GST (Goods and Services

Tax)
Biggest Tax Reform Since
Independence..

Introduction
Introduction of Goods and Services Tax (GST) will
indeed be an important logical step towards a
indirect tax reforms in India.
The scheme is supposed to be implemented in
India from 1st April 2016, however it may get
delayed since the NDA government does not
have majority in Rajya sabha (The upper house
of parliament or the house of states).
Further, Punjab and Haryana are reluctant to
give up purchase tax, Maharashtra is unwilling
to give up octroi, and all states wanted to keep

Meaning of Tax
Taxes are the amount of money government
impose on an individual orcorporate directly or
indirectly so as to generate revenue or to keep in
check any black money activities in India.
If tax is
levieddirectlyonpersonalorcorporateincome,
then it is adirect tax.
If tax is levied on thepriceof a good or service,
then it is called anindirect tax.
The purpose oftaxationis tofinancegovernment
expenditure.

Value Added TaxWhen we pay an extra amount of price for the

goods and services we consume or buy, that
extra amount of money is called as VAT. This
taxes is about to be replaced by Goods and
Services Tax.
Current rateOn agricultural goods-4%
On luxury items- 20%
Customs Duty
Customs Duty is a type of indirect tax levied on
goods imported into India as well as on goods
exported from India.In India, the basic law for
levy and collection of customs duty is Customs
Act, 1962. It provides for levy and collection of
duty on imports and exports.

Excise Duty
An excise or excise tax is an inland tax on the
sale, or production for sale, of specific goods or a
tax on a good produced for sale, or sold, within a
country or licenses for specific activities. Excises
are distinguished from customs duties, which are
taxes on import.
Service TaxService 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. It is charged on all services
except the services in the negative list of
services.
Current rate-12.36%

What is GST?
G Goods
S Services
T Tax
Goods and Service Tax (GST)is a comprehensive
taxlevy on manufacture, sale and consumption of
goods and serviceat a national level under which no
distinction is made between goods and services for
levying of tax.
It will mostlysubstitute allindirect taxeslevied on
goods and services by the Central and State
governments in India.

OBJECTIVES OF GST
One of the main objective of Goods & Service
Tax(GST) is to eliminate the doubly taxation i.e.
cascading effects of taxes on production and
distribution cost of goods and services.
The exclusion of cascading effects i.e. tax on tax till
the level of final consumers will significantly improve
the competitiveness of original goods and services in
market.
Introduction of a GST to replace the existing multiple
tax structures of Centre and State taxes is not only
desirable but imperative. Integration of various taxes
into a GST system would make tax system

Cascading Effect of Present Tax

system
(assuming tax rate=5%)

VAT(Value Added Tax)

Value added tax is imposed on amount of
Value addition made,
wherevalue addition = Sale PricePurchase Price
Thus, VAT= Output Tax - Input 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

Illustration of VAT

Problems with VAT

A major problem with VAT is the way it
taxes inputs and outputs.
Input are taxed at 4 percent and outputs
at 12.5 percent.
It is not uniform in nature.
VAT is different for different States.
Different rates of taxation for different
goods.

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.
At all stages of production and distribution,
tax is borne by the final consumer.
All sectors are taxed with very few exceptions

GST Structure

Centre
GST

State
GST

GST to be
levied by
Centre

GST to be
levied by
State

Dual GST
GST to be levied
by the Centre
and the States
concurrently

Proposed GST Rates

Taxes to be subsumed in GST

Following Central Taxes should be subsumed
under the Goods and Services Tax:
Central Excise Duty
Additional Excise Duty
The Excise Duty levied under the Medicinal and
Toiletries Preparation Act
Service Tax
Additional Customs Duty, commonly known as
Countervailing Duty (CVD)
Special Additional Duty of Customs - 4% (SAD)
Surcharges, and
Cesses

The following State taxes and levies would be,to

begin with, subsumed under GST:
VAT / Sales tax
Entertainment tax (unless it is levied by the local
bodies).
Luxury tax
Taxes on lottery, betting and gambling.
State Cesses and Surcharges in so far as they relate to
supply of goods and services.
Entry tax in lieu of Octroi.

Product Excluded from GST

Petroleum Product
Alcohol
Tobacco Product
Purchase Tax

Illustration of GST

Benefits of GST
Transparent Tax System
Uniform Tax system Across India
Reduce Tax Evasion
Export will more competitive

Hurdles in Implementation
Dispute between centre and state over Tax
Sharing
Highly sophisticated IT infrastructure
required .
Issue of taxing financial services and ecommerce is to be appropriately addressed
and integrated.
Political Imbalance

GST Global Scenario

More than 140 countries have already
introduced GST/National VAT.
France was the first country to introduce
GST system in 1954.
Typically it is a single rate system but
two/three rate systems are also prevalent.
Canada and Brazil alone have a dual VAT.
Standard GST rate in most countries ranges
between 15-20%.