What is the Goods And services Tax (GST) :-
Earlier in India, many indirect taxes were applicable like Value added tax (VAT) , Central sales tax , Services tax , Excise duty , Entertainment tax , Luxury tax to name a few . But now with effect from 1st July 2017 GST has been introduced in India. With the introduction of GST all these indirect taxes will be abolished and only 1 tax i.e. GST will be levied or charged.
Background of GST in India:-
Often said that “Slow and study wins the race” which is perfect phrase for India. In India roughly 17 years before the first Bill of GST was presented by Shri Pranab Mukherjee , who at that time was Finance Minister in India. It took 17 years as many debates were held in Lok Sabha , Rajya Sabha , moreover a official GST committee was formed to look in the matters of GST and its effects on Indian economy. After much discussions, a consensus was formed between the Central and all States government. So, on 30th June 2017 midnight at 12 AM president Shri Pranab Mukherjee and Prime Minister Shri Narendra Modi together rang the bell at Central Hall of the Parliament. GST appilcation was also introduced to give comfort to business enterprises in obtaining any sought of information, obtaining GST – ID Number etc.
Purpose or Advantages of Goods and services tax (GST) :-
-> The primary motive of introducing GST is to abolish all kind of multiple indirect taxes and levy or charge only one tax called GST. due to this commodities will become cheaper and some expensive also. But as it is said “1 NATION 1 TAX” quite logical.
-> The second main motive of introducing GST is to reduce the ”tax avoidance” and ”double taxation” . Earlier, many business enterprises deprive of paying indirect taxes or makes manipulation in the amount of tax to be paid, but now with GST tax avoidance will be reduced to maximum extent. Double taxation means tax on tax. That is a commodity is taxed number of times. With the GST only one tax will be levy or charge rather than multiple taxes, thus abolishing double taxation .
-> GST will lead to increase in Gross Domestic Product (GDP) of Indian economy.
->From business enterprises point of view , simpler calculation of tax amount , less documentation , less formalities therefore less burden for enterprises and more compliance towards taxation laws of GST.
-> Uniformity in tax of all states.
Input Tax Credit :-
Earlier also there was input tax credit but was bit confusing and inefficient. ‘Input Tax Credit’ is the main component of GST or we can say that with the facility of Input tax credit GST is total failure.
Tax paid on purchasing raw material by enterprise is called Input tax and tax received by enterprise on selling finished goods is called Output tax. Thus when tax amount which is received by enterprise timely be deposited by him/her then Input tax credit will be given.
Before availing Input tax credit facility , enterprise must check that he is dealing in that goods in which this facility is available. Plus while billing amount of GST must be clearly shown separately i.e. CGST (central goods and services tax) and SGST (State goods and services tax) and timely returns must be filed.
Thus, Input tax credit acts as a main pillar and is great benefit for enterprises . Because of it enterprises will eager to deposit tax on time and avail credit thus reducing tax avoidance. Input tax will ensure continuous flow of tax. Input tax credit is a facility given by government to business enterprises. Thereby, win win situation for both business enterprises and the government.
FOR EXAMPLE:- Lets say “A” is a business enterprise -> purchases raw material @ Rs.500 (Cost- 400 and Tax- 100)
“A” sells finished goods to consumer “B” @ Rs. 650 (Cost- 550 and Tax-100)
So, “A” will get Rs 100 as credit on depositing Rs.100 which he got from consumer “B”, subject to some other conditions ( like “A” must be dealing in goods applicable for Input tax credit) .
-> Initially, we all may get problems or complaints in following GST , but once we get into the habit of GST it will be advantageous than those multiple indirect taxes. we have to give some time , we need to have some patience while going through it. After sometime things will become really smooth and comfortable . Lets join hands to make GST successful as above all it’s for betterment of our country. Lets make 17 years of time span worthy now.
-> ARTICLE BY:- RAMITA GUPTA