Difference between Current Tax Structure and GST !!!

GST is a single tax right from the manufacturer or service provider to the consumer. In this system, taxes paid at each stage will be credited in the subsequent stage of value addition. Thus, Goods and Services Tax charged by the final dealer (seller or service provider) is the final tax borne by the customer, with set off of all taxes paid at all earlier stages in the supply chain. So, there are many Benefits of GST at every stage.

GST is a new form of tax that seeks to replace all central and state taxes and levies such as excise duty, countervailing duty, service tax, value added tax, octroi, entry tax and luxury tax. This new and bold tax reform will help ease countrywide movement of goods and services without complications on account of different state or local jurisdictions.

Recommended Read : Goods and Service Tax (GST) Regime to roll out from July 01, 2017 !!!

What is GST?

Taxes Subsumed in GST are:

Central TaxesState Taxes
Excise duty
Value added tax (VAT)
Service tax
Entry tax and octroi
Additional customs duty or Countervailing Duty (CVD)
Luxury tax
Special additional custom duty
Purchase tax
Central surcharges and cesses
Taxes on lottery, gambling etc.State surcharges and cesses

Recommended Read : What is GST Bill (Goods and Services Bill)?

Also Read : How will GST work?

GST in India:

  • It will be levied on all goods and services produced or supplied or imported in India.
  • As is the case under existing tax regime, exports will not be subjected to Goods and Services Tax.
  • Initially, for a period of 2 years, tax will be levied by central and state governments. The GST levied by the Central authority will be known as CGST and by the state authority will be known as SGST respectively.
  • Starting from the third year, all forms of GST will be merged into one single tax.
  • Goods that are kept outside its purview include alcohol for human consumption, petroleum products such as crude oil, petrol, motor spirit, high speed diesel, natural gas, turbine fuel and electricity

Difference between Current Tax Structure and GST:

Comparison PointsCurrent Tax Structure
Number of Laws
There are separate laws for separate taxes and respective VAT on states
There is only ONE law
Tax Rate
Existence of separate tax rates
There will be one CGST rate and uniform SGST rate across all the states
Cascading effect (Taxes on Tax)
Presence of cascading effect of taxes due to multiplicity in taxes
Cascading effect is reduced which makes it very simple
Tax Burden
High tax burden on taxpayers
Tax burden is much reduced
Tax Structure
Presence of multiple taxes makes compliance difficult
Subsuming or absorbing the taxes into one makes compliance simple and easy
Prices for Consumers
Usually very high due to cascading effect of taxes
Prices are expected to be reduced

Benefits of GST:

For Manufacturers and Traders:
  • Easy compliance
  • Uniformity in tax rates and structure
  • Removal of cascading or compounding effect of tax
  • Enhance the competitiveness
  • Move towards development of a common national market
For Central and State government:
  • Simple and easy administration
  • Improved compliance and revenue collections
  • Better revenue effectiveness
For Consumers:
  • Payment of the single and transparent tax
  • Reduction of burden of the tax payers

Also Read : Top 10 Benefits of GST

Leave a Reply

Your email address will not be published. Required fields are marked *