An inner view to GST(Goods And Services Tax)

Recently GST(Goods
and services Tax) was in headlines and the proposal is going rounds in the
economic fraternity, GST when comes in to picture sooner or later will help
economic scenario to a very large extent and will create a utopia for the
companies and people. It is an important topic in terms of forthcoming
examinations,  So let’s understand what
GST is.

1.   
What is GST?
It is an indirect tax that will lead to the
abolition of all other taxes such as, 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.

2.   
What categories are
exempt from GST?
Exports will not be subject to GST. Direct taxes, such as
income tax, corporate tax and capital gains tax will not be affected.

3.   
How will GST benefit
the economy?
It will simplify India’s tax structure, broaden the tax base,
and create a common market across states. This will lead to increased
compliance and increase India’s  tax-to-gross domestic product ratio.
According to a report by the National Council of Applied Economic Research, GST
is expected to increase economic growth by between 0.9 per cent and 1.7 per
cent.  Exports are expected to increase by between 3.2 per cent and 6.3
percent, while imports will likel rise 2.4-4.7 per cent, the study found.

4.   
How will GST benefit corporate?
It will be beneficial for India Inc as the average tax burden on
companies will fall. Reducing production costs will make exporters more
competitive.

5.   
Will goods and
services become costly?
 
The highest rate of taxation under GST will be around 15
per cent in the first year, and eventually come down to 12 per cent in the
second year. By comparison, the current rate of the various indirect taxes
levied in India amounts to roughly 20 per cent. Goods deemed necessary or of basic
importance will be taxed at a lower rate.

6.   
Will state governments
lose out?
 
Some states fear that a uniform tax rate, if lower than
their existing rates, will dent collections.  However, the central
government has said it will compensate states for the potential revenue
loss. The reduced and uniform taxation will help more pouring of money in the
state.


7.   
Can states decide to
opt out of GST
?
In a deviation from its earlier stand, the government has agreed
for a phased roll-out of GST. States will also have the flexibility to opt
out of GST.

8.   
How will it become a
reality?
 
The GST can be implemented only through a Constitutional
Amendment Bill, which means it needs to be approved by not less than
two-thirds of the members present and voting in each House of Parliament.
The GST must also be ratified by the legislatures of at least one-half of
the states.