significantly dependent on IT capability – not just at the tax administration level but also at the taxpayer level. Efforts will be required to change existing IT systems for GST enablement which could be complex, challenging and lengthy task for the IT department. .

GST WORLDWIDE While countries such as Singapore and New Zealand tax virtually everything at a single rate, Indonesia has five positive rates, a zero rate and over 30 categories of exemptions. In China, GST applies only to goods and the provision of repairs, replacement and processing services. It is only recoverable on goods used in the production process, and GST on fixed assets is not recoverable. Some Of The Country Rate of GST Australia10%France19.6%Canada5%Germany19%Japan8%Singapore7%S weden25%India27% New Zealand15%Pakistan18%Malaysia6%Denmark25%

GST – The story so far

CONCLUSION The taxation of goods and services in India has, hitherto, been characterized as a cascading and distortionary tax on production resulting in mis-allocation of resources and lower productivity and economic growth. It also inhibits voluntary compliance. It is well recognized that this problem can be effectively addressed by shifting the tax burden from production and trade to final consumption. A well designed destination-based value added tax on all goods and services is the most elegant method of eliminating distortions and taxing consumption. Under this structure, all different stages of production and distribution can be interpreted as a mere tax pass-through, and the tax essentially ‘sticks’ on final consumption within the taxing jurisdiction. A ‘flawless’ GST in the context of the federal structure which would optimize efficiency, equity and effectiveness. The ‘flawless’ GST is designed as a consumption type destination VAT based on invoice-credit method.