Question

India witnessed the launch of its biggest tax reform since Independence, the Goods and Services Tax (GST) characterized as 'The Good and Simple Tax' on July 1, 2017. While the Goods and Services Tax (GST) is focused on ironing out the creases left by the predecessor tax regime and enhancing ease of doing business, it will involve a wave of short term adjustments like obtaining multistate registrations, interpretation of provisions, determining the place of supply, transitional issues, etc. GST, which is a destination-based tax, has been introduced to subsume several state taxes like Value Added Tax, Entry Tax, Octroi, Luxury Tax, Purchase Tax, Entertainment Tax, etc. and federal taxes like Service tax, Central Excise Duties, Counter-vailing Duty, Additional Duties of Customs, etc. GST will thus replace all these taxes with one tax.
a. Examine the impact of GST in Indian context.
b. Compare the previous laws with GST Act.
c. Discuss the administrative machinery of GST in the country. How GST will enhance ease of doing business?

Answer 1

a. Impact of Goods and Service Tax (GST) in Indian Context.

1.Elimination of multiple taxes and double Taxation ;GST has subsumed majority of Indirect Taxes levies both at central and state level.Now only GST will be leviable uniformly on all goods and services.

2. Buoyancy to Government revenue ; GST is expected to bring buoyancy to government Revenue by widening tax base and improving tax payer compliance.

3.mitigation of ll effects of cascading ; GST has subsumed all the taxes and has allowed set off of prior stage taxes for transaction across the entire value chain.hence credit of full taxes can be taken under GST will mitigate ill effects and cascading effects of tax system because earlier Tax credit of VAT was not allowed against Excise.because VAT being state tax and Excise being central tax.but now state and central taxes are under one head GST.

4.Unified National Market.: GST aims to make india a common market with common tax rates and procedures.

b. Compare the previous laws with GST:

1. No set off : earlier certain taxes levied by state governments were not allowed to set off for payments of other taxes .

For example, when goods are manufactured and sold both Excise duty(CENVAT) and VAT were levied. though CENVAT and state level tax are essentially Value Added Taxes, set-off of one against credit of another was not possible as CENVAT was a central government levy and VAT was state government levy. But in GST credit for purchase and sales will be under same tax only one tax GST and hence under GST tax credit taking became very easy.

2. Variety of Taxes and Rules : if we take VAT as example then variety of VAT laws were there with different rates and different practices divided into separate economic areas. every state in India has their own VAT laws to be followed but now under GST there is only one law and one tax for whole India to e followed.

3. High compliance cost : all the taxes like excise, entry tax, VAT laws, service tax, octroi, all taxes created high compliance cost for taxpayers in form of returns,payments,registration etc. now under GST there is compliance cost only for one tax.

4.Double taxation : Earlier certain items were treated as both commodity as well as service depending on the business. GST is clear about the difference of service and goods.

c. How GST will enhance ease of doing business

1. Ease in compliance process ; GST is technologically driven as there is simplified ans automated procedure for various processes like filling of returns in GST is very easy for any business person also registration in GST has been very easy and fast.and also payment system in GST is fast and easy . This will help a business structure a hassle free tax management.

2. reduced compliance cost : Removal of multiple taxation of same transaction will alleviate the need for multiple record keeping for variety of taxes, thus business will require lessor manpower in maintaining records.

3. Harmonised laws, Procedures and rates of taxes, this will make compliance easier and simple also lead to greater certainty of the system.

4.More transparency and accountability : there is one portal GSTN which is for GST services like returns payments and other things. form this portal online electronic verification, matching of input tax credit across India has lead to encourage culture of compliance.