Goods and Service Tax in India

In: Business and Management

Submitted By avaniraghuwansi
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Pages 9
What is GST?

The Goods and service tax is an initiative towards a reform in which this tax will replace all the indirect taxes in the Centre as well as the State, which can be levied in case of a sale being made or a service being provided. It is especially necessary in the current scenario, due to the degrading effects of the present tax system of CENVAT and State Vat system and the other complexities that prevail in the tax system of India.

Some of the taxes that will be replaced under the central taxes are Service Tax, Surcharges, Central Excise Duty, Customs Duties and other Excise Duties.

Some of the taxes that will be replaced under the state taxes are Luxury Tax, Entertainment Taxes, Tax on gambling and betting, Lottery Taxes, surcharges etc., as long as they are related to entry tax and the supply of goods and services.

Due to reasons, which are social, environment related as well as those related to import dependence, certain products like high-speed diesel, alcohol (human consumption) is not included.

Also, the direct taxes will be exempted from the GST, including capital gains, corporate and income tax.

To better understand GST, consider the following:
There exists a manufacturer, retailer and dealer (wholesaler). Goods and Service Tax is 10%.
Now assume that the manufacturer buys the raw materials worth Rs 100 for Rs 140. Therefore, the total GST he will pay is Rs 4 by getting a tax credit of Rs 10 on the raw materials he had purchased. Now, the wholesaler too, who sells it for Rs 150 will pay Rs 2 as the total GST. The retailer will then sell the product for Rs 170 and he will pay Rs 2 as the total GST with the tax credit for the good, which eventually comes up to Rs 15.

It’s Implication On Tax Revenue

Will the implementation of GST result in the state government to lose out? That is one issue, which States might fear about,…...

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