GST - India
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The document discusses India's taxation system and the proposed Goods and Services Tax (GST). It describes the key features of direct and indirect taxes such as income tax, sales tax, and VAT. It then explains the proposed GST system, which will combine multiple indirect taxes into a single tax applicable to both goods and services. The GST is proposed as a dual GST with both central and state-level components. The complex structure and need for coordination between levels of government poses administrative challenges but is aimed at improving compliance and growth.
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GST - India
- 1. Tax Reformation in India
- 2. Tax • A fee charged ("levied") by a government on a product, income, or activity. • If tax is levied directly on personal or corporate income, then it is a direct tax. • If tax is levied on the price of a good or service, then it is called an indirect tax. • The purpose of taxation is to finance government expenditure. • One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning.
- 3. Sales Tax • Under sales tax, tax is levied on every sale made. • For example if a dealer (say A) sold goods to another dealer (say B) he collects local sales tax from such dealer which is normally included in his sale price.If dealer B again sells goods to another dealer (say C) he again collects tax on sales made by him.The tax levied by dealer B shall be on his sale price i.e (his purchase price + profit ). As his purchase price already includes tax paid by him,sales tax includes tax on tax already paid i.e it is repetetive in nature. Under VAT (value added tax) the tax is on sales made by any dealer levied only on value added at each selling point.so it is not repetetive in nature.
- 4. Value Added Tax(VAT) • Sales tax is retail only. • Value-Added tax is a tax at every step of the inventory process • Taxed at every step from manufacturer to distributor to warehouser to retailer to customer. • VAT is uniform; whereas sales tax differs from state to state.
- 5. Goods and Service Tax (GST) • The Goods and Service Tax (GST) is a Value Added Tax (VAT) to be implemented in India, from April 2016. • GST is comprehensive tax mechanism where in all major indirect taxes are clubbed into one, whether they are levied on services(service tax) or goods(excise and vat). • Government had promised that GST will reduce the compliance burdens at present. • One of the aims of introducing GST is to reduce the cascading effects of taxes which is the primary focus of VAT but vat system is not comprehensive enough to do so.
- 7. VAT Vs GST • VAT is value added tax (on products). GST (Goods and Services Tax) is like VAT but applies to Services also (apart from products). • In India, we have VAT and Service Tax. Whereas in many countries you have only GST that applies to both products and services.
- 8. History • In 2000, the Vajpayee Government started discussion on GST by setting up an empowered committee. • An announcement was made by Palaniappan Chidambaram, the Union Finance Minister, during the central budget of 2007–2008 that it would be introduced from April 1, 2010. • After this announcement, the Empowered Committee of State Finance Ministers decided to set up a Joint Working Group on May 10, 2007, with the Adviser to the Union Finance Minister and the Member-Secretary of Empowered Committee as co-convenors and the concerned Joint Secretaries of the Department of Revenue of Union Finance Ministry and all Finance Secretaries of the states as its members.
- 9. • The Joint Working Group, after intensive internal discussions as well as interaction with experts and representatives of Chambers of Commerce and Industry, submitted its report to the Empowered Committee on November 19, 2007. • This report was then discussed in detail in the meeting of Empowered Committee on November 28, 2007. • On the basis of this discussion and the written observations of the states, certain modifications were made, and a final version of the views of Empowered Committee at that stage was prepared and was sent to the Government of India (April 30, 2008). • The comments of the Government of India were received on December 12, 2008 and were duly considered by the Empowered Committee (December 16, 2008).
- 12. Centre Includes Compensation in GST Amendment Bill • The Centre has included in the Goods and Services Tax (GST) Constitutional Amendment Bill the compensation which will be paid to states for revenue loss on account of rolling out the new indirect tax regime. • The Bill was introduced in the Lok Sabha on December 19. • While liquor has been completely kept out of the GST, petroleum products like petrol and diesel will be part of the new regime from a date to be decided at a future date by the GST Council, which will have two- third of its members from states.
- 13. India's GST structure is complex, says IMF • Report says the proposed GST structure will require the Centre to coordinate with 30 states, which is an administrative challenge. • Even as the International Monetary Fund (IMF) says the proposed goods and services tax (GST) will improve tax compliance and enhance economic growth by 1-1.5 per cent over time, it finds the structure of the indirect tax regime in India complex. • “The GST design being contemplated is... fairly complex, with a dual administration arrangement that involves the tax authorities of both the Centre and states separately taxing a single transaction,” says the Fund in a report on India.
- 14. Analysis on Budget 2015 - 2016 • Excise Duty & Service Tax 1. Rise in Excise Duty & Service tax(ST increased to 14% from 12.36%) was seen making it getting sync with the GST rates of 27%. 2. This is because the GST rate would not be felt as a burden when it is adopted 3. Also, this would fund the CG as it requires compensation payment to the states
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