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GST: India’s approach to One Nation, One Tax


http://www.lawji.in/2017/06/GST-Goods-And-Service-tax.html


‘In this world nothing is certain, but death and taxes.’- Benjamin Franklin

The above quotation of Benjamin Franklin is enough to explain the implication of taxes on the life of people. Such is a tax regime that is going to be introduced in India is known as the GST: Goods and Services Tax.

In the year 1954, France became the first country to introduce the idea of GST or one tax regime for the whole nation. This idea was later on adopted by 160 different countries which include many significant economies like China (1994), Russia and many others. Approximately 18 countries in Asia had already adopted GST tax regime before India which include Nepal, Pakistan, Sri Lanka and many other. So we can say that India is one of the prominent economies that will join GST now. The discussion to introduce GST in India was put by Atal Bihari Vajpai in the year 2000 and a committee was formed under then finance minister of West Bengal, Asim Dasgupta to design the GST model for India.

As the topic of GST is very dynamic I will hereby try to give the basic understanding of what GST is and how it will help the government to strike out the problems existing like the cascading effect of taxes, and how it will help in curbing the corruption.

What Do You Mean By GST
GST means Goods and Services Tax introduced in India as the One hundredth first amendment to the constitution of India. GST in short can be defined as the destination based tax, multi-staged that will be charged on every value addition to the product or good manufactured.

As per the definition I will start elaborating the concept of GST. First what is the meaning of GST being destination based? By destination based it means that the tax will be levied as per the location of the product being sold. As for example, if product is manufactured in Uttar Pradesh and to be sold in Bihar, then the state of Uttar Pradesh will receive the revenue only of the manufacturing process (the GST that will be charged on the manufacturing process) and once product will move out of the state it will not receive the tax on selling of the product that will be sold in Bihar.

Secondly, for understanding GST being multi-stage we have to under the meaning of ‘Value addition’. Value addition means each time the cost of the product increases, it is said to be value addition. For understanding this, one relevant example would be when a wholesaler adds a product name to the good manufactured it adds a value to that. Now whenever there is a value addition then the GST will be charged at that particular stage. And there are many stages in selling of a product, the manufacturing stage, wholesaler stage, retailer stage and ultimately the consumer stage and GST will be charged on all these stages, that’s why it is called multi-staged tax.

Implication of GST on the common people
GST, we can say that is a people friendly tax regime that will be introduced shortly in India. It will help the people on many fronts. Previously there were two types of taxes mainly the Direct and the Indirect taxes. The direct taxes like the Income tax charged were directly deducted from the account, but in case of indirect taxes there was one implication of shifting the liability of the tax to the consumers and hence increasing the cost of the product for the consumer, but now due to the multi-stage character of the GST the sellers will not be able to increase the cost as they already have paid the taxes at their stages and only nominal tax will be charged on the consumers, that will reduce the cost of the product for the consumer. This will reduce the amount of tax liability on the consumers which is popularly known as the Cascading effect of the taxes (tax on tax).

Types of taxes in GST
GST is broadly divided into three types of taxes:
I) CGST- Central Goods and Services tax
II) SGST- State Goods and Services tax
III) IGST- Integrated Goods and Services tax

The main difference is the way in which it is charged on the products, if the product is produced in Odisha and sold in Odisha (Intra-state) then both CGST and SGST will be charged and the amount of the tax will be distributed between the centre and the state equally, but when the product is produced in Odisha and sold in West Bengal (Inter-state) then IGST will be charged on the product and the whole amount of tax will be deposited in the Consolidated fund of India.

Conclusion
Finally we can say that GST will help in improving the quality of the life that the common people lead. It will make our nation economically strong, will control the black money made by tax evasion, now the government will have the power to look at all the stages of the production and can question at any stage. GST will also help in tracking the illegal drain of money from the country. Many common people’s products will be tax free and if it exists it will be very less. Hope the people will accept the GST in an optimist way.

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