GST is an indirect tax for the entire nation that will make India a unified common market. Right from the manufacturer to the consumer, it’s a single tax on the supply of goods and services. Due to credits of input Taxes paid at each stage being available in the following stage of value addition, GST which is now integrated with Tally software essentially is a tax only on value addition at each stage. The consumer will thus bear only the GST charged by the last dealer in the supply chain along with the set off benefits at all the earlier stages. With GST, all the geographical barriers for trading are set to be eliminated and will transform the entire nation to one common trading place.
How GST differs from present tax structure?
It’s important to understand the fundamentals of GST as it’s a dual concept tax system. Under this system, tax is managed, collected and shared by both the State and Centre governments, based on the nature of transaction. It certainly differs from the present tax structure and would make the life of people easy, once implemented. Let’s have a look at how GST will differ from the current tax structure:- In the present tax structure there are separate laws for separate tax whereas in GST there would be only one such law as GST will include several taxes
- Currently there are separate rates. In this system there would be one CGST rate and a uniform rate of SGST across all states
- In current system there’s a cascading effect due to credit of CST and several taxes aren’t allowed. In GST, this situation won’t arise as CST concept is being eliminated with introduction of IGST
- Under current scenario, tax burden on tax payer is quite high. In GST, tax burden is expected to lessen since all taxes are integrated which make it possible the burden to be divided equally between manufacturing and services
- Due to the existence of cascading effect, some taxes become part of the cost. In GST, the cost burden is lessened as the mechanism eliminates such effect by offering credit
- At present, there’s no concurrent power to both Centre and State on same subject tax matter in the present tax system. In GST, both Centre and State are entrusted with the power to make law on GST due to the proposed Article 246A of the constitution
- Currently, tax compliance is complex due to the multiplicity of laws and their necessities to be followed. in GST, tax compliance would be easier as only one law including other taxes need to be followed
- Currently, tax is imposed at two stages in broad manner, i.e. when product moves out of factory and the other at retail outlet. GST needs to be imposed only at final destination of consumption and not at several points. This leads to transparency and corruption free tax administration.
