Earlier in India there were two types of Indian Taxation System that would work which is – Direct Tax and Indirect Tax. Direct Tax referred to the taxes which were deducted from the salary or income of an individual without any intermediate between him and the government. Whereas Indirect Taxes were paid by an Intermediate like a shop owner from which the individual purchased XUZ materials. Indirect Taxes include – Excise duty, VAT, Service Tax, Custom Duty etc. All of these branches had their own tax rate and many times it differed within them also. Now that the GST Bill has been passed by the government all of these Indirect Tax come under a single umbrella known as GST – Goods and Services Tax. What is important to note here is that there is no more difference in the tax rate across different states, the whole nation is to pay a unified tax and thusis under a Unified Common Market.
All the goods and Services have a single rate of tax right from the manufacture to the consumer. One must know that India has adopted the Canadian model dual model of GST where citizens have to pay different GST Central government and different GST to State Government.
To elaborate it further let’s look at the Indirect taxes GST has subsumed within it –
It is important to note that there are three kinds of GST –
CGST (Central Goods and Services Tax) is revenue collected by the Central Government. SGST (State Goods and Services Tax) is revenue collected by the state government. IGST (Integrated Goods and Services tax) is collected by revenue of interstate sales.
The rate of GST in India is 0-28 percentage, where there are many sectors which are not either GST ready (Petrol, alcohol) or are exempted from GST count (Education, Healthcare, Pilgrimage, Metro Travel, Basic products like milk, Paneer, Cereal, Eggs, Meat etc.) The chart to the right side shows GST rate of some other selected countries.
GST is Online
Easy Compliance to all tax payers as registrations, returns, payments etc. would be available to the taxpayers online, which would make compliance easy and transparent. The complete GST process takes place electronically (from registration to filing returns), and it’s remarkably simple. In particular, it has been advantageous for start-ups, as they don’t have to run from place to place to even get various registrations such as VAT, excise, and service tax
GST creates one Unified Market
Fortunately, under GST, there is only one single, unified return to be filed. The number of returns to be filed has, thus, decreased. There are approximately 11 returns under GST, of which 4 are basic returns which apply under GST to all taxable persons. The key GSTR-1 will be manually populated and auto-populated with GSTR-2 and GSTR-3.GST will ensure uniformity and Structural Indirect Tax rates which will be common throughout the country, thereby increasing certainty and ease of doing business.