Goods and services tax, GST is a new introduction made by the government in India. The same shall be launched on 1st July 2017 abandoning the current taxation system on goods and services.it is a comprehensive of all the current taxes, a multi-stage and a destination based tax that shall be applied on every value added to the goods and services.
The introduction of GST involves an improvement in our taxation system. While in the olden times, only service tax was charged on goods and services, there was the problem of double taxation that lead to the introduction of VAT, excise duty, etc. Now, the input credit of VAT is available against the output of VAT. Similarly, the input credit of excise duty is available only against its output. However, calculation of VAT also includes the value of excise. Thus, the problem of double taxation still persists in the society. In order to evade double charges and complications in our taxation system, the government has decided to introduce GST. Let us find the differences in the current taxation and GST in India that might bring affect to your business:
No tax on tax
In the current regime, excise is first charged on the actual value after which VAT or CST is imposed on the value + excise. However, under GST, both central and state GST will be charged only on the actual amount. Thus, the double taxation issues will be resolved.
Input on central purchases
In the current taxation system, CST is charged on central purchases, but there is no input available for the same. On the other hand, GST ensures availability of input on central purchases which is also termed as IGST Credit.
Uniform tax rates
The tax rates in the current system aren’t uniform. They differ from state to state. In some states, they also levy a surcharge on the VAT. Thus, GST shall bring in uniform rates in the entire country.
Input on capital goods
In the current regime, 50% CENVAT is available on capital goods in the current year and the rest to the subsequent year. Further, the input for VAT differs from state to state. Under GST, the input shall be available in the initial year.
CGST and SGST on both goods and services
Presently, the VAT is charged only on the sale of goods by the state government. The service tax was applied to the services offered by the Central government. Under GST, both CGST and SGST will be applicable on goods and services. This further requires one to file both the taxes and returns.
Electronic duty credit registrar
There is tremendous confusion in the current regime. The excise and service tax applicable on one selling party does no match with the other purchasing party. This is because the sales are never mentioned as per the parties. However, these absent details will be mandatory to file under GST.
Abolishment of Form C & F
Unlike the present regime, now that input of CST purchases shall be accessible, these forms will be completely abolished.
GST in India launching from 1 July 2017 shall bring a huge impact on the economy. Like every component in the everyday life holds its own advantages and disadvantages, GST too shall be favourable for some and not for all. However, considering the overall development, it is probable to bring a positive effect on the economy.