Goods and Services Tax (India)
Goods and Services Tax (GST) is an indirect tax applicable throughout India which replaced multiple cascading taxes levied by the central and state governments. It was introduced as The Constitution (One Hundred and First Amendment) Act 2017,[1] following the passage of Constitution 122nd Amendment Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India. Under GST, goods and services are taxed at the following rates, 0%, 5%, 12%, 18%, 28%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold.[2] In addition a cess of 15% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products.[3]
Touted by the government to be India's biggest tax reform in 70 years of independence, the Goods and Services Tax (GST) was finally launched on the midnight of 30 June 2017, though the process of forming the legislation took 17 years (since 2000 when it was first proposed). The launch was marked by a historic midnight (30 June - 1 July 2017) session of both the houses of parliament convened at the Central Hall of the Parliament, but which was immediately boycotted by the opposition by staging a walk out to show their disapproval of the same.[4]
Members of the Congress boycotted the GST launch altogether. They were joined by members of the Trinamool Congress, Communist Parties of India and the DMK, who reportedly found virtually no difference between the existing taxation system, and therefore claimed that the government was trying to merely rebrand the current taxation system but made it worse for common people by increasing existing rates on common items and reducing rates on luxury items. Many critics pointed out that the GST would increase costs of daily goods and affect many Indians adversely, especially the middle, lower middle and poorer classes[5] GST was initially proposed to replace a slew of indirect taxes with a unified tax and was therefore set to dramatically reshape the country's 2 trillion dollar economy. However, it has been met with sharp criticism from various fronts due to the increased costs and troubles that it will cause to common citizens.[6] The rate of GST in India is between double to four times that levied in other countries like Singapore.[7]
President Mukherjee & Prime Minister Narendra Modi launching the Goods & Services Tax (GST) at Parliament's Central Hall on the midnight of 30 June 2017 in a special session.
Prime Minister Narendra Modi delivering a speech on the GST in a midnight session convened at the Parliament's Central Hall.
History
Taxes on various goods Edit
The GST is imposed at different rates on different items. This is in addition to state taxes that are also levied. Thus, the rate of GST is 18% for soaps and 28% on washing detergents. GST on movie tickets is based on slabs, with 18% GST for tickets that cost less than Rs. 100 and 28% GST on tickets costing more than Rs.100.[16]
Tax replaced Edit
A single GST replaced several existing taxes and levies which include: central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi.[17][18] Other levies which were applicable on inter-state transportation of goods has also been done away with in GST regime.[19][20]
The following taxes will be replaced by the GST:
Central Excise Duty
Commercial Tax
Value Added Tax (VAT)
Food Tax
Central Sales Tax (CST)
Introit
Octroi
Entertainment Tax
Entry Tax
Purchase Tax
Luxury Tax
Advertisement tax
Service Tax
Customs Duty
Surcharges
Taxation scheme Edit
GST is levied on all transactions such as sale, transfer, purchase, barter, lease, or import of goods and/or services. India adopted a dual GST model, meaning that taxation is administered by both the Union and State Governments. Transactions made within a single state will be levied with Central GST (CGST) by the Central Government and State GST (SGST) by the government of that state. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption-based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced. IGST complicates tax collection for State Governments by disabling them to collect the tax owed to them directly from the Central Government. Under the previous system, a state would have to only deal with a single government in order to collect tax revenue.[21]
Effects and Impacts Edit
The introduction of the GST increased the costs of most consumer goods and services in India including food, hotel charges, insurance and cinema tickets. Upon its introduction in the country, GST led to a number of protests by the business community, primarily due to an increase in overall taxes and hence the prices of goods. Nearly 1100 cinema theaters in the state of Tamil Nadu declared an indefinite strike from 3rd July 2017.[22]
Checkposts across the country were abolished ensuring free and fast movement of goods.[23]
The Central Government had proposed to insulate the revenues of the States from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and petroleum products. The central government had assured states of compensation for any revenue loss incurred by them from the date of GST for a period of five years. However, no concrete laws were made to support such action.[24]
Goods and Services Tax Network (GSTN) Edit
As per the government website on GST, "Goods and Services Tax" Network (GSTN) is a nonprofit organisation proposed to be formed for creating a website / platform for all the concerned parties related to the GST, namely stakeholders, government and taxpayers to collaborate on a single portal. When up and running, the portal is supposed to be accessible to the central government which allows it to track down every transaction on its end while taxpayers are advertised to have the ability of connecting this to their tax returns. However its efficacy and efficiency is yet to be tested. The IT network was touted to be developed by unnamed private firms. The known authorised capital of GSTN is ₹10 crore (US$1.6 million) in which Central Government holds 24.5 percent of shares while the state government holds 24.5 percent and rest with private banking firms for smooth running of the transactions
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