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G S T
(Goods and Services Tax)
Biggest Tax Reform Since Independence….
What is GST?
Goods and Services Tax is a single tax rate levied on the
manufacture, sale and consumption of goods and services at national
In this system, GST is levied only on the value-added at every single stage of production.
This will ensure that there is no cascading effect of taxes(tax on tax paid) on inputs that are
used in manufacturing of goods.
For example- If a tax of 15% is levied on Rs. 2 lakhs at the first stage, the tax outflow would
be Rs. 30,000. At the next stage when the same goods are sold for Rs. 2.5 lakhs the tax
would have been Rs. 37,500 (Rs. 2.5 lakhs * 15%) but since there is set off of Rs. 30,000
available, the actual tax at that stage will be 7,500 (Rs. 37,500 – Rs. 30,000).
Feb, 2006 : First time introduced concept of GST and announced
the date of its implementation in 2010
Jan. 2007: First GST study by ASSOCHAM released by Dr.
Feb. 2007: F.M. Announced introduction of GST from 1 April 2010
The Government came out with a First Discussion Paper on GST
in November, 2009
Introduced the 115th Constitution Amendment (GST) Bill in the
Motives behind the GST:
Subsume all indirect taxes at the centre and the state
Reduce the cascading effect of taxes on taxes
Increase productivity and transparency; increase tax-
Reduce/Eliminate tax evasion and corruption
Additional Excise duty
Excise duty under medicinal and toilet
Additional Custom duty commonly known as
Countervailing Duty (CVD), Special Additional
Duty ( SAD)
Value Added Tax (VAT)
Entertainment tax levied by states
Tax on Lottery, betting and gambling
Entry tax other than for local bodies
Taxes subsumed in GST :
Basic Custom Duties
Excise on liquor
Tax on sale/consumption of electricity
Taxes not subsumed under GST :
Products not covered under GST :
High Speed diesel
Aviation turbine fuel
Note- What will be status of Tobacco and Tobacco products under the GST regime?
Ans. Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power
to levy Central Excise duty on these products.
Model Of GST
GST to be levied
by the Centre
GST to be levied
by the State
GST to be levied
by the Centre
and the States
How it is different from past tax system?
Past Tax System GST
A combination of Value Added Tax(VAT)
which is destination-based tax and origin-
based taxes such as excise duties etc.
Tax incidence at the point of the
Tax Base Goods and Services are taxed
separately, subject to some exemptions
Comprehensive base of goods
and services included
Multiple tax rates Single tax rate
Incomplete set of mechanism for tax paid
in the supply chain (e.g. no set off
available for VAT against service tax or
Complete setoff should be
available in the entire chain of
production and distribution to
eliminating tax cascading effect
Gains accrue to the Consumers :
Life gets simpler: GST will replace 17 indirect tax levies and compliance costs will fall. Tax filling
will get simpler and easy.
Payment of the single and transparent tax: Consumers will not be subjected to double
taxation. All taxes that are levied while purchasing good will include both the central government’s
taxes as well as the state government’s taxes.
Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall
tax burden on most commodities will come down, which will benefit consumers.
Reduction in procedural complexity in paying taxes, less paperwork
No Excise Duty at the time of Manufacture & GST will be applicable on “SUPPLY”. Will be great
relief to all Manufacturer
Reduction in cascading effect ( Like earlier VAT was charged on Value + Excise amount)
Hassle Free Supply of Goods because no Entry Tax/Octroi
Increased Working Capital Requirements (Because Branch Transfer will be treated as supply)
Free Supplies & After Sale discount will be burden on supplier
Valuation of Self Supplies required clarity
Pre packaged products for retail consumption valued on MRP leading higher cost price which is
unlikely in GST
Gains accrue to the producers :
Reduction in Cost because of cross input tax credit available
No Cascading effect will reduced cost & ultimate benefit to customer
No need to open multiple branches in different states as claim of interstate purchase &
interstate sale is available now
GST compliance will be burden for small traders & retailers, Considering higher no. of
returns and monthly credit matching concept
Filling of monthly returns with purchase & Sales monthly cross examination helps to
curb circulations of dummy purchase and sales invoices in the market
Gains accrue to the intermediaries :
Simple and easy to administer: GST replaces multiple indirect taxes at the Central and State levels.
Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other
indirect taxes of the Centre and State. All the management of GST would be handled by the GSTN.
Better control on leakage: Because of the Advanced IT platform, it would be difficult to evade GST. The
system of GST also promotes the tax payment. A businessman can claim tax credit only if it has the tax invoice
for the purchase. If it doesn’t have tax invoice of a purchase, It has to bear whole tax. Thus, a retailer would ask
tax invoice from the dealer and in return dealer would ask tax invoice from the manufacturer.
The in-built mechanism in the design of GST incentivizes tax compliance by the traders.
Higher revenue efficiency: GST is expected to decrease the cost of tax collection. It will lead to higher
revenue efficiency. The duplication of indirect tax collection would end after the GST. It would finally decrease
the cost of revenue collection. Both, the centre and state government would benefit.
Gains accrue to the Government :
North South Central East West
GST awareness programmes, workshops etc. getting organised
by both the State and Central government departments and
been trying to create awareness on the GST and trying to
convince people it is people’s friendly and tax burden will come
down on people due to one country one tax system.
For spreading more awareness among the public, centre and
states have to work together to spread awareness about GST
procedures to tide over the teething issues. Central ministries
have been told to hold 100 awareness programmes apiece from
July 1 to address any concerns and spread awareness about
GST Awareness Programmes in India
* Statistics has been used from official site of Central Board and Excise Customs(CBEC)
Awareness programmes are the programmes design to
increase awareness about something. And it is not just
billboards, television commercials or social media.