Goods and Services Tax (GST): Features, components & impact

The Goods and Services Tax (GST) is an indirect tax on the supply of goods, it is a comprehensive, cumulative, and destination-based tax. It has revamped the structure of indirect tax in many countries by encompassing a wide variety of taxes all in one. In this article below, the author will discuss and explain GST along the line with a better understanding of features, implementation of GST and its benefits, issues, as well as global importance of GST will also be discussed.

What is GST?

GST is an indirect tax that has been constructed to replace a number of taxes in order to reduce the problem of the tax on tax. It is due on every supply involved in the supply chain and the amount paid in the earlier stage of supply chain is recoverable as input tax credit.

Key Features of GST

• Unified Tax Structure: Substitutes number of indirect taxes such as: Value Added Tax, Excise Duty, and Service Tax.
• Destination-Based Tax: Collected at the time consumption rather than at the time of production.
• Input Tax Credit (ITC): Lets the businesses opt for an input tax credit where effectively they are crediting back taxes on input purchases made.
• Dual GST Model: For example, in India, GST is paid by the Centre and states together (central GST, state GST or unified territory GST, and integrated GST for cross-border sales).
• Tax Slabs: Goods and Services are divided into various tax brackets (like 5%, 12%, 18%, & 28%).
• Technology-Driven Compliance: Forces companies to incorporate and submit and store data through online media.

Components of GST

• CGST (Central Goods and Services Tax): Imposed by the central government on the supply of goods within the same state.
• SGST/UTGST (State/Union Territory GST): Collected by the state or union territories in respect of the supplies made within the state or union territory.
• IGST (Integrated GST): Imposed on inter-state and international dealings, be recovered by the Central Government and be paid by it to the States.

Objectives of GST

• Simplify Taxation: Simplify and replace multiple chy and complicated taxes by unifying them into one system.
• Increase Compliance: Make compliance voluntary through, informing the workers and making the whole process easily understandable.
• Boost Revenue: Enrich the base of taxpayers and non-compliance with taxation rules.
• Promote Economic Growth: Remove institutions that hinder trade and establish one and single nation market.

Benefits of GST

1. For Businesses

• Simplified Taxation: Decline in the number of indirect taxes.
• Cost Efficiency: Cancelling of cascading taxes reduce the prices of products and services.
• Input Tax Credit: Increases the business profitability to the extent possible by lowering tax burden.
• Ease of Doing Business: Simplified procedures promote the culture of doing business.

2. For Consumers

• Reduced Prices: Reduced tax incidence means that the cost of the various products is likely to come down.
• Transparency: Consumers are in a position to notice tax costs within prices.

3. For the Government

• Increased Revenue: Wider base and enhanced compliance increase its yield.
• Economic Stability: Integrated policy system enhances policy execution and planning of the nation’s economy.

Challenges of GST

• Initial Compliance Burden: The paper analyses various problems, which small businesses experience when trying to implement digital solutions.
• Multiple Tax Slabs: He notes that the complexity stems from the fact that goods and services are classified under different slabs.
• Technological Infrastructure: Reliance on reliable Information Technology systems often develops problems within implementation.
• Revenue Sharing: Revenue sharing disparities between central and state governments.
• Impact on Small Businesses: Higher compliance costs can put a stress on Micro and Small Enterprises.

Introduction of GST in India

GST was implemented in India on the 1st of July, 2017 following the 101st amendment on the Indian constitution. Key milestones in the journey include:

• GST Council Formation: Set up to advise on tax rates, exemptions and such like issues.
• Transition Phase: Companies were given an opportunity to transform to the general new system.
• Digital Infrastructure: Other related platforms include; Goods and Services Tax Network (GSTN) to help in registration process, filing returns and making payments.

Tax Slabs Under GST

• 5%: Basic commodities such as food grains.,
• 12%: Routine products and services such as processed foods.
• 18%: Almost all products and services and this includes electronics.
• 28%: Consumer durables and non-durables, tobacco products and automobiles, particularly luxury items.

Global Perspective on GST

Currently, GST/ its equivalent is in operation more than 160 countries. While the structure and rates vary, the core objective remains consistent: In order to simplify and simultaneously, harmonize the process of taxation,

Examples:

• Australia: Felled, with the implementation of the GST in the fiscal year 2000/ 2001 at the standard rate of 10%.
• Canada: Has a federal and provincial GST in operation.
• European Union: VAT also relates to GST in terms of its function.

Impact of GST on the Economy

• Unified Market: Y Eliminates trade barriers, with ease in crossing borders by services and products.
• Increased Tax Compliance: Progressively involves the extra official economy through promoting formalization.

Sectoral Impact:

• Manufacturing: They have been able to cut on production costs that have been occasioned by ITC.
• Services: New compliance burdens.
• E-commerce: Easy online tax collection.

GST vs. Previous Tax System

Some of the other myths about GST include

• GST Increases Prices: Even if the first steps involved the increase of prices for car owners, the absence of cascading taxes ultimately minimizes costs.
• Only for Large Businesses: As for now let me introduce that GST is charged on all businesses with revenue above the set limit.
• Complicated Process: While it is easy to adhere to these regulations with the help of online technologies, the first steps can be complex.

Future of GST

1. Simplification of Tax Slabs

• There are movements to cut down the number of tax sections for better conciseness of the system.

2. Inclusion of New Sectors

• Making petroleum products and real estate part of the GST regime continue to remain work in progress.

3. Technological Advancements

• Better developed IT applications can guarantee compliance and at the same time do away with miscalculations.

Conclusion

It is the biggest reform of the century has given new path of growth to indirect tax, reduced the burden of compliance and build a unified Indian Market. 

However, the key achievements recorded indicate that the policy and technology are on a progressive path that will guarantee it success as a catalyst for the improvement of the economy.

FAQs

1. To whom is the GST registration compulsory?

Every undertaking with a turnover of more than ₹20 lakh (₹10 lakh for special category states) during the relevant fiscal has to be registered under GST. Some businesses require registration including electronic business operators.

2. What is the GSTIN?

Operations GSTIN is a 15-digit number assigned to every registered taxpayer under GST i.e. Goods and Service Tax Identification Number.

3. What are the GST tax rates?

GST rates in India are categorized into five slabs: 0%, 5%, 12%, 18%, and 28%. Each type of goods and services has a specific rate applied on them.

4. What does Input Tax Credit (ITC) mean?

ITC enables enterprises to set off the GST charged on inputs used for supply of goods or services in their commercial activities.

5. What are GST returns?

GST returns are some of the returns that the registered taxpayers must file within a specific period, and contain information about the turnover, purchase, and tax collected as well as paid. They include GSTR-1, GSTR-3B, and GSTR-9 are some of the popular types of GST returns.

6. When is due for GST payment?

GST payment is mainly required to be deposited by the 20th of the subsequent month of the concerned return accompanied by filing of GSTR-3B.

7. Can GST returns be revised?

To the best of my knowledge, GST return cannot be revised. Any adjustments have to be made in the return for the subsequent tax period.

8. If GST is not paid on time, then what?

For delayed GST payment, a penalty along with interest is charged. Premature payment is allowed to be made anytime in which interest of 18% per annum is charged on the outstanding tax amount in addition to a filing fee for filing the returns after the due date.