The evolution, structure and the Impact of Goods and Services Tax (GST).


The Good and Services Act (GST) has born. The fear and worries about GST impact is the talk of the day. This article provides the comprehensive knowledge and information about Good and Services act and its impact on Indian economy. Come and read the article to have better command on GST.

Introduction

The parliament of India has passed the GST bill and it came into force from1 July 2017. It is a tax reform measure which will simplify the tax regime. All type of tax such as excise duty, service tax, VAT, CST, etc. will integrate into single tax (GST). The long awaited dream of one country one tax and one market has become true due to GST implementation.

Historical evolution

GST has been adopted by more than 160 countries of the world. France was the first country to implement GST in 1954. The idea of GST first time came into year 2000 in Shri Atal Bihari Vajpayee government. Asheem Das Gupta committee was constituted to give recommendation on Goods and Services Tax (GST). The committee gave its report in 2009.In 2004 Vijay Kelkar committee recommended for the implementation of Goods and Services Tax (GST). PC Chidambaram announced to bring GST in the budget of 2010. The GST Bill was passed in lok Sabha in May 2015 but could not passed in Rajya Sabha due to congress oppose till Dec 2016. Finally, Rajya Sabha and the state legislative assemblies passed the bill. After the accent of president, it became Goods and Services Tax Act 2017. It came into force from 1 July 2017.

122th constitutional amendment 2016

It was necessary to amend the constitution before enacting the GST act. So 122th constitutional amendment act was passed. This amendment inserted article 279A, 269A and 246A into the Indian constitution. This provide these 3 acts.
  1. Central Goods and Services Tax (CGST)
  2. State Goods and Services Tax (SGST)
  3. Interstate Goods and Services Tax (IGST)


GST Rates

There has been fixed 5 GST rates in India. These are 0%,5%,12%,18%,28%. On cars 2%,5%,22%,cess is loaded above 28%GST. 2% for small car, 5% for medium cars, and 22% for XUVs.The GST rates of some countries as follows:
America-0 to 7.5%
Singapore-7 %
China-17 %
Japan -10 %
UK-20%
Africa-14 %
Pakistan-14%
India's' rate are very high and It is a burden on the citizen. Govt should review these rate and should remove 28% and 28%+ cess category.

GST Registration

GST registration is compulsory for whose yearly turnover is above 20 lac. You can refer this article on registration- How to submit online application for GST registration

GST return filing

After installing GST software and getting initial training one will be able to file GST return. It requires 3 returns per month and 36 return per year. GST R1, GST R2, GST R3 forms are required to file the returns. One need to upload all the invoices he has generated.

Short term impact

In short term GST has negative impact on economy. Traders are agitating against GST. It has reduced GDP from 7.9 to 5.7 in the previous quarter of 2017. About 10 days' business was halted to migrate to GST regime. Traders has to keep records and upload return. This requires additional expenditure to meet the return filing requirement.

Long term impact on the economy


There are many long term impacts. Each is explained below:
  • cascading effect of tax will eliminate levying tax on the tax will come to an end. For example, cinema industry was paying excise duty on pictures. In addition entertainment tax was imposed by state govt. Thus total tax was about 50-60 %. Now only 18% GST will be levied
  • Transparency : The GST regime will promote transparency in transactions.
  • Check over the tax theft and avoidance: The GST regime will promote transparency in transactions. This will lead to eliminate tax theft and avoidance. So tax revenue collection will increase
  • Simplification of tax : This has simplified the tax regime. All type of tax such as excise duty, service tax, VAT, CST, etc. have integrated into single tax (GST)
  • Cheaper commodities :The essential commodities and the unpacked edible items has become cheaper as it attracts 0 % and 5% rates
  • Services will be costlier: Before GST services were charged at 15%, now services attract 18% GST
  • Foreign investment : Due to simplification of tax, investors are at ease and they are encouraged in investing in India
  • More tax collection : Now traders will not be able to avoid tax/ theft tax. Hence tax base has increased. There is 20-25% jump in tax collection
  • Less develop states will be more benefited : GST is levied on the final consumption of the goods. So the less developed states like Bihar UP and Orissa will be more benefited. As there is a provision of input tax credit (ITC) system. In this system ITC is available to the non-consuming traders and companies
  • Zero rated supply on export : Exported items attract zero rated supply. Its mean exporter has to pay IGST 18% and avail ITC
  • Sectoral impact : GST has impacted all the sectors but the most benefited sectors are real estate, transportation (abolition of check-post, octrai), power sector (5% GST on coal). Steel and cement prices has increased as they come now 18 and 28% rate respectively


Conclusion

The impact is different on the different sectors. Still GST is a game changer. It is the greatest tax reform in this century. Tax has been simplified and avoidance is impossible so there is a great increase in tax base, tax revenue, tax collection and GDP. GDP will be in two digits after 2 years. Let us support the government. Finally the additional tax revenue will come back to us in the form of welfare and development.


Comments

Author: umesh12 Sep 2017 Member Level: Gold   Points : 4

GST is implemented and it is there to stay. Though it took a long time but finally it has seen the daylight.

There are many consequences of GST implementation which will be surfacing in near future one by one. Due to its input tax adjustment feature many business establishments are going for GST registration voluntarily due to its need to them rather than due to fear of Govt machinery. Some people are considering it as a new simplified unified tax which may one day even engulf and replace the income tax. Today it may seem a conjecture but could be a reality in future. There are many who are imagining that the GST tax which is paid by the individuals at many places may soon be deducted from their income tax. Seems a wishful thinking but again could become true soon.

Let us not imagine so far off but one thing is clear that the computerization of GST itself has removed so many hassles from the business environment and most of these organisations are happy due to this improved governance.

It is also hoped that with large collections of GST Govt may eventually cut down these rates to come near to the international bench marks in this area.

Author: Neethu12 Sep 2017 Member Level: Silver   Points : 0

So far being a commoner if I am asked that how GST has affected me, I would say that the prices of everything from basic food to travelling have increased. It has not provided any relief so far, I don't know what effects it has on the economy but I do know that I am shelling more money than before.



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