Introduction: Goodsand Service Tax (GST) as the name suggests is a tax levied when a consumer buysa good or service. It is meant to be a single, comprehensive tax that willsubsume all the other smaller indirect taxes on consumption like service tax,VAT etc. Before GST, apart from the central excise duty or service tax, therewere indirect taxes levied at multiple points on every product or service be itVAT/sales tax, Octroi, Luxury Tax etc.
which all added up to cut the consumerspocket. After GST, all the aforementioned indirect taxes have been subsumedunder a single tax. The GST is thecountry’s largest tax reform in the 70 years of independence and it will helpmodernize Asia’s third largest economy worth US$ 2 trillion with 1.3 billionpeople into a single market by bringing in a uniform indirect tax systemChandran N., CNBC.
com, Dec 2017. It was introduced as the Constitution (OneHundred and First Amendment) Act, 2016. Theconcept of GST was originally devised in France way back in 1954 and at presentit is being followed by 161 countries in the world.
India became the 162ndcountry in this list. There are basically two systems of GST viz., unified GSTand dual GST. India being a quasi-federal country has adopted the dualstructure of GST where tax is imposed by both the union and the states.Therefore, we have three forms of GST in India- the Central GST, the State GSTand the Integrated GST.
Body: All kinds of taxes in India areimposed by the Union and the state governments. The constitution provides that”no tax shall be levied or collected except by authority of law” (Article 265of the Constitution). Hence, the GST had to be introduced as the Constitution(One Hundred and First Amendment) Act, 2016. The main idea behind introductionof GST was to make India a single common market by bringing in one singleindirect tax which was to be imposed uniformly all over the nation.
The coreprinciple of GST thus is “One Nation One Tax One Market” Teltumbde A., MarginSpeak, Vol. 52, Issue No. 27, Jul 2017. The expectations of each and everystakeholder be it the government, taxmen, economists, industry and the commonmen are many.
The government believes that the former system of indirecttaxation had a cascading effect and the introduction of GST has rationalizedit. The taxmen believes that many areas of services which were earlier untaxedhave now been covered after the introduction of GST thereby expanding the baseof taxation. The economists believes that GST has enabled much more than simplyredistributing the tax burden from one sector or group in the economy toanother. The industry pressure groups believes that GST brings uniformity oftaxes pan India regardless of place of manufacture or distribution therebyproviding greater certainty and transparency of taxes. The common man believesthat GST has made India a common national market by providing an unbiased taxstructure which is business neutral irrespective of the geographical locations.If the GST is implemented properly, it has got many takeaways for all thestakeholders.
The challenges while implementingGST are also diverse. GST follows a fully online procedure. Beginning from theregistration of the assesses to filing of returns and the payment of taxes, onehas to be in touch with the online GST portal.
The small and medium sizedbusinesses will have to gradually adapt to this change by equipping themselveswith the required technical support and trained manpower. Even though it aimedfor simplification of tax structure but the presence of multiple slab ratesmakes it cumbersome while practical implementation. The regulatory compliancefor the Corporate Sector is going to be a hectic one. They have to file 37returns (3 returns per month plus one annual return) and that is just for onesingle state.
The organizations having network of branches across differentstates of India will have to file multiple returns in state specific manner.The IT infrastructure, MIS, Accounting and ERP Software needs to be updated toincorporate GST in them and the major challenge would be to tactfully andcarefully deal with bugs, technological issues pertaining to temporary serverproblems, blackouts etc. in the GST portal while logging in. The need for GST came out of thenecessity of making India a One Market Economy. The Constitution of Indiastates that, “India i.e., Bharat is a Union of States” Article 1(1). TheUnion is strong only if both the Centre and States are strong.
Here comes theconcept of Cooperative Federalism. The Indian concept of dual GST is also basedon this principle of Cooperative Federalism which is justified by theConstitution of India itself MyGovTeam, Blog.MyGov.in, Jul 2017. Government of India’s present Chief economicAdvisor Mr. Arvind Subramanian once stated that despite being a single country,it’s not a single market. There were too many taxes such as Central Sales Taxon inter-state sale of goods and services and numerous intra-state levies suchas VAT, Octroi etc. which ended up in raising the price of the goods.
The endconsumer thus ended up in paying higher prices since the sellers could not getInput Tax Credit (ITC) on all the taxes paid by them. This problem of cascadingeffect of taxes has been addressed by GST. The uniformity of tax rates acrossthe country with a system of seamless ITC have lead to a reduction in the costsof production and thus the consumer is being ultimately benefited. Not onlythis but also it has lead to an increase in the competitiveness of the Indianexporters in the global market thereby positively impacting the Make in Indiamission of the Honorable Prime Minister of India Mr. Narendra Modi. In thewords of present Finance Minister of India Mr. Arun Jaitley, “Old India waseconomically fragmented.
New India will create One Tax, One Market, and One Nation.It will be an India where Centre and states work together towards the commongoal of shared prosperity” preliminary text of Finance Minister, Mr. ArunJaitley’s address at the launch of Goods and Service Tax from Central Hall ofParliament, Parliament of India Archives, Jul 2017.Conclusion: The major impact of GST is that ithas turned India into a One Market Economy.
The cascading effect of indirecttaxes have been removed to a great extent but still certain commodities likePetroleum and Alcoholic beverages have been kept out of it. This directly meansthat the cost of transportation is impacting the price of the goods because theITC is not available in case of fuel expenses. The boost that it gives to theMake in India mission means that the foreign investors will be attracted toinvest in India. Moreover, the GST will be applied on imports; domesticmanufacturers on the other hand will be encouraged to export their productsoverseas. The prices of goods will be reduced which means that better goods andservices will be within the reach of alarge number of the population and as such increase the standard of living ofthe people. By all these things, the government is trying to create anatmosphere for strengthening the manufacturing sector in India. All the sectors of the economy be itthe small, medium, large, intermediaries, importers, exporters, traders,professionals and consumers shall be directly affected.
The GST is going tointegrate the economies of all the states of India and thereby make the Indianeconomy a single, unified and a strong one. The tax barriers between the statesare going to be broken and the taxation burden between the manufacturing andconsuming states is going to be equitably distributed. To sum up, the idea of One India,Strong India given by the first Home Minister cum Deputy Prime Minister ofIndia, Sardar Vallavbhai Patel is going to be fulfilled in the true sensethrough GST which is going to be a pan India tax i.e., “One Nation One Tax OneMarket”.