The dilemma of multiplicity of taxes is being experienced in India over a number of years, though introduction of CENVAT and VAT has considerably helped in reduction of such multiplicity but still the sorrow continues to prevail. The problem on account of CENVAT is that taxes like Additional Custom Duty, Additional Excise Duty, etc. are not included in it, whereas, Vat fails to include taxes such as Luxury tax, Entertainment tax and others. Added to this one of the main component of overall tax structure, Service Tax is ignored in both the cases. Thus, to overcome such miseries implementation of GST is being considered.
GST or Goods and Service Tax will include a uniform rate of taxation in all respect and would allow an implementation of an incessant link from theproducer of goods and service to the retailer’s stage and will also eradicate all cascading effects in such process.
The GST system is based on the same concept as VAT. Here, set-off is available in respect of taxes paid in the previous level against the GST charged at the time of sale. The GST model has some aspects which are as follows:
- Components: GST will be divided into two components, namely, Central Goods andService Tax and State Goods and Service Tax.
- Rate: Rates charged across all states and the central level will be uniform along with the regulations, definitions and classifications.
- Applicability: GST will be applicable to all Goods and sold or provided in India, except from the list of exempted goods which fall outside its purview.
- : GST will be charged and paid separately in case of Central and State level.
- Input : The facility of Input Tax Credit at Central level will only be available in respect of Central Goods and Service tax. In other words, the ITC of Central Goods and Service tax shall not be allowed as a set-off against State Goods and Service tax and vice versa.
- Pan Linked identification: Each taxpayer shall be provided with an unique 13 to 15 digit ID number for filing periodical returns with the Central and State government.
Thus, we get an overview of what the system of GST (Goods and Service tax) is likely to be and upon its implementation what benefits are we going to derive from it. All in all a very good proposal which one can look forward to which reduces the complexities of the tax system in respect to both, the taxpayer and the Tax authorities.