[email protected] 1 Unit IV
Managerial Aspects of Business Concept of GST
GST stands for “Goods and Services Tax”, and is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level.
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.
Simply put, goods and services tax is a tax levied on goods and services imposed at each point of sale or rendering of service. Such GST could be on entire goods and services or there could be some exempted class of goods or services or a negative list of goods and services on which GST is not levied. GST is an indirect tax in lieu of tax on goods (excise) and tax on service (service tax). The GST is just like State level VAT which is levied as tax on sale of goods. GST will be a national level value added tax applicable on goods and services.
A major change in administering GST will be that the tax incidence is at the point of sale as against the present system of point of origin. According to the Task Force under the 13th Finance Commission, GST, as a well-designed value added tax on all goods and services, is the most elegant method to eliminate distortions and to tax consumption.
One of the reasons to go the GST way is to facilitate seamless credit across the entire supply chain and across all States under a common tax base. It is a tax on goods and services, which will be levied at each point of sale or provision of service, in which at the time of sale of goods or providing the services the seller or service provider can claim the input credit of tax which he has paid while purchasing the goods or procuring the service. This is because they include GST in the price of the goods and services they sell and can claim credits for the most GST included in the price of goods and services they buy. The cost of GST is borne by the final consumer, who can’t claim GST credits, i.e. input credit of the tax paid.
Example: A product whose base price is ₹ 100 and after levying excise duty @ 12%value of the product is ₹ 112. On sale of such goods VAT is levied @ 12.5% and value to the ultimate
[email protected] 2 consumer is ₹ 126. In the proposed GST system on base price of ₹ 100 CGST and SGST both will be charged, say @ 8% each, and then the value to the ultimate consumer is ₹ 116. So, in such a case the industry can better compete in global environment.
Therefore, GST is a broad based and a single comprehensive tax levied on goods and services consumed in an economy.
What is Indirect Tax?
The indirect taxes are the levies made by Central and State government on the expenditure, consumption, services, rights and privileges yet not on the property or income. This includes duties of customs paid on imports, as well as excise duty paid on production and value added tax on certain stages of production and distribution of products etc.
All these comprise to make indirect taxes since they are not directly applicable on the consumer’s income. Considering that indirect taxes are less as compared to income tax due to invisibility on pay slip, various state agencies tend to raise these taxes so as to generate higher revenue. Indirect tax is often also known as the consumption tax, since they are a regressive measure in application, and not rooted in paying ability.
Types of Indirect Taxes Goods and Services Tax:
The law on GST was brought to action in July 2017, with 17 indirect taxes under its purview.
All major services and service tax has been subsumed under the GST- On the state level:
State excise duty
Additional excise duty
Service tax
Countervailing duty
Special additional custom duties At the central level, it covers:
Sales Tax
Entertainment Tax
Central sales Tax
Octroi and entry Tax
Purchase Tax
Luxury Tax
Taxes on lottery gambling and betting Levies on products outside GST purview:
Taxes on products that use alcohol and petroleum products.
Sales Tax:
The tax levied on the sales of goods. The Union Government imposes this sales tax on the Inter-State sale, while the sale tax on Intra-state sale is levied by the State Government. This tax has a three-segment bifurcation along
Inter-State Sale
Sale during import/export
Intra-State Sale Service Tax:
Service tax are indirect indices which taxpayers pay on various paid services. These paid services include-
Telephone
Tour operator
Architect
Interior decorator
Advertising
Health centre
Banking and financial service
Event management
Maintenance service
Consultancy service
Service tax interest is 15%
Value Added Tax:
The state governments collect this category of taxes. For instance, when a person buys a product that it is important, we pay an additional tax known as Value Added Tax. Paid to the government, the VAT has a rate that is composed along nature of item and respective state of sale.
Custom Duty and Octroi Tax:
Levied upon goods imported into the country from abroad. The tax of custom duty is paid at the entry port of a country such as the airport. The rate of taxation is variable as per product’s nature. Octroi is charged upon the goods entering a municipal zone.
Excise Duty:
Excise duty is an indirect tax form that is charged on the goods produced inside a country.
This duty is different from the custom duty. This is also known as CVAT, or Central Value Added Tax.
Anti-Dumping Duty:
This is levied upon goods that are exported at a rate less than the standard rate by the nation to some other nation. This tax is levied upon by the Central government.
Benefits of new GST
GST is aimed at reducing corruption and sales without receipts.
GST reduces the need for small companies to comply with excise, service tax and VAT.
GST brings accountability and regulation to unorganised sectors such as the textile industry.
With GST replacing multiple state and central taxes, the tax collected is likely to be distributed across the country, providing funds for development to the developing or underdeveloped pockets in India.
GST has reduced taxes on certain goods by 2% and others by 7.5%, such as smartphones and cars.
GST brings uniformity in the taxation process and allows centralised registration. This gives a chance to small businesses to file their tax returns every quarter via an easy online mechanism. This reduces the multiplicity of taxes as they do not have the resources to hire tax experts.
GST reduces logistics cost by eliminating border taxes and resolving check-post discrepancies. A 20% price drop in logistics cost for non-bulk goods is clearly an expected outcome.
GST points toward a positive impact on India’s GDP. It is expected to increase by at least 80% within the next couple of years.
The possibility of tax evasion is minimised completely with GST coming into action.
