Goods and Service Tax (GST) is an indirect tax in India imposed when a customer buys a good it has been implanted in India on 1st July 2017. GST is regarded as an indirect tax imposed on the sale, manufacture, buying of goods. The aim of GST is to remove all the indirect taxes imposed on goods by the Indian Central governments and State governments.
The Goods and Service Tax (GST) is a new type of indirect tax which will remove all other types of taxes like sales tax, octroi tax, service tax, central and state sales tax imposed under the current multi-tax system.
The Goods and Service Tax (GST) is basically imposed on the supply of goods and services. GST is a single domestic indirect tax law for the entire country. Under the GST, the tax is imposed at every point of sale. The journey of GST started in the year 2000 when a committee was formed to draft law. From 2000 it took 17 years for developing the law. Finally, in the year 2017, the GST Bill was passed both in the Rajya Sabha and Lok Sabha and on 1st July 2017, the GST Law became effective.
Basically, there are three taxes that are applicable under the GST and they are:
The importance of GST Bill on Indian economy are as follows:
- GST increase in export by removing the custom duties applicable to exports.
- GST supports Small and medium- sized enterprises (SME).
- GST increases revenue by extending the tax base.
- GST enhanced Pan India operations.
- GST reduces burden of tax on producers and increases the growth through more production.
- GST provides transparency as the customers will exactly know about the taxes they are being charged.
- GST abolishes the cascading effect of tax.
- GST defined treatment for the operators of E- commerce.
- GST has reduced taxes on some goods by 2% while on the other hand it reduces taxes on other goods such as smartphones and cars by 7.5%.
- GST has a positive impact on India’s GDP as it is expected to increase by at least 80% within the couple of years.
Some disadvantages of GST Bill on the Indian economy are as follows:
- Operational costs increase under the GST.
- Costs increased due to software purchase.
- SMEs will have a higher burden of tax.
- During the middle of the financial year GST came into force.