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Article on GST And Its Impact
In India taxes are levied by the Central Government and the State Governments.The
municipality and other local authorities have also levy some miscellaneous taxes. Article 246 of
The Indian Constitution provides the authority to the Central and State government to levy taxes
through legislation in parliament or state legislature.
Some of the important taxes are as follows:
CENVAT or central value added tax. Cenvat (Central Value Added Tax) has its origin in
the system of VAT (Value Added Tax) Concept of VAT was developed to avoid cascading
effect of taxes. VAT was found to be a very good and transparent tax collection system,
which reduces tax evasion, ensures better tax compliance and increases tax revenue.
Service Tax : Service Tax is a tax imposed by Government of India on services provided
in India. The service provider collects the tax and pays the same to the government t is
charged on all services except the services in the negative list of services. The exemptions
i.e those activities which are part of negative list are found in Finance act.1
The 2016 Budget has imposed a cess called the krishi kalian cess at the rate of 0.5% on
all taxable services. A swachh bharat cess has also been introduced at the rate of 0.5% on
entire taxable amount of a service. The rate of service tax was increased from 12% to
14.5 in % plus education and higher education cess in 2015. Now 2016 budget proposes
to increase it to 15% with the introduction of krishi kalian cess. With effect from June 1
2016.2
Customs Duty : A tax issued on the import of products, it is governed by the customs act
of 1962
paid on manufacture are not presented towards adjustment on duties payable on sale of
commodities.
Thus it is obvious that the transitioning to VAT has not solved he issue of non-creditable duties
and the resulting cascading effect which desperately needs further reform in the area and as a
result the need for GST has been felt.
In 1994 Service tax was introduced. Current service tax rate is 15%. The extent of service tax has
since been extended constantly by successive Finance Acts and now about 119 services are
covered. However there are many service sectors which remain beyond the purview of Central
Government which has the potential to create more revenue for the Government.
In spite of the of existence of various taxes like Excise, Customs, Education Cess, Surcharge,
VAT, Service Tax etc. GDP of India is significantly lower than the GDP of countries like USA,
China and Japan. India has miles to go to achieve this level.
Therefore, the Indirect Taxes need to be immediately rationalized and unified. If the G.S.T. is
introduced it would without doubt increase the amount of tax collection. The implementation of
GST would ensure that India provides a tax regime which is comparable to the rest of the world.
It will also develop the international cost competitiveness of domestic goods and services.
Services would be ensured. GST would aid in providing unbiased tax structure that is neutral to
business processes and geographical locations.
SALIENT FEATURES
Some of the salient features of GST are mentioned below:
i. Harmonized system of nomenclature (HSN) will be applied for goods4.
ii. Uniform return & collection procedure for central and state GST.
iii. PAN based Common TIN registration5.
iv. Turnover criteria to be prescribed for registration under both central goods and
services tax (CGST) and state goods and services tax (SGST).
v. TINXSYS to track transactions6.
vi. Tax Payment will be by exporting dealer to the account of receiving state.
vii. Credit will be allowed to the buying dealer by receiving state on verification.
viii. Submission of declaration form is likely to be discontinued.
ix. Area based exemptions will continue up to legitimate expiry time both for the Centre
and the States.
x. Product based exemptions to be converted into cash refund.
xi. Limited flexibility to be given to Centre and States for exceptions like natural
disasters etc.
xii. Simplified structure to reduce transaction cost xiii. Separate rules and procedures for the
administration of CGST and SGST.
xiv. Specific provisions for issues of dispute resolution and advance ruling.
IMPACT OF GST
1. Food Industry
The application of GST to food items will have a significant impact on those who are living
under subsistence level. But at the same time, a complete exemption for food items would
drastically shink the tax base. Food includes grains and cereals, meat, fish and poultry, milk
and dairy products, fruits and vegetables, candy and confectionary, snacks, prepared meals
for home consumption, restaurant meals and beverages.
Even if the food is within the scope of GST, such sales would largely remain exempt due to
small business registration threshold.
Given the exemption of food from CENVAT and 4% VAT on food item, the GST under a
4 http://www.wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonizedsystem.aspx
5 http://blog.reachaccountant.com/tin-number-apply-tin-number/
6 https://www.tinxsys.com/TinxsysInternetWeb/index.jsp
In respect of Central GST, the position is slightly more complex. Small scale units
manufacturing specified goods are allowed exemptions of excise upto Rs. 1.5 Crores. These
units may be required to register for payment of GST, may see this as an additional cost.
The enumeration of benefits casts a welcome setting for GST.Proving GST as a superior and
sufficient system depends upon the structure it is designed into and the manner of
implementation. While it serves to be beneficial set up for the Industry and the Consumer, it
would lead to increase in revenue to Government.