The Goods and Service Tax (GST) is an indirect tax which is based on destination principle. Under this principle, tax is levied on goods and services in the place where they are consumed rather than where they are produced. It is also known as consumption tax.
Presently, there are various central and state taxes which are levied. Under GST, 17 of these taxes will be subsumed, thereby, removing the hassle of multiplicity of taxes and the cascading effect of taxation. This would in turn promote the concept of a common market for all.
GST would enable taxpayers to register themselves using their permanent account numbers and file tax returns, process payments and receive refunds online.
For this purpose, the government created a non-profit organisation called GST Network (GSTN) to provide the technological infrastructure needed by the central and state governments; taxpayers and other stakeholders for the execution and implementation of GST.
This will also enable collation of data at a central level after which it will be transmitted to the state tax departments, thereby preventing tax evasion and widening the tax base to include more traders.
Positives of GST
- There will be one, single unified common national market that will help in the seamless flow of goods and services by preventing tax-on-tax and make goods cheaper for the Indian consumers.
- Generation of employment opportunities since GST would give a boost to the export and manufacturing sector of the economy.
- Cascading effect of taxation would be averted since input tax credit would be applied at every stage of supply of goods and services.
- Elimination of multiplicity of taxes leading to ease in conducting business.
- Reduction in the number of procedures as filing of taxes, returns and refunds would be automated and simplified.
- Lower compliance costs as central and state taxes presently levied would be subsumed under GST.
- High proportion of small retailers would be exempt from tax or will be charged a low rate of tax.
- Tax burden of companies would fall thus, bringing down prices of commodities.