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What is GST?

GST a good and innovative move by Government which integrated India into one common market by abolishing various taxes and budgetary barriers between the states. Goods and Services Tax (GST), as the name suggests it is levied on goods and services during the point of sale or rendering of service. GST is applicable on all goods and services, except the exempted class of goods and service. After passing various stages, the GST regime in India had been rolled out w.e.f 1st July, 2017.

Benefits of GST

Currently there are multiple indirect taxes (around 15) levied by the Central and the State Government and they differ across states. GST will simplify and rationalise the tax structure of India by bringing in a regime of a single and uniform tax.

Currently, doing business across state borders is very difficult due to differences in tax procedures. GST will lead to a unified economy and allow businesses to expand its operations with ease. It will alsoimprove manufacturing in India, attract foreign investment and lead to job creation.

A simple tax regime will reduce the cost of compliance and hence increase the number of taxpayers. This will help increase tax revenues. Also, the tax base will be comprehensive as all goods and services will be taxed with a few exemptions

GST is a uniform tax levied on value-added. Levy at each stage of sale/ purchase will be set-off against taxes paid by the supplier in the previous stage. Through this set-off mechanism, GST is levied only on value-addedTo illustrate: Let’s say GST is 10 %. Continuing with our earlier example, if you make a packet of chips (manufacturer) and sell it for Rs. 20, your GST should come out to be Rs 3 (10 % of Rs. 30). But, this tax is levied only on value-addition and so you’ll be allowed to claim a tax credit to the value of GST already paid by the supplier in the previous stage. Let’s say you bought raw materials (potatoes etc.) worth Rs. 10 for making chips. The supplier of the raw materials has already paid Re. 1 (10 % of Rs. 10) as GST. So, the chips manufacturer can claim a tax credit of Re. 1 and pay only the remaining Rs. 2 as GST. Thus, there is no cascading effect and no burden of ‘tax on tax’.

Certain industries in India like construction and textile are largely unregulated and unorganized. GST has provisions for online compliances and payments, and availing of input credit only when the supplier has accepted the amount, thereby bringing accountability and regulation to these industries.

GST Network

GST is backed by a robust Information Technology (IT) infrastructure for registration of taxpayers, processing of GST returns, managing GST remittances, refunds, auditing and levy of penalty. The Information Technology infrastructure behind GST, is controlled by the GSTN or GST Network, a Section 8 Company (not-for-profit company) promoted by Central Government, State Governments and other non-Government Institutions. The Government of India holds 24.5% stake in the GSTN, while state Governments combined hold 24.5% state and the balance 51% is held by Non-Government Institutions. Thus, GSTN will act like a clearing house that is self-sustaining through levey of charges on taxpayers and tax authorities using the GST Network.

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