Goods & Services Tax (GST)
GST in India
The Government of India is committed to bring about one of the biggest reforms in the indirect taxation system in India by introducing GOODS AND SERVICES TAX (GST) in the near future.
GST is a destination based value added tax which will remove trade barriers and create one common Indian market. By providing seamless credit of input tax across entire supply chain, it will remove the cascading effects of taxes, thereby reducing the cost of indigenous goods and services and making them more competitive in the international market. It will subsume various indirect taxes currently levied in the country by the Centre and the states including excise duty, service tax, value added tax (VAT), Central Sales Tax (CST), purchase tax, octroi, entry tax,etc.
India being a federal country, it will follow the dual model of GST where GST is levied by both the Central (CGST) and the State (SGST) Governments, just like Brazil and Canada. In case of inter-state transactions, Inter-State Goods and Service Tax (IGST) would be levied by the Centre. Economists believe that once implemented, it would boost India’s GDP by at least 2%. All goods and services barring a few exceptions will be brought into the GST base. Importantly, there will be no distinction between goods and services, for the purpose of the tax, with GST being applicable to both. Exports will be zero-rated.
As GST would work on the principle of value added tax, it would eliminate the cascading effects of double taxation, thereby favorably impacting the domestic manufacturing sector and also encourage the flow of foreign investments to India. Considered as a progressive system of taxation, it will bring the Indian taxation system at par with the system existent in developed countries.
The Goods and Services Tax (GST), India’s biggest tax reform in 70 years of independence, was launched on the midnight of 30 June 2017 by the Prime Minister of India Narendra Modi. The launch was marked by a historic midnight (June 30-July 1, 2017) session of both the houses of parliament convened at the Central Hall of the Parliament.
GST will enable businesses to move into different geographies seamlessly GST is a welcome change and in principle looks attractive and simplify the tax regime. GST shall provide the much needed stimulant for economic growth in India by ensuring the free flow of goods and services within the economy and also eliminating the cascading effect of different taxation.