The term GST is used for Goods and Services Tax. It is a comprehensive indirect tax proposed to be levied on manufacture, sale and consumption of goods and services throughout India. The present system of taxation includes multiple taxations at the Centre and State level. The proposed GST is likely to replace these taxes with taxation under a common integrated platform, facilitating a common national market.
The Goods and Service Tax GST happens to be one of the biggest taxation reforms in India. It had been introduced in the Parliament as the one hundred and twenty second amendment bill, by Finance Minister ArunJaitley on the 19th of Dec 2014. The LokSabha voted in favour of the bill and passed it on the 6th of May, 2015 with a strong mandate of 352 votes for it and only 37 against it. The bill was moved to the RajyaSabha on 11th May, 2015 from where it has not yet been passed.
The history of GST in India dates back to the year 2000, when the Vajpayee government had initiated the process by setting up an empowered committee. The committee was given the task of designing the GST model and overseeing the IT back-end readiness for rolling it out. The reform with its seeds sown almost 15 years back has been moving forth and back in a political stalemate. It has been through number of committees which have come out with various recommendations. With an extensive research, the GST now stands at a platform that makes it ripe for adoption.
The Goods and Services Tax is likely to be simple, transparent and a very efficient system. It has been adopted by 140 countries around the world and is running successfully. Countries like the UK, Germany, Australia, and even the smaller ones like Singapore and New Zealand are reaping the benefits of GST. Each of the countries has its own history with the implementation of GST, and also has systems and policies of taxation that suits their own taxation laws and practices.
India being a Federal state will have the dual mode of GST. It will bring the taxation at the Central level known as CGST, and also at the state level (SGST). To take care of the inter-state transactions the Integrated GST (IGST) has been mooted. It would comprise of CGST plus SGST and would be levied by the Centre. The taxes proposed to be subsumed under CGST include the Central Excise duty, Service Tax, CVD, SAD, and countervailing duty etc. The SGST will take care of the VAT, entertainment tax, and luxury tax etc.
Recently the revenue neutral rate for the GST has been brought out very recently by the Subramanian panel. It has pegged the revenue neutral rate at 15~15.5 per cent which is quite inline the expectations. At this rate the government will earn the same amount of revenue as it is getting under the current taxation system.
The GSTN is the IT network envisaged to help in the smooth rollout of the reform and to ensure that the flow of credit begins to the government vaults.
The GST has huge potential remaining to be unlocked for the growing economy like India. One of the greatest expectations on the anvil is the growth of country’s GDP by 1 to 2 per cent.