Overview of GST

A single common "Goods and Services Tax (GST)" was proposed and given a go-ahead in 1999 during a meeting between then Prime Minister Atal Bihari Vajpayee and his economic advisory panel, which included three former RBI governors IG Patel, Bimal Jalan and C Rangarajan. Vajpayee set up a committee headed by the finance minister of West Bengal, Asim Dasgupta to design a GST model. The Goods and Services Tax was launched at midnight on 30 June 2017 by the President of India “Pranab Mukherjee” and Prime Minister of India, Narendra Modi. The launch was marked by a historic midnight (30 June – 1 July). Goods and Services Tax (GST) is an indirect tax which was introduced in India on 1ST July 2017 and was applicable throughout India which replaced multiple cascading taxes levied by the central and state governments and which will make India one unified common market. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. The Goods and Services Tax (GST) will be levied at multiple rates ranging from 0 per cent to 28 per cent. GST Council finalised a four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess. It was introduced as The Constitution (One Hundred and First Amendment) Act 2017, following the passage of Constitution 122nd Amendment Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India.

Role of GST Council

A GST Council would be constituted comprising the Union Finance Minister (who will be the Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation Ministers to make recommendations to the Union and the States on (i) The taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed under GST.
(ii) The goods and services that may be subjected to or exempted from the GST.
(iii) The date on which the GST shall be levied on petroleum crude, high speed diesel, motor sprit (commonly known as petrol), natural gas and aviation turbine fuel.
(iv) Model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply.
(v) The threshold limit of turnover below which the goods and services may be exempted from GST.
(vi) The rates including floor rates with bands of GST.
(vii) Any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster.
(viii) Special provision with respect to the North- East States, J&K, Himachal Pradesh and Uttarakhand.
(ix) Any other matter relating to the GST, as the Council may decide.

Benefits of GST for Business and Industry

Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.
Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.
Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.
Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.
Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

Benefits of GST for Central and State Governments

Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.
Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.
Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.

Benefits of GST for Consumer

Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.
Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.

GST Impact on Pharmaceutical Sector

India is the largest producer for generics and the country’s Pharmaceutical Industry is currently the 3rd largest in the world in terms of volume. Healthcare and pharmaceutical industry is one of the leading contributors with respect to revenue and employment and therefore revenues from taxes. GST will subsume various taxes to make it simple and cost effective. The effect of GST is a positive on the pharmaceuticals industry. Before GST, there were 8 different types of indirect taxes in pharma industry but now only one tax which is GST. So that’s why the industry is expecting an increased profit margin with GST’s launch in India.

Is Your Business Ready For GST??

Every business in India will need to comply with GST after 1st July 2017. GST rules will apply to invoicing, receipts, delivery challans and various other transactions. Proman is GST-compliant accounting software which will help you create GST invoices, file GST returns online and do reconciliation of sales & purchases. It’s very simple to use and trusted by thousands of business owners and CAs.
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