Life of a Storyteller
UNDERSTANDING GST
2017
Goods and Services Tax (GST) is an Indirect Tax levied at multiple stages of production & distribution of goods and services. GST is proposed to be levied on all stages, from manufacturing to the final consumption with credit of taxes paid at the previous stage available as set off. Only value addition will be taxed, and the burden of tax is to be borne by the final consumer.
​
The central idea behind this form of taxation is to replace existing levies such as Value added tax (VAT), service tax, and turnover tax by levying a comprehensive tax on the manufacture, sale, and consumption of the goods and services in the country.
​
The present tax structure of India has several Indirect Taxes like Central Excise Duty, Service Tax, Surcharges & Cesses, Central Sales Tax, Entertainment Tax, Luxury Tax, Purchase Tax, and Octroi & Entry Tax, etc. The Indian constitution divides taxation powers between Centre and States. Due to multiple taxes, there has been a cascading effect of tax (tax on tax) and double tax.
Why has it not been implemented?
The constitution has to be revised, and a consensus must be reached within states. While earlier State Government were not impatient for the GST as they were of the view that it could lead to revenue losses for them, recent developments in India indicate that most states have recognized a compensation formula that will reimburse them for their losses.
Salient Features of GST:
• Businesses operating in multiple states would need multiple registrations.
• United Nations bodies would be issued a unique Identification code or UID.
• Multiple Registrations are permitted for those operating in multiple business verticals within the state.
• Unique department identification numbers will also be issued for Government departments.
Goods and Services rate is composed of two rates, one of CGST and one of SGST. The Central Government would collect central Goods and Services Tax (CGST) and Integrated Goods and Services Tax (IGST), and the State Government would collect state Goods and Services Tax (SGST).
For better Clarification of CGST and SGST let’s assume,
A dealer in Delhi sold goods to the consumer worth Rs. 1,00,000. The GST rate is 18% comprising the rate of CGST rate of 9% and SGST rate of 9%; in such case, the dealer collects Rs. 18,000, and Rs. Nine thousand will go to the CGST and RS. Nine thousand will go to the Delhi Government.
Another example of the clarification of IGST,
A dealer in Rajasthan sold goods to its dealer in Maharashtra worth Rs. 10,000. The GST rate is 18% consisting of CGST and SGST rate of 9% each; in such cases, the dealer has to charge Rs. 1800 as IGST.