Real-time Stock quotes, portfolio, LIVE TV and more.
Feb 05, 2013, 03.34 PM IST
The Goods and Services Tax (GST) is being looked upon as one the most important reform for the country owing to its simplicity and revenue-worthiness. However, the wait for GST has been long and hard.
Below are some frequently asked questions about GST
Q: What is the Goods and Service Tax or GST?
A: The Goods and Service Tax or GST as it is more commonly referred to is a system of taxation where there is a single tax in the economy for goods as well as services. This is meant to bring together the state economies and create a single taxation system in the entire country for all goods and services.
Q: What are the stages covered in the GST?
A: All the stages related to a good or a service is covered under the GST. This means that it is a levy that will cover the manufacture, consumption and sale of various goods and services. This will be undertaken at a national level, so it is comprehensive in nature.
Q: What is the main change that will be witnessed with the introduction of the GST?
A: The biggest benefit that will be witnessed with the introduction of the GST is that multiple taxes that currently exist will no longer remain in the picture. This means that taxes like octroi, CENVAT, central sales tax, state sales tax, entry tax, license fees, turnover tax etc will no longer be present and all that will be brought under the GST. Businesses thus will not have to deal with multiple taxes but will be able to undertake the tax compliance in an easy manner.
Q: What is the main feature of the GST?
A: The main feature of the GST is that there is a tax credit available at each stage of the value chain. There is a value added at each stage right from manufacture to each additional stage of sale but the tax to be paid is only on the value added instead of the whole amount. So for example if there is a tax paid on Rs 2 lakhs at 15 per cent at the first stage then the tax here will be Rs 30,000. At the next stage when the same goods are sold at Rs 2.5 lakh then the tax would be Rs 37,500 but there is a set off of Rs 30,000 available so the actual tax at that stage will come to just Rs 7,500.
Q: Who bears the final tax in the process?
A: The GST is an indirect tax which means that the tax is passed on till the last stage wherein it is the customer of the goods and services who bears the tax. This is the case even today for all indirect taxes but the difference under the GST is that with streamlining of the multiple taxes the final cost to the customer will come out to be lower on the elimination of double charging in the system.
Q: Where is the GST going to be collected?
A: The GST is collected at the point of sale so there is no confusion about when this has to be paid. Currently different taxes are collected at different stages of the process so there is a tax on manufacturing, one at the time of sale and even another one when goods move from one place to the other. Under the GST all of these will be eliminated making it easier to implement and follow.
Q: Will the rate rise in case of GST making it costlier?
A: There will be a standard rate present under the GST. This will make the impact different for various goods and services across the country depending upon the current or existing rate. If the existing rate is higher then the GST will lead to a lower rate but if the rate is lower than the rate will be higher. However it is expected that with multiple taxes eliminated it will ultimately lead to savings for the consumer.
Q: Will all goods and services be covered under the GST?
A: Except for a specific list of exempted items all the other goods and services will be covered under the GST making this a comprehensive tax in the Indian Economy. In fact this will be the main tax on the indirect tax side in the economy.
Q: Will the GST impact other taxes like income tax or corporate tax?
A: Income tax and Corporation taxes are direct taxes which means that they have to be paid by the person or entity on whom they are levied and cannot be passed on to someone else. They will remain as they exist currently but the change will occur in all indirect taxes present in the country.
Q: Is this an accepted system of taxation across the world?
A: Most of the countries across the world have a GST in place. In fact by some estimates more than 140 countries have implemented the GST in their economies.
Q: Why are states unhappy with the GST?
A: The replacement of the existing taxes with the GST will lead to a revenue loss for the states. The states want compensation for this and the matter is how they will be compensated. So there are efforts to arrive at a formula that is acceptable to the states.
Q: What are some of the benefits of GST?
A: Among the benefits that the GST will present for the Indian economy is that the entire structure of taxation will be simplified. This is likely to lead to more compliance and this will raise the total level of taxes in the economy. It will also lead to a fall in costs in many cases making several products competitive leading to benefits for the manufacturers and also making some of them competitive on the world stage. Over a period of time the consumer will reap the benefits of the process through lower costs.
May 22 2013, 13:11
- in MARKET OUTLOOK
May 22 2013, 10:44
- in Economy