GST -A clear definition by Anurag katuwal for the beginner

The countdown for GST has begun.We have only 1 day in our hand.If you are about to buy new mobile just book it online right now you may get some relief prior to that,infact lots of shopping sites are offering huge discount on cell phones to clear the pre GST sale.Before talking about GST ,lets have a quick look at its meaning and how we may be benefitted from it.Right now most people exactly dont know what GST is and in what ways it may be used and benefitted.Actually i am also not economist or student of commerce I am just a simple teacher and ,i have just expressed it how much i know about GST and tried to define it in easiest way .Ok now lets start it.

What is GST ?

GST is a
Goods and Service Tax. It is a single indirect tax for the entire nation.GST is one of the most important and complex Tax reform in indirect tax.GST is a Destination based Tax. Tax is levied on consumption of Goods and Services. The burden of taxation moves from the manufacturing /producing states to the
consuming states.The constitution had to be amended because Centre will tax goods beyond the stage of manufacture & states will tax services. Also states to impose interstate tax on Imports.Around 160 countries in the world follow GST. Canada has a dual GST similar to India.But implementing GST in India will pose a major challenge because of its federal structure.GST will help goods move seamlessly across all states in India. It is a single tax on
Supply
of goods and services. Under GST the taxable event is Supply whereas under the earlier regime the Taxable event was Production (excise duty) or Sale of goods (VAT or CST) or Provision of Service (Service Tax).

Lets take an example a manufacturer wants to make assamese gamosa.For this he must buy Silk-pat.This gets turned into gamosa after manufacture.So the value of silk-pat is increased when it gets woven into a Gamosa.Then the manufacturer sells it to a warhousing agent who attaches lebels and tags to each gamosa.

. That is another addition of value after which the warehouse sells it to the retailer who packages each Gamosa separately and invests in marketing of the Gamosa thus increasing its value.

GST will be levied on these value additions – the monetary worth added at each stage to achieve the final sale to the end customer.

There is one more term we need to talk about in the definition – Destination-Base Goods and Services Tax will be levied on all transactions happening during the entire manufacturing chain. Earlier, when a product was manufactured, the centre would levy an Excise Duty on the manufacture, and then the state will add a VAT tax when the item is sold to the next stage in the cycle. Then there would be a VAT at the next point of sale.

So, earlier the pattern of tax levy was like this:

Now, Goods and Services Tax will be levied at every point of sale. Assume that the entire manufacture process is happening in Assam and the final point of sale is in Nagaland. Since Goods & Services Tax is levied at the point of consumption, so the state of Assam will get revenue in the manufacturing and warehousing stages, but lose out on the revenue when the product moves out Assam and reaches the end consumer in Nagaland. This means that Nagaland will earn that revenue on the final sale, because it is a destination-based tax and this revenue will be collected at the final point of sale/destination which is Nagaland.

How GST will work?

When Goods and Services Tax is implemented, there will be 3 kind o

CGST: where the revenue will be collected by the central government

SGST: where the revenue will be collected by the state governments for intra-state sales

IGST: where the revenue will be collected by the central government for inter-state sales

In most cases, the tax structure under the new regime will be as follows:

For example:

A dealer in Assam sold goods to a consumer in Assam worth Rs. 10,000. The Goods and Services Tax rate is 18% comprising CGST rate of 9% and SGST rate of 9%. In such cases the dealer collects Rs. 1800 and of this amount, Rs. 900 will go to the central government and Rs. 900 will go to the Assam government.

Now, let us assume the dealer in Assam had sold goods to a dealer in Gujarat worth Rs. 10,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%. In such case the dealer has to charge Rs. 1800 as IGST. This IGST will go to the Centre. There will no longer be any need to pay CGST and SGST.

GST law-A history in detail:

France was the world’s first country to implement GST Law in the year 1954. Since then, 159 other countries have adopted the GST Law in some form or other. In many countries, VAT is the substitute for GST, but unlike the Indian VAT system, these countries have a single VAT tax which fulfills the same purpose as GST.

In India, the discussion on GST Law was flagged off in the year 2000, when the then Prime Minister Atal Bihari Vajpayee brought the issue to the table. 

SUMMARY AT ALL:

The idea behind having one consolidated indirect tax to subsume multiple currently existing indirect taxes is to benefit the Indian economy in a number of ways:

▪It will help the country’s businesses gain a level playing field

▪It will put us on par with foreign nations who have a more structured tax system

• It will also translate into gains for the end consumer who not have to pay cascading taxes any more
• There will now be a single tax on goods and services

In addition to the above,

• The Goods and Services Tax Law aims at streamlining the indirect taxation regime. As mentioned above, GST will subsume all indirect taxes levied on goods and service, including State and Central level taxes. The GST mechanism is an advancement on the VAT system, the idea being that a unified GST Law will create a seamless nationwide market.
• It is also expected that Goods and Services Tax will improve the collection of taxes as well as boost the development of Indian economy by removing the indirect tax barriers between states and integrating the country through a uniform tax rate.

The tax slab for different common goods that we use:

 So friends no need to worry much .
I hope you all got a summary on GST at a glance.
This is a historic step by Modi government till date which was required for clear and crystal taxation.
Only confusion(my personal) if coal and kerosene are in the slab of GST then why petrol and diesel were being exempted.Lets await for final explanation by leaders regarding this.

So thats all for today will be back with some other topic next time.

*****Thank you*******
*****Jai Hind********
*****Joi aai axom****


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