Finance Minister, Arun Jaitley has confirmed the roll out of Goods and Services Tax (GST) this year to bring a solution to the issues related to the comprehensive indirect tax regime. According to him, GST would streamline tax administration and avoid harassment of business and result in higher tax collection both at the Centre and States. We look at 6 "must know" things about GST.
GST is a single and uniform tax levied all over India on goods and services. It is one of the most ambitious indirect tax reform ever planned in the country. What GST would aim to do is remove dual taxes that are levied at the state as well as centre and streamline the entire tax system for goods and services.
How GST will streamline the tax system?
Currently, a multilayer tax is levied at the Centre and State at different phases of supply chain like excise duty, VAT (value added tax), Central Sales Tax (CST), Octroi etc. If GST is implemented then all the different types of taxes levied now will be included under it, thus streamlining all these taxes.
GST to boost GDP
A study by the NCAER has said that there can be an impact of GST on growth through direct cost reduction as well as cost reduction of capital inputs. Preliminary results by the study indicate that the growth in GDP can be anywhere between 2-2.5 per cent.
How GST will work?
The Centre and State will tax GST at the same rate. For example, if 10 per cent GST is charged on goods and services then Centre will collect 5 per cent and State will collect 5 per cent i.e. in equal proportion.
GST to benefit SMEs and large corporates.
Tax administration will be simplified and will be more business friendly. It will help all the small and medium enterprises (SMEs) as well as large corporates to file tax returns and paying taxes. In addition, e-payment mechanism is expected to be introduced to make it simpler.
The delay in GST is due to reluctance of States.
States like Maharashtra which annually collects more than Rs. 13,000 crore from Octroi, Gujarat that collects Rs. 5,000 crore from CST, Punjab and Haryana which collects Rs. 2,000 crore from purchase tax are reluctant for GST to roll out. These states fear they will suffer loss of revenues if all these different taxes are included under GST.