GOOD AND SERVICES TAX

Introduction

Every country's government requires cash to carry out its essential roles and responsibilities. Operating governmental institutions, improving the country's infrastructure, and funding public welfare projects and programmes are all examples of these. A government earns the cash necessary for these facilities by charging its inhabitants in return for providing them. Every country has a suitable taxes method established forth by its government to make this process effective. India is no exception, with its diverse range of income earners and revenue sources. It emphasises the significance of taxes across the board and distinguishes between the many sorts of taxes. Let's take a closer look at the Indian tax structure with reference to GST.

What is GST

GST (Goods and Services Tax) is an indirect tax (sometimes known as a consumption tax) imposed on the production of goods and services in India. It is a destination-based, multistage, comprehensive tax: comprehensive since it includes practically all indirect taxes, with the exception of a few state levies. The GST, as a multi-staged tax, is imposed at each stage of the production process, but it is intended to be refunded to all parties involved in the various stages of production except the final consumer, and as a destination-based tax, it is collected from the point of consumption rather than the point of origin, as previous taxes were. For tax collection purposes, goods and services are separated into five tax slabs: 0%, 5%, 12%, 18%, and 28%. The GST Council, which is made up of the finance ministers of the federal government and all states, sets the tax rates, rules, and regulations. The GST is a federation tax that is intended to replace a plethora of indirect taxes. GST must be paid on the product purchased by the consumer.

History of GST

The Goods and Services Tax (GST) was implemented in India on July 1, 2017. However, the implementation of the new tax regime began a long time ago. In the year 2000, India's then-Prime Minister, Atal Bihari Vajpayee, established a group to design the GST legislation. A task team decided in 2004 that a new taxation system should be implemented to improve the tax scheme at the time. In 2006, the finance minister suggested that GST be implemented on April 1, 2010, and in 2011, the Constitution Amendment Bill was enacted to enable the GST law to be implemented. The Standing Committee began discussing GST in 2012, and a year later, it presented its report on GST. Arun Jaitley, the new Finance Minister at the time, reinserted the GST bill in Parliament in 2014, and it was enacted in the Lok Sabha in 2015. Despite this, the law's enforcement has been postponed since it was not enacted by the Rajya Sabha.

GST was implemented in 2016, and the updated model GST statute was passed by both houses of Congress. India's President has also given his approval. In 2017, the Lok Sabha passed four supplemental GST bills, which were then approved by the Cabinet. The Rajya Sabha then enacted four more GST Bills, and the new tax regime went into effect on July 1, 2017. Previously, the tax was collected separately by the federal government and the states. The tax systems differed depending on the area. Even when an import tax was charged on one person, the burden was passed on to another. When it comes to direct taxes, the taxpayer is responsible for paying the tax. Direct and indirect taxes existed in India prior to the implementation of GST.

Types of GST

1. Integrated Products and Services Tax (IGST): The Integrated Products and Services Tax, or IGST, is a GST-based tax that applies to interstate (between two states) as well as foreign trade of goods and/or services. The IGST Act regulates the IGST. The Central Government is in charge of acquiring the taxes under the IGST. The Central Government divides the taxes collected among the several states after they have been collected.

2. State Goods and Services Tax (SGST): The State Goods and Services Tax, or SGST, is a tax levied under the GST regime on transactions taking place within the same state. Both State GST and Central GST are charged on intrastate supplies of goods and/or services. The State GST or SGST, on the other hand, is a tax collected by the state on products and/or services purchased or sold inside the state. The SGST Act is in charge of it. The income generated by the SGST is received only by the state government.

3. Central Goods and Services Tax (CGST): The Central Goods and Services Tax (CGST), like State GST, is a GST-based tax that applies to intrastate (inside the same state) transactions. The CGST Act regulates the CGST. The Central Government is in charge of collecting the CGST income.

4. Union Territory Products and Services Tax (UTGST): The Union Territory Products and Services Tax (UTGST) is the Indian Union Territories' (UTs) counterpart to the State Goods and Services Tax (SGST), which is charged on the delivery of goods and/or services. In the Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra and Nagar Haveli, and Lakshadweep, the UTGST applies to the provision of goods and/or services. The UTGST Act regulates the UTGST. The Union Territory government is in charge of collecting the UTGST income. In Union Territories, the UTGST takes the place of the SGST. Thus, the UTGST will be levied in addition to the CGST in Union Territories.

Advantages of GST

1. Multiple indirect levies that existed under the former tax regime have been replaced with GST. The benefit of having a single tax is that each state applies the same rate to a specific product or service. The central government sets the rates and rules, making tax administration easier.

2. All of the major indirect taxes were merged into the GST. It has substantially lowered the cost of compliance on taxpayers while also making tax administration easier for the government.

3. One of the key goals of the GST was to eliminate the tax cascade effect. Previously, due to differing indirect tax legislation, taxpayers were unable to offset one tax's tax credits against another.

4. India's GST regulations are significantly stricter than any of the country's previous indirect tax legislation. Only invoices filed by their individual suppliers are eligible for an input tax credit under GST. The possibilities of obtaining input tax credits on fraudulent invoices are greatly reduced in this manner.

Conclusion

Though new systems are implemented to address the problems of previous systems, they also have flaws of their own. That is exactly what has happened with the GST programme in its first few years of operation. Furthermore, in a country like India, where there is so much variety and a clogged bureaucracy, implementing new ideas is never straightforward. However, adjustments are unavoidable, and the government is making timely revisions to the GST laws to simplify them. The administration has taken a positive move in this direction. If we want to compete in the global economy, we must learn to play by their rules.

References

https://www.bankbazaar.com/tax/gst.html#gst

https://cleartax.in/s/gst-law-goods-and-services-tax#before