WHAT IS GOODS & SERVICE TAX (GST) SCHEDULED TO BE LAUNCHED ON 1ST. JULY ?

 

The Goods and Services Tax or GST is scheduled to be launched on the 1st of July, and it is set to revolutionize the way we do our taxes. But what is GST and how will it reform the current tax structure? And most importantly, why does the country need such a huge overhaul in its taxation policies?   The Goods & Servic Tax(GST) is an indirect tax throughout India to replace taxes levied by  the central and state governments. It is introduced as The Constitution (One Hundred and Twenty Second Amendment) Act 2017, following the passage of Constitution 122nd Amendment Bill. The GST is governed by GST Council and its Chairman is Union Finance Minister of India – Arun Jaitley. Under GST, goods and services will be taxed at the following rates, 0%, 5%, 12%, 18%, 28%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold.  The reform process in indirect tax regime of India was started in 1986 by Vishwanath Pratap Singh by introduction of Modified Value Added Tax (MODVAT). Goods and services tax (GST) will subsume various indirect taxes including central excise dutyservices tax, additional customs duty, surcharges, state-level value added tax and Octroi.[4][5] Other levies which are currently applicable on inter-state transportation of goods are also likely to be done away with in GST regime. The following taxes will be bound together by the GST:

  • Central Excise Duty
  • Commercial Tax
  • Value Added Tax (VAT)
  • Food Tax
  • Central Sales Tax (CST)
  • Octroi
  • Entertainment Tax
  • Entry Tax
  • Purchase Tax
  • Luxury Tax
  • Advertisement tax

GST will be levied on all transactions such as sale, transfer, purchase, barter, lease, or import of goods and/or services. India will adopt a dual GST model, meaning that taxation is administered by both the Union and State Governments. Transactions made within a single state will be levied with Central GST (CGST) by the Central Government and State GST (SGST) by the government of that state. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced. IGST complicates tax collection for State Governments by disabling them to collect the tax owed to them directly from the Central Government. Under the previous system, a state would have to only deal with a single government in order to collect tax revenue.

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