Goods and Service tax - an Introduction

Hello guys, now days a very hot topic is going on in finance and tax fraternity , which is GOOD AND SERVICE TAX or also known as GST. Since GST has been passed now every one is concerned about the effect and causes of GST on there routin work. In this article we shall discuss the basic info about the GST.

INTRODUCTION

The Constitution Amendment Bill for Goods and Services Tax (GST) has been approved by The President of India post its passage in the Parliament (Rajya Sabha on 3 August 2016 and Lok Sabha on 8 August 2016) and ratification by more than 50 percent of state legislatures. The Government of India is committed to replace all the indirect taxes levied on goods and services by the Centre and States and implement GST by April 2017.

With GST, it is anticipated that the tax base will be comprehensive, as virtually all goods and services will be taxable, with minimum exemptions.

GST will be a game changing reform for the Indian economy by creating a common Indian market and reducing the cascading effect of tax on the cost of goods and services. It will impact the tax structure, tax incidence, tax computation, tax payment, compliance, credit utilization and reporting, leading to a complete overhaul of the current indirect tax system.

GST will have a far-reaching impact on almost all the aspects of the business operations in the country, for instance, pricing of products and services, supply chain optimization, IT, accounting, and tax compliance systems.

The reference of GST was first made in the Indian Budget in 2006-07 by the then Finance Minister Mr. P. Chidambaram as a single centralized Indirect tax. The GST Constitution (One Hundred and Twenty Second Amendment) Bill, 2014 was introduced on December 19, 2014 and passed on May 6, 2015 in the Lok Sabha and yet to be passed in the Rajya Sabha

The Bill seeks to amend the Constitution to introduce Goods and Services tax vide proposed new article 246A. This article gives power to legislature of every state and Parliament to make laws with respect to goods and services tax where the supplies of goods or of services take place. Recently, Union Minister Mr. Arun Jaitley said that GST could be implemented as early as January 1, 2016

MEANING

there was man Clause 366(12A) of the Constitution Bill defines GST as “goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. Further the clause 366(26A) of the Bill defines “Services” means anything other than Goods. Thus it can be said that GST is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level. The proposed tax will be levied on all transactions involving supply of goods and services, except those which are kept out of its purview.

EFFECT OF GST 

Though GST may have diversed effect on depending upon the nature and related factors of the Entity concerned , yet two of the most important effects of GST are as follows .

1. Single Taxation system.

GST shall replace the burden of various taxes charged by the Union and state govt. 

Before GST there were different tax regarding sale inter-state (CST charged by central govt.) and intra- state ( Local VAT chagred by State govt.) but after CST the entity will have to pay all the taxes under a single umbrella . 

2. Removing Cascading effect 

Cascading Effect means in Simple way means Tax being charged on the earlier amount of tax. GST is intended to remove “Tax on Tax Effect” and provide for common national market for Goods and Services. Though before GST the VAT system provide a relief from cascading effect but it wasn't effective when goods where to be presented in National market but GST is being designed to take over this hindrance as well.

Hope this article will provide you with some basic concepts about GST  and we will be covering more aspects of GST soon .