GST is a value-added tax levied at all points in
the supply chain with credit allowed for any tax paid on input acquired for use
in making the supply. It would apply to both goods and services in a
comprehensive manner, with exemptions restricted to a minimum.
In keeping with the federal structure of India,
it is proposed that GST will be levied concurrently by the Centre (CGST) and
the states (SGST). It is expected that the base and other essential design
features would be common between CGST and SGST across SGSTs for individual
states. Both CGST and SGST would be levied on the basis of the destination
principle. Thus, exports would be zero-rated, and imports would attract tax in
the same manner as domestic goods and services. Inter-state supplies within India
would attract an Integrated GST (aggregate of CGST and the SGST of the
destination State).
In addition to the IGST, in respect of supply of
goods, an additional tax of up to 1% has been proposed to be levied by the
Centre. Revenue from this tax is to be assigned to origin states. This tax
is proposed to be levied for the first two years or a longer period,
as recommended by the GST Council.
Benefit of GST
GST has been envisaged as an efficient tax
system, neutral in its application and distributionally attractive. The advantages
of GST are :
1.
Wider tax base, necessary for lowering tax rates and eliminating
classification disputes
2.
Elimination of multiplicity of taxes and their cascading effects
3.
Rationalization of tax structure and simplification of compliance
procedures
4.
Harmonization of center and state tax administrations, which would
reduce duplication and compliance costs
5.
Automation of compliance procedures to reduce errors and increase
efficiency.
Destination
principle
The GST
structure would follow the destination principle. Accordingly, imports would be
subject to GST,while exports would be zero-rated. In the case of inter-state
transactions within India, State tax would apply in the state of destination as
opposed to that of origin.
Taxes to be
subsumed
GST would replace most indirect taxes currently
in place such as:
Central Taxes
Central Excise Duty [including additional excise duties, excise duty
under the
Medicinal and Toilet Preparations (Excise Duties) Act, 1955]
Service tax
Additional Customs Duty (CVD)
Special Additional Duty of Customs (SAD)
Central Sales Tax ( levied by the Centre and collected by the States)
Central surcharges and
cesses ( relating to supply of goods and services)
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State Taxes
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