More than a decade, after the idea was first conceived in the budget speech, Goods and Services Tax (GST) finally rolled out on 1st July, 2017. This much-awaited indirect tax reform, the biggest one since independence, has become one month old now. The period of one month has been a period of confusion, questions and research for all of us. From the task of migration to GST –to- research on coding –to- uploading invoice details – every task was a concept to deal afresh. However, on our way, it appears that all this hard work will pay off and we will be rewarded with the benefits of the reforms made by GST – a ONE Nation, ONE Market, ONE Tax (Jammu & Kashmir also joins the nation’s biggest indirect tax reform!!).
Earlier, the multiple tax regimes made business enterprises and even common man face difficulties, directly or indirectly, as they had to deal with a numbers of taxes. More than a dozen of taxes viz., Service Tax, Value Added Tax, Sales Tax, Luxury Tax, and Entertainment Tax and so on, were levied on the products. The compliance rules were also complicated. Also, input tax credit of taxes paid could not be availed.
GST seeks to unify the entire country into a single market with only one value added tax levy on all goods and services across states at the point of consumption, subsuming more than a dozen taxes and levies that are imposed at present. Earlier if a supplier made inter-state supply, then excise duty credit would lapse. Also CST paid could not be set off against VAT payable. Hence, all these taxes were getting added to the cost of the product. Due to this, it would be difficult for inter-state suppliers to trade outside a state. But in the present scenario, GST paid on manufacture (CGST & SGST) can be set off against GST payable on inter-state supplies (IGST). Further, IGST paid can be set-off against GST payable on further intra-state supplies (CGST & SGST). Moreover, taxes paid on services can be utilised for disposing off the tax liability on goods and vice versa.
We need to understand here the rules to set-off credits of taxes paid:
- CGST credit can be utilised sequentially first towards payment of CGST liability and then towards IGST liability.
- SGST credit can be utilised sequentially first towards payment of SGST liability and then towards IGST liability.
- CGST credit cannot be utilised towards payment of SGST liability and vice versa.
- IGST credit can be used sequentially first for IGST, then for CGST and then for SGST.
Many people across India have contributed to the implementation of GST in their own way. Many apps and call centres have been created to ensure smooth implementation of GST. An app named ‘GST Rates Finder’ has been launched to help users to find rates of GST for various goods and services. For the first two months, return filing process has been relaxed so as to enable the assessees to get accustomed to the model of GST Network. The applicability of provisions relating to tax deduction at source and tax collection at source has been postponed till the date which will be notified later.
GST has enabled quick movement of goods which has resulted in reduction of time consumed during transit. This has resulted in hassle-free movement of goods. Also, supplies can be made directly from the principal place of business without any compulsion to open branch offices in various states. Many cesses, such as Swachh Bharat Cess, Krishi Kalyan Cess, etc., have been subsumed in GST. Compensation Cess (i.e. 28% GST + Compensation Cess of 12%) has been levied on five products namely, Tobacco, Pan Masala, Coal, Aerated Drinks and Luxury Goods.
Introduction of GST would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%. Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. There may also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved tax compliance. Last but not the least, this tax, because of its transparent character, would be easier to administer.
Nidhi Jain, Delhi 