THE JOURNEY FROM VAT TO GST IN INDIA

Up to June 2017, we have Value-Added tax (VAT) system at both on the central and state levels. The central VAT mechanism extends the tax set-offs only against central excise duty and service tax paid up to the level of production, it doesn’t extend to value added by the distributive trade and manufacture.

Only sales is covered by state VATs, on previous purchases a seller can claim credit only against VAT. Here the VAT doesn’t subsume a host of other taxes imposed within the state such as luxury and entertainment tax, octroi, etc.

But the GST will ensure a complete, continuous and comprehensive mechanism of tax credits. Under it, the end product will only bear the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. 

The GST is scheduled to be launched on the 1st July 2017, it is not a new phenomenon. It was 1st introduced and implemented in France in 1954, after that it was implemented by several other countries. It is a unified taxation system which was accepted by global, now adopted by India in this year. In the year of 2000, Prime Minister Atal Bihari Vajpayee brought this issue to the table of discussion in the parliament.

We can say the GST is the total of VAT, Central Exercise Duty, Service tax, Commercial tax, Food Tax, Central sales Tax, Octroi, Entertainment Tax, Entry Tax, Purchase Tax, Advertisement Tax, Taxes on Lotteries and Luxury Tax.

The proposed GST law is executed by 21-members select committee and introduced as the constitution (122 Amendment) Act 2017.the GST is governed by GST council and its chairmen is Arun Jaitley, Union Finance Minister of India. The new tax will be performed in the state and union territory of India except the Jammu-Kashmir, there is no GST on the sale and purchase of securities it will continue by Securities Transaction tax.

The GST will be levied at multiple rates ranging from 0% to 28%, the council finalizes the 4-tier of GST structure 5%, 12%, 18% and 28%. The lower rate is for essential items and highest for luxury and de-merits goods.

Train ticket or other services, taxes come under the lower rate of15%-18%, essential items including food will be taxed at zero rate to control inflation. the 5% tax will be on common use items and for fast moving consumer goods or bulk of goods and services will come under the standard rate of 12%-18%. here is a special rate of 0.25% on semi-precious stones & rough precious and 3% on gold, goods like cigarettes or other harmful goods will be additional cases on sin.

The currently taxed of 30-31% goods are applicable under highest tax slab, Ultra Luxuries, demerit and sewn goods will be in the 28 % rate category.

· Benefits of GST for industry
Ø It makes easy compliance and transparent.
Ø Uniformity of Tax and Structures.
Ø Improved competitiveness.
Ø Cascading removal.
Ø Gain in exporters and manufacturers.
· Benefits of GST for state and central government
Ø Better control on leakage.
Ø Simple and easy to administer.
Ø Higher revenue efficiency.
· Benefits of GST for consumer
Ø Relief in overall tax burden.
Ø Single and transparent tax proportionate to the value of goods and services.

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