5th April 2017
An introduction of GST has by far proven to be one of the most effective and rational step towards curbing the effects of indirect taxation in India. Ever since 2005 when the government introduced VAT, it had little awareness about its repercussions. This reform back then was a hindrance in the road to progress. In order to replace the VAT taxation system with something new GST was introduced.
GST in India was first talked about in the year 2006-2007 as a reference made by then finance minister P. Chidambaram to be introduced as a centralised tax system. In 2015 Lok Sabha requested an amendment seeking the Central government to introduce GST as the taxation system in India. This was proposed to be introduced as a new article 246A.
This bill was supposed to be rolled out back in 2016, due to it’s hard to meet deadlines and lack of planning its introduction has now been scheduled on July 1, 2017 if all fairs well. This reform also promises a boost in the GDP between 0.9-1.7% which is considered to be a fairly good growth. Apart from the boost in GDP GST bill will also promote fairer tax collections, increase in export, seamless interstate trade and curb cascading effect of taxes.
To understand the broad spectrum of GST we need to look through the difference of both taxation systems.
GST through covers a large spectrum there are a few players that can be exempted from being covered under this taxation system. For instance under agricultural sector, farmers are exempted from registering under GST. On the other hand intermediaries who deal with agricultural products will be subjected to this new tax reform.
Apart from the above mentioned and few other exemptions GST is prescribed to be charged on all good and services. In case of intrastate supply of goods the supplier is expected to charge central tax or State tax. When it comes to interstate supply of goods services and integrated tax will be charged.
The rate of this GST will depend upon the price mutually agreed between both the parties which is the supplier and the recipient. If the tax payer is registered with GST they can enjoy the benefit of input tax credit which will be paid to the supplier.
The chain of tax credit will finally come to an end when the product or the service finally reaches its final destination; to the customer. Integrated tax will be charged on goods that are imported and will be charged under the Customs Tarrif act. Post the accounted exceptions, the import of services will hence be taxed on reverse charge basis.
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