A Guide to Goods and Service Tax (GST) in India- Meaning, evolution, features and registration


INTRODUCTION OF GST IN INDIA


The Goods and Service Tax (GST) is an inclusive Value-Added Tax (VAT) on the supply of goods or services. The introduction of the GST in India is a historic step because it marks a major reform of the country's indirect taxation. It is expected that the consolidation of a large number of taxes (central and state) into a single tax will bring huge benefits. One of the most important advantages of this measure is to reduce double taxation or eliminate tax cascading effects.


The initiative paved the way for the establishment of a common national market. After the introduction of the goods and services tax, it should be more competitive in the domestic and international markets.


EVOLUTION OF GST IN INDIA


During the pre -GST regime, indirect taxes in India were collected by both Central and State Governments under various Taxation Laws. However, with time, it was felt that administrating various taxation laws both at Centre and State was quite a task and the dealers/manufacturers were burdened.


GST- Goods and Services Tax


Thus, to provide relief to the business houses and service providers and also the Centre and well as State Government, the decision to introduce comprehensive GST laws were taken into consideration.

Some of the major events that bought changes in the GST structure of India are -

  • In the year 2000, the idea of adopting GST was first advised by the Vajpayee Government

  • In the year 2004, A special task force was ruled by Vijay L. Kelkar the advisor to the finance ministry, indicated that the existing taxation system had a lot of hurdles that would be eased by the GST system.

  • In the year 2005, the Finance Minister of that time P. Chidambaram stated that as discussed at the 2005-2006 budget meeting, the government’s mid-and long-term goal is to introduce a single goods and services tax structure across the country, covering the entire production-distribution chain.

  • In February 2006, the finance minister fixed 1 April 2010 as the introduction date of GST. This deadline for GST implementation was retained in the Union budget for 2007-08.

  • In the year 2011, the Constitution (115th Amendment) Bill for the introduction of GST, was put forth by the Government led by the Congress Party.

  • In May 2014 the Constitution Amendment Bill lapsed. Narendra Modi was in power at the Centre during this same year.

  • Arun Jaitley, India’s new Finance Minister put forward the Constitution (122nd Amendment) Bill, 2014 in the parliament. Jaitley in his speech indicated that the government is planning to implement the GST system by 1 April 2016.

  • In the year 2015, The Lok Sabha passed the Constitutional Amendment Bill. However, the same was not passed by Rajya Sabha.

  • In March 2016, Mr. Jaitley agreed with Congress's demand for the GST rate not to be set above 18%. But he was not inclined to fix the rate at 18% for a long term.

  • In August 2016, the opposition party led by Congress finally agreed to the Government’s proposal on the amendments to the Bill. The Bill was hence successfully passed in the Rajya Sabha. In the same year, the Honourable President of India provides his consent to the bill to become an Act.

  • In the year 2017, Four Bills related to GST to become an act were approved in the parliament with the President’s assent:

  1. The Central GST Bill

  2. The Integrated GST Bill

  3. The Union Territory GST Bill

  4. The GST (Compensation to States) Bill.

GST rates and GST rules were finalized by the GST Council.

  • Finally, from 1 July 2017, the government declared that GST would be applicable.

THE MEANING AND FEATURES OF GST:


Article 366 (12A) of the Constitution of India defines the Goods and Services Tax (GST) as a tax on the supply of goods and services or both, besides the supply of alcoholic liquor for human consumption.



GST- One nation, one tax

Goods and services tax is a tax based on the consumption of goods and services from producers to consumers and is levied by the State and Union Governments for the same taxable event. It is levied in all stages from manufacturing to the final product. Thus, only value addition is taxed. The final consumer bears the burden of the tax.

THE SALIENT FEATURES OF GST

  1. No cascading effect: The effect of taxes on taxes is known as cascading effect. In India, both the states and the center levy tax separately and this causes the cascading effect. This problem is solved by the introduction of GST, where Input Tax credit (ITC) can be availed for both Excise duty as well as for inter-state purchase.

  2. One Nation One Tax: GST is one of the most important indirect tax reforms of India. “One Nation One Tax” means we have only one type of tax throughout the nation although multiple tax rates of different items of goods and services.

  3. The Dual-mode: There are two components of GST – The Central GST(CGST) and the State GST (SGST). The CGST (Central goods and service tax) is levied and collected by Central Govt. on an Intrastate sale. Whereas, The SGST (State goods and service tax) is levied and collected by the State Govt. on an Intra-state scale.

  4. GST is a destination-based Consumption taxation.

  5. Th introduction of GST would facilitate the free movement of goods and services across the country and would create a unified national market.

  6. The power to suggest modifications in the rules, rate structure, etc. under Article 279A is provided to GST Council. Based on the recommendations made by the GST Council, modifications relating to GST Laws, rules, etc. are made that are notified by the Government.

  7. The Integrated Goods and Service Tax (IGST) is levied and collected by the Central Government on the inter-state supply of goods and services.

  8. GST would help in broadening the tax base.

  9. GST will help in ensuring a seamless flow of credit across the whole supply chain of products and service providers in all states under a common tax base.

  10. GST will improve transparency in the indirect tax system and is expected to reduce inflation.