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GST

NITA MALIK

ASSOCIATE PROFESSOR

HEAD , POLITICAL SCIENCE DEPARTMENT,

HANS RAJ MAHILA MAHA VIDYALAYA , JALANDHAR

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Introduction

  • Goods and service tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level.
  • GST is a tax on goods and services with value addition at each stage
  • GST includes many state and central level indirect taxes.
  • It overcomes drawback past tax system

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Tax Structure in India

  • Direct Tax
    • Income Tax
    • Corporate Tax
    • Wealth Tax

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  • Indirect Tax
    • Excise Duty
    • Custom Duty
    • Service Tax
    • Octrai Tax
    • VAT

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Method of Taxation

  • Progressive Tax
  • Increasing rate of tax for Increasing Value or Volume

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Method of Texation �Contd.

  • Regressive Tax
    • Decreasing rate tax for Increasing Value or Volume

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Method of Texation �Contd.

  • Proportional Tax
    • Fixed rate of tax for every level of income or production

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Shortcomings in current Tax System

  • Tax Cascading (Tax on Tax)
  • Complexity
  • Taxation at Manufacturing Level
  • Exclusion of Services
  • Tax Evasion
  • Corruption

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Cascading effect of Old Tax System

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VAT (Value Added Tax)

  • Implemented in April-1 /2005
  • It is replacement to complex Sales Tax
  • It overcomes a Cascading Effect of Tax
  • It applied on " Value Added Portion" in sales price

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Problems with VAT

  • It is not uniform in nature
  • VAT is different for different states
  • Different rates of taxation for different good

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What is GST?

  • GST is a comprehensive value added tax on goods and services
  • It is collected on value added at each stage of sale or purchase in the supply chain
  • No differentiation between goods and services as GST is levied at each stage in the supply chain
  • Seamless input tax credit throughout the supply chain
  • At all stages of production and distribution, taxes are a pass through and tax is borne by the final consumer
  • All sectors are taxed with very few exceptions / exemptions

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History of GST

  • Feb, 2006 = First time introduced concept of GST and announced the date of its implementation in 2010
  • Jan. 2007= First GST study by ASSOCHAM released by Dr. Shome
  • Feb. 2007: F.M. Announced introduction of GST from 1 April 2010 in Budget
  • The Government came out with a First Discussion Paper on GST in November, 2009
  • Introduced the 115th Constitution Amendment (GST) Bill in the year 2011

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Model of GST

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Taxes proposed to be subsumed in GST

  • Central Taxes
  • Excise Duty
  • Additional Excise Duty
  • Excise duty under medicinal and toilet preparation act
  • Service Tax
  • Additional custom duty commonly known as countervailing duty (CVD), special addition duty (SAD)
  • Surcharge
  • CENVAT

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GST – Features

  • Dual GSTs - Central GST & State GST
  • Destination based state GST
  • Uniform classification
  • Uniform forms — returns, challans (in electronic mode)
  • No cascading of central and state taxes
  • Cross credit between centre and state not allowed
  • Tax levied from Production to consumption

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GST – Global Perspective

  • It has been a part of the tax landscape in Europe for the past 50 years.
  • It is fast becoming the preferred form of indirect tax in the Asia-pacific region.
  • While countries such as Singapore and new Zealand tax virtually everything at a single rate, Indonesia has five positive rates, a zero rate and over 30 categories of exemptions.

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GST – Global Perspective

  • In china, GST applies only to goods and the provision of repairs, replacement and processing services.
  • It is only recoverable on goods used in the production process, and gst on fixed assets is not recoverable.

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GST – Global Perspective Contd

  • There is a separate business tax in the form of vat.
  • Brazil was the first country to adopt GST system.
  • Brazil has adopted a dual gst where the tax is levied by both the central and the provincial�governments.

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Conclusion

  • We all will pay GST on every product or service we buy/ consume
  • All indirect taxes levied by the states and the centre will be merged into one GST, we would exactly know how much tax we pay which at present is difficult to understand.
  • The sellers or service providers collect the tax from their customer.
  • Before depositing the same to the exchequer, they deduct the tax they have already paid.

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