Essay on GST
GST stands for goods and services tax. It is an indirect tax on the consumption of goods and services sold for domestic consumption. On the final price, tax is included and paid by the consumers at the point of sale and passed on to the government by the seller. The GST is usually taxed at a single rate across the nation.
In 2000, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee Government. The state finance ministers formed an Empowered Committee (EC), though GST came into effect only on 1st July 2017, by amending the Constitution of India. GST was the major tax reform to date, intending to reshape the economy. It was the One Hundred and First Amendment of the Constitution of India
Tax slabs under GST:
Under the GST regime, there are five distinct tax slabs, these are 0%, 5%, 12%, 18%, 28%. Most of the daily consumption items are changed at 5% tax and it increases to 28% tax for luxury items.
Is GST applicable to all goods and services?
There are some goods where GST is not applicable. These are high-speed diesel, natural gas, aviation turbine fuel, petrol, petroleum crude etc. these products are not brought under GST and charged based on the earlier tax structure. Initially, it had been proposed that these will be included in GST later on, but so far no decision on it has been taken.
Some products are completely exempted from GST, these are fresh milk, fish, ginger, garlic, melon, grapes (fresh fruits and vegetables), unroasted coffee, unprocessed green – tea leaves etc. Wheat, soybean, maize, corn, rice and a few other agricultural products are also exempted.
Types of GST in India
- SGST: GST imposed within the state is called SGST (State-GST). It is intrastate trading. In this case, revenue is earned by the state government because goods are manufactured and consumed within the state.
- UGST: GST imposed where Union Territory comes into the scene is referred to as UGST (Union-GST). Here the GST is collected by the Central Government.
- CGST: For intrastate transactions of goods and services, CGST (Central-GST) is levied by the Central Government. It is collected in addition to the SGST or UGST. The revenue is distributed between the state and the central government.
- IGST: IGST stands for Integrated GST. It is collected on goods and services transactions between different states. The SGST portion of the tax collected is given to the state as it is the consumer of goods and services. IGST earned is then divided between the state and the central government.
Government’s perspective of GST:
- The government aimed at bringing 17 different indirect taxes at the central and state level under one heading i.e. GST.
- GST focused on the ‘one country one tax-rate system implemented across the country.
- These are taxes imposed on the ‘supply of goods or services. There is no difference whatsoever between the goods and services. It is a comprehensive tax levied on all goods and services.
- GST was intended to free the flow of credits in the economic circle.
- GST is added at every step of the supply chain as a value addition; however, input tax credit mitigates the imposition of extra taxes.
- GST depends on the destination of consumption of goods. For example: if a mineral water bottle is manufactured in State X and consumed in State Y, the collected GST is accredited to State Y and loss of revenue to State X is compensated by levying GST Compensation Cess.
Advantages of GST:
- Elimination of cascading tax: One of the major benefits of GST is it let go of the previously different set of tax rules adopted by respective state governments and brings it all under one roof. This simplified the tax structure by bringing in uniformity and transparency.
- Revised threshold limit: The implementation of GST has come as a great boon to the small and medium businesses houses by increasing the threshold limit from time to time with the revised limit being Rs. 40 lakh for normal category states.
- Reduced compliances: Separate compliance for each tax had to be done earlier. With the introduction of GST, taxpayers need to file returns only once. This has reduced a lot of workloads and simplified the return filing procedures.
- Fixed rates of GST under Composition Scheme: GST has a provision for lowering taxes for business units. They can opt for Composition Scheme if their annual turnover is up to Rs.1.5 crore for normal category states and Rs.75 Lakhs for northeastern states. If the business enterprise falls under this bracket, the Composition Scheme allows payment of a fixed amount of GST irrespective of the income. Though there are few conditions to it.
- Online GST portal: With the basic knowledge of computers it is now very easy to file a tax return. An account needs to be created in the GST Portal and you can start filing returns. All the details regarding GST are mentioned in the portal. This is very beneficial for new startups as it reduces a lot of paperwork load and saves time. It becomes easy to establish transparency among tax jurisdictions between the State and Central Government.
There are several advantages of GST depending on the business structure.
Disadvantages of GST:
- The increased cost of operations: With everything going online it’s difficult for not so tech-savvy small business houses to keep pace with the changes. They have to outsource help ultimately increasing the operational cost. They have to update their books and accounts with the latest GST-compliant software or Enterprise Resource Planning (ERP) which is costly.
- The burden of compliance: Every company must register on the GST portal in the state of their operation. It is a long process of registering, maintaining documents, invoices and filing returns. It enhances the difficulties for companies.
- Penalties for non-GST compliant firms: Every company must register themselves under the GST portal, and if they fail to do so they will be penalised. It’s difficult for small businesses to keep pace with online portals. They have to hire people to do it for them, thereby increasing their cost.
New changes in GST from January 1, 2022
*GST on footwear increased from 5% to 12% on a certain category of items.
* Online transport aggregators such as Ola/Uber auto-rickshaw would become taxable @5%.
* Food delivery platforms like Swiggy and Zomato will come under GST. They will be made liable to collect and deposit GST on restaurant services supplied through them. The end consumer will not be affected as only the compliance of deposit has been shifted from restaurants to delivery platforms
* Aadhar authentication will be mandatory for claiming GST refund.
* The new law allows GST officers to visit premises to recover dues without any show-cause notice.
The government has introduced this GST system to smoothen tax processes and bring business from overseas into the Indian economy, thereby strengthening the GDP. It is increasing competitiveness and performance in the manufacturing sector which has ultimately increased healthy competition among businesses.
With changing times it is important to make timely amendments to streamline GST rules. These changes are essential if India wants to make its stand in the world economy. The initial process is painful but changes are necessary.
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