GST: A step to end multiplicity of taxes in India

GST Step

We all are aware that since India is a large country the constitution of India empowered the Central Government to levy excise duty on manufacturing and service tax on the supply of services. Further it empowers State Governments to levy sales tax or value added tax (VAT) on the sale of goods. This exclusive division of fiscal powers has led to a multiplicity of indirect taxes in the country. In addition, central sales tax (CST) is levied on inter-state sale of goods by the Central Government, but is collected and retained by exporting states. Further, many states levy an entry tax on goods in local areas. Taxes by Union Government, State Governments and the local governments have resulted in difficulties and harassment to the tax payer, as he/she has to contact several authorities and maintain separate records for each of them. In the current indirect tax structure in India, there is cascading of taxes due to ‘tax on tax’. No credit of excise duty and service tax paid at the stage of manufacture is available to traders while paying the state level sales tax or VAT. Further, no credit of state taxes paid in one state can be availed in other states. Hence, the prices of goods and services get artificially inflated.

So what is the solution to all this? And how will Goods and Services Tax (GST) put an end to this? These are two very important questions that people are talking about these days. To find an answer to these questions we will have to first understand what is Goods and Services tax. It is a proposed system of indirect taxation in India. It merges most of the existing taxes into single system of taxation. GST would be a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India, to replace taxes levied by the central and state governments. Goods and Services Tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method. This method allows GST registered businesses to claim tax credit to the value of GST they paid on purchase of goods or services as part of their normal commercial activity. Taxable goods and services are not distinguished from one another and are taxed at a single rate in a supply chain till the goods or services reach the consumer. Administrative responsibility would generally rest with a single authority to levy tax on goods and services. Exports would be zero rated and imports would be levied the same taxes as domestic goods and services adhering to the destination principle. We will all have to beware of the rumours being spread about GST. There are many benefits that common men will get once GST comes into force such as a unified tax system; less tax compliance and a simplified tax policy as compared to earlier tax structure; removal of cascading effect of taxes; due to less burden of taxes on manufacturing the cost of manufacturing will reduce, due to reduced costs some products like cars will become cheaper, low prices will also help increase in demand and consumption of goods, increase in demand will further increase productions. This will help curb the circulation of black money and help boost the economy

I believe this is very positive move by the central government to regulate prices of goods and taxes levied on them. So let’s hope that Goods and Services Tax system benefits common man and also helps strengthen our country’s economy in the days to come.

Source : http://www.navhindtimes.in/gst-a-step-to-end-multiplicity-of-taxes-in-india/

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