Goods And Services Tax (GST): History, Important and Benefits

What is Goods and Services Tax (GST)?

The Goods and Services Tax (GST) is an indirect tax (or consumption tax) levied on the supply of goods and services in India. It is a comprehensive multi-stage, destination-based tax with a comprehensive process as it subsumes almost all indirect taxes with the exception of a few. Others are returned to all parties at various stages of production.

History of (GST) Goods and Services Tax:

A common "Goods and Services Tax (GST)" was proposed between India's former Prime Minister Atal Bihari Vajpayee and his economic advisory panel and carried forward in 1999, with three former RBI governors IG Patel, Bimal Jalan and formed a committee by C Rangarajan under the chairmanship of West Bengal Finance Minister Asim Dasgupta, which formulated the GST model. Following which, based on the discussions between the central government, the EC released its first Discussion Paper (FDP) on GST in November, 2009. Explained the features of GST proposed by the FDP and made the basis rules for the current GST laws.

Seven months after the formation of the then Modi government, the new Finance Minister Arun Jaitley introduced the GST Bill in the Lok Sabha, where the BJP had a majority. In February 2015, Jaitley set another deadline of 1 April 2017 to implement the GST. In May 2016, the Lok Sabha passed the Constitution Amendment Bill, paving the way for GST. Finally in August 2016, the amendment bill was passed. Over the next 15 to 20 days, 18 states ratified the Constitution Amendment Bill and President Pranab Mukherjee gave his assent to it.

Subsequently, these bills were passed by the Lok Sabha on 29 March 2017. Rajya Sabha passed these bills on 6th April 2017 and then enacted as Act on 12th April 2017 and finally after the enactment of various GST laws, Goods and Services Tax was introduced all over India from 1st July 2017 was. In which the Jammu and Kashmir state legislature passed its GST Act on 7 July 2017.

Why is the Goods and Services Tax (GST) important?

According to the Indian Constitution, the power to levy tax on the sale of goods rests with the state government and the power to levy tax on production and services rests with the central government. As per the taxation structure in practice, excise duty is levied on the product produced by the producers and custom duty is levied at the time of import. When the commodity is sold in the Indian market, sales tax is levied on the products.

In this way, the current system of taxation has multiple taxes at every step, which means that taxes are levied on the taxes themselves which is also known as the cascading effect. Therefore, the main objective of the government while introducing the Goods and Services Tax is to bring about uniformity in taxation across the country.

Benefits of Goods and Services Tax (GST):

Benefits for the businessman:

Removal of Cascading Tax: Cascading tax, is when the tax is collected at each stage of the process until it is sold to the end consumer, thus eliminating the double taxation process. the resulting. GST aims to follow One Nation, One Tax policy with a single tax structure across the country.

Ease of doing business and standardization: Multiple taxes are being levied at many points, and all other associated factors make it very difficult for businesses to operate in India. One of the main benefits of GST is that it is standard across the country and will simplify indirect taxes, making it easier to do business.

Benefit to producers and exporters: Lower cost of locally manufactured goods and services by subsuming central and state taxes in GST and complete and comprehensive absorption of input goods and services and phasing out of central sales tax Will go This will increase the competitiveness of Indian goods and services in the international market and will also boost Indian exports. Improving Competition: Reducing transaction costs in doing business will lead to improved competitiveness for trade and industry.

Easy Compliance: A robust and comprehensive Information Technology system will be the foundation of the GST regime in India, hence all tax payment services like registration, returns, payments etc. will be available online to the taxpayers, making compliance very simple and transparent.

Benefits to the Central and State Governments:

Ease of administration: Many indirect taxes, both at the central and state level, create complexity and confusion, making it difficult to administer. Due to a robust and complex IT system, the administration of indirect tax under GST will be much simpler.

Enhanced tax compliance: The design of GST has an inbuilt mechanism that incentivizes traders who are tax compliant by moving input tax credit through the value chain. With this, a robust IT infrastructure is expected to result in better tax compliance.

Higher revenue: Because indirect taxes were implemented in multiple phases, the cost of collecting taxes was also high. However, GST is expected to reduce this cost for the government, leading to higher revenue efficiency. Further revenue gains are expected on account of other surrounding factors.

Increase in investment in India: According to Christine Lagarde, Managing Director IMF, GST will help create jobs, boost education, boost domestic manufacturing, increase revenue, etc.

Benefits to the economy:

Growth of GDP (Gross Domestic Product): Introduction of GST will help in reducing tax rates, removing multiple point taxation and increasing revenue. Basically, a uniform tax system would make India a common market, and promote trade, commerce and exports. Together, these will help accelerate economic growth and boost the country's GDP. Many experts are expecting this growth to be around 1-2% and expect the GST to bring down inflation by around 2%.

Benefit to the consumer:

Transparency: The complexity of the current indirect tax structure prevents transparency. GST being a uniform tax system, it will give necessary information to the end consumers and help in creating a transparent environment.

Relief in overall tax burden: The present system has several complexities, which have a cumulative effect on pricing for the end consumer. In the present system the prices of all commodities are increased by multiple indirect taxes collected at all the progressive stages of the value chain. GST is expected to reduce the overall tax burden on many items, thus ultimately benefiting the consumer.