by GST stands for “Goods and Services Tax”, and aimed at creating a single, unified market that will benefit both corporates and the economy. It is an indirect tax that will lead to the abolition of all other taxes such as octroi, central sales tax, state-level sales tax, excise duty, service tax, and value-added tax (VAT). Both the state and the central governments will impose GST on almost all goods and services produced in India or imported into the country.
GST is levied at every stage of the production distribution chain with applicable set off in respect of the tax remitted at previous stages. It is basically a tax on final consumption. GST is to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. GST is an destination based taxed. Its main objective is to consolidates all indirect tax levies into a single tax, except customs (excluding SAD) replacing multiple tax levies, overcoming the limitations of existing indirect tax structure, and creating efficiencies in tax administration.
Extent and Commencement
Part I of the Constitution of India states: “India, that is Bharat, shall be a Union of States”. It provides that territory of India shall comprise the States and the Union Territories specified in the First Schedule of the Constitution of India. The First Schedule provides for twenty-nine (29) States and seven (7) Union Territories.
Part VI of the Constitution of India provides that for every State, there shall be a Legislature, while Part VIII provides that every Union Territory shall be administered by the President through an ‘Administrator’ appointed by him. However, the Union Territories of Delhi and Puducherry have been provided with Legislatures with powers and functions as required for their administration.
India is a summation of three categories of territories namely:
(i) States
(ii) Union Territories with Legislature
(iii) Union Territories without Legislature.
The State of Jammu and Kashmir enjoys a special status in the Indian Constitution in terms of Article 370 (Abolished) of the Indian Constitution. The Parliament has power to make laws only on Defence, External Affairs and Communication related matters of Jammu and Kashmir. As regards the laws related on any other matter, subsequent ratification by the Government of Jammu and Kashmir is necessary to make it applicable to that State. (Amendment to whole India)
Therefore, the State of Jammu & Kashmir were required to pass special laws to be able to implement the Goods and Services Tax Acts. Accordingly, the assembly of J&K passed the GST bill in the first week of July. Subsequently, Honourable President of India had promulgated two ordinances, namely, the CGST (Extension to Jammu and Kashmir) Ordinance, 2017 and the IGST (Extension to Jammu and Kashmir) Ordinance, 2017 making the CGST/ IGST applicable to the State of Jammu and Kashmir, w.e.f. 8th July, 2017.
Once the laws are passed by the State of Jammu & Kashmir, the Union Government will have to amend the Central Goods and Services Act, 2017 to delete the phrase that such provisions do not apply to the State of Jammu & Kashmir. After the promulgation of ordinance, the India has adopted GST in its form across the country.
Commencement:
The CGST Act came into operation on 01.07.2017, the date appointed by the Central Government. However, certain provisions i.e. Sections 1,2,3,4,5,10,22,23,24,25,26,27,28,29, 30,139, 146,164 were made effective form 22.6.2017.
Benefits of GST
Regulation of Unorganised Industries
Certain sectors in the country, such as textile and construction, are highly unorganised and unregulated. GST aims to ensure that payments and compliances are done online, and input credit can only be availed when the supplier accepts the amount, thus ensuring that these industries have regulation and accountability.
Common Portal
Since technology will be used heavily to drive GST, taxpayers will have a common portal (GSTN). The procedures for different processes like registration, tax payments, refunds, returns, etc., will be automated and simplified. Whether it is the filing of returns, filing of refund claims, payment of taxes, or even registration, all processes will be done online via GSTN. The verification of input tax credit will be done online too, and input tax credit across the country will be matched electronically, thereby turning the process into an accountable and transparent one. As a result, the process will also be much quicker since the taxpayer will not have to interact with the tax administration.
Simpler and Lesser Number of Compliances
Compliance will be simpler through the harmonisation of tax rates, procedures, and laws. Synergies and efficiencies are expected across the board thanks to common formats/forms, common definitions, and common interface via the GST portal. Inter-state disputes such as those on e-commerce taxation and entry tax that currently prevail will no longer cause concerns, while multiple taxation on the same transactions will also be removed. Compliance costs will also reduce as a result.
Cascading of Taxes
The cascading of taxes will be prevented by GST as the whole supply chain will get an all-inclusive input tax credit mechanism. Business operations can be streamlined at each stage of supply thanks to the seamless accessibility to input tax credit across products or services.
Common Procedures
The procedures for refund of taxes and registration of taxpayers will be common, while the formats of tax return will be uniform. The tax base will also be common, as will the system of assortment of products or services in addition to the timelines for each activity, thereby ensuring that taxation systems have greater certainty.
Lowered Tax Burden on Industry and Trade
The average tax burden on industry and trade is expected to lower because of GST, resulting in a reduction of prices and increased consumption, which will eventually increase production and ultimately enhance the development of various industries. Domestic demand is set to increase and local businesses will have greater opportunities, thus generating more jobs within the country.
Benefits to Industry and Trade
- Elimination of cascading of taxes thanks to the seamless flow of tax credit from the supplier or manufacturer to the retailer or user.
- Uniform procedures for registration, filing of returns, payment of taxes, and tax refunds.
- Higher efficiency with regards to the neutralisation of taxes so that exports are globally competitive.
- Small scale suppliers can make the most of the composition scheme to make their goods less expensive.
Benefits to the Economy
- Increase in manufacturing processes.
- Creation of a unified common market.
- Generation of more jobs through enhanced economic activity.
- Enhancement of exports and investments.
