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 Taxes||State 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 Points||Current Tax Structure||GST Tax
|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
- Payment of the single and transparent tax
- Reduction of burden of the tax payers
Also Read : Top 10 Benefits of GST