10 questions answered about goods & services tax
TRANSCRIPT
Questions Answered about
Goods & Services Tax 10
Q1. WHAT IS GST?
Goods and Services Tax or GST is a comprehensive tax levy on
manufacture, sale and consumption of goods and services at a national
level. Through a tax credit mechanism, this tax is collected on value-
added goods and services at each stage of sale or purchase in the
supply chain.
What is GST?
Q2. WHO BEARS THIS TAX?
The system allows the set-off of GST paid on the procurement of goods
and services against the GST which is payable on the supply of goods
or services. However, the end consumer bears this tax as he is the last
person in the supply chain.
Who bears this Tax?
Q3. What will happen?
GST is likely to improve tax collections and boost India's economic
development by breaking tax barriers between States and integrating
India through a uniform tax rate.
What will happen?
Q4. You may wonder why this
tax reform is so important for
the country and how it will help
the common man?
HERE’S HOW-
As multiple taxes on a product or service are eliminated and a single
tax comes into place, the tax structure is expected to be much simpler
and easier to understand. Paperwork will become simpler and there will
be a reduction in accounting complexities for businesses. A simple
taxation regime can make the manufacturing sector more competitive
and save both money and time. Experts opine that the implementation
of GST would push up GDP by 1%-2%.
I. Simpler tax structure
A simpler tax structure can bring about greater compliance, thus
increasing the number of tax payers and in turn tax revenues for the
Government. The current state of the Indian economy demands fiscal
consolidation and reduction in fiscal deficit. GST is the country’s best
bet to achieve fiscal consolidation. As there is not much scope to
reduce Government expenditure, increasing tax revenues is the best
alternative to improve the fiscal health.
II. Increased tax revenues
GST will eliminate all other forms of indirect taxing. This will effectively
mean that the tax paid by the final consumer will come down in most
cases. Lower prices will help in boosting consumption, which is again
beneficial to companies. The biggest positive of GST is that goods and
services will be taxed on a common basis.
III. Competitive pricing
When the cost of production falls in the domestic market, Indian goods
and services will be more price-competitive in foreign markets. This can
bode well for exporters, who compete with manufacturers abroad facing
a lower cost structure.
IV. Boost to exports
Q5. What is the cascading impact of
Taxes on landed costs?
Let us understand the cascading impact of indirect taxes through an
example of a typical value chain.
There are multiple incidences on taxes and cascading impact on the
cost of finished goods.
a) Custom Duty + Counter Veiling Duty + Cess paid on imported Goods
Sales Tax / VAT paid on domestic purchases, which include the excise
duty paid by the raw material manufacturer. Sales Tax / VAT are also
charged on the excise duty element.
What is the cascading impact of
Taxes on landed costs?
b) Excise duty on the cost of manufactured goods. So, this excise duty
also gets levied on the sales tax element (or custom duty & cess) paid
on raw materials imported as stated above.
c) Service Tax on Transportation Sales Tax (CST or VAT) on the sales
of Finished Goods cost, which also includes the excise duty elements,
sales tax paid on raw materials and service tax paid on transportation.
Practically, the sales tax at this stage gets levied on all the taxes paid in
the previous steps.
What is the cascading impact of
Taxes on landed costs? (Contd.)
Q6. HOW WILL IT BENEFIT THE
CENTRE AND THE STATES?
It is estimated that India will gain $15 billion a year by implementing the
Goods and Services Tax as it would promote exports, raise
employment and boost growth. It will divide the tax burden equitably
between manufacturing and services.
How will it benefit the centre and the
states?
Q7. WILL THIS BE AN EXTRA TAX?
It will not be an additional tax. CGST will include central excise duty
(Cenvat), service tax, and additional duties of customs at the central
level; and value-added tax, central sales tax, entertainment tax, luxury
tax, octroi, lottery taxes, electricity duty, state surcharges related to
supply of goods and services and purchase tax at the State level.
Will this be an extra tax?
Alcohol, tobacco, petroleum products are likely to be out of the GST regime.
Q8. What are the items on which
GST may not be applied?
Q9. Which countries are
implementing VAT/GST?
No. Region No. of Country No. of Countries
ASEAN 7
Asia 19
Europe 53
Oceania 7
Africa 44
South America 11
Caribbean, Central & North
America 19
• Afghanistan, Bahamas, Bhutan, Kiribati,
Marshall Islands, Micronesia, Palau, Sao
Tome and Principe, Syria
• Gulf Cooperation Council (Bahrain,
Kuwait, Qatar, Saudi Arabia, Oman and
the United Arab Emirates)
Q10. Which countries are working
towards a VAT/GST system?
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