GST is a tax on goods and services with comprehensive and continuous chain of se t-off benefits from the producer's

point and service provider's point up to the retailer's level. It is essentially a tax only on value addition at each stage, and a supplier at each stage is permitted to set-off, through a tax credit mecha nism, the GST paid on the purchase of goods and services as available for set-of f on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. Stage of supply chain Purchase value of Input Value addition Value at which supply of goods and services made to next stage Rate of GST GST on o utput Input Tax credit Net GST= GST on output - Input tax credit Manufacturer 100 30 130 10% 13 10 13-10 = 3 Whole seller 130 20 150 10% 15 13 15-13 = 2 Retailer 150 10 160 10% 16 15 16-15 = 1 This new levy would replace almost all of the indirect taxes. In particular, it would replace the following indirect taxes: At Central level Central Excise Duty Service Tax Additional Excise Duties CVD (levied on imports in lieu of Excise duty) SAD (levied on imports in lieu of VAT) Excise Duty levied on Medicinal and Toiletries preparations, Surcharges and cesses Central Sales Tax At State level VAT/Sales tax Entertainment tax (unless it is levied by the local bodies) Luxury Tax Taxes on lottery, betting and gambling Entry tax not in lieu of Octroi Cesses and Surcharges GST is different from the current tax structure in many ways. Currently, taxes t reat goods and services differently. As mentioned above, goods attract Excise at m anufacturing level and VAT at the time of sale. In contrast, services attract on ly one levy i.e. Services tax on provision of taxable services. A product or service passes through many stages till it reaches the final consum er. Governments at Central and State level have, as and when the need arose, int roduced many indirect taxes on various taxable events in this value chain (such as Excise duty on manufacture, VAT on sale etc). As these taxes are levied on di fferent taxable events they have their limitations. To illustrate further, lets t ake an example of Excise Duty. Excise duty is levied on manufacture and it fails t o tax the value addition at distribution level. Additionally, at present, goods su ffer two levies (Excise and VAT) whereas taxable services suffer only one levy i.e . service tax. This leads to distortion: distortion arises because the relative prices of services would be lower as compared to goods. Even, as current tax s ystem treats goods and services differently, in certain cases there is double ta xation (software being one of such case where the industry has taken conservativ e stand and both VAT and Service Tax is being currently levied). Also, there are restrictions on availment of credit such as a service provider cannot avail cre dit of VAT and a trader cannot avail credit of Service tax. The above lacunas affect free flow of goods and services. Additionally, it bring s uncertainty in the trade which is not good for the economy as a whole. GST is now being projected as a solution to all these problems. India is implementing du al GST. In dual GST regime, all the transactions of goods and services made for a c onsideration would attract two levies i.e. CGST (Central GST) and SGST (State GS T). After implementation most of the current issues will be resolved such as the cla ssification, valuation, double taxation disputes etc. Under GST, the taxation bu rden will be divided equitably between manufacturing and services, through a low

er tax rate by increasing the tax base and minimizing exemptions. On a positive note, most of the credit which is not available will be available in GST regime such as the service provider will be eligible to avail credit of VAT, Luxury tax , Entertainment Tax etc. Implementation of a comprehensive GST would lift India' s economy of over $1 trillion by between 0.9 percent and 1.7 percent, on top of whatever growth would otherwise be achieved, according to a report by the New De lhi-based economic think-tank the National Council of Applied Economic Research. GST rollout likely to miss April 2013 deadline. The government's plan to roll ou t the Good and Services Tax (GST) by next April is unlikely to be met as an expe rt has suggested not rushing through with the country's most ambitious tax refor m initiative. The combined GST rate is being discussed by government. The rate i s expected around 14-16 per cent. After the total GST rate is arrived at, the St ates and the Centre will decide on the CGST and SGST rates.