Brought to you by - Competition ZENITH
Recently GST(Goods and services Tax) was in headlines and the proposal is going rounds in the economic fraternity, GST when comes in to picture sooner or later will help economic scenario to a very large extent and will create a utopia for the companies and people. It is an important topic in terms of forthcoming examinations, So let’s understand what GST is.
1. What is GST?
It is an indirect tax that will lead to the abolition of all other taxes such as, central sales tax, state-level sales tax, excise duty, service tax, and value-added tax (VAT). Both the state and the central governments will impose GST on almost all goods and services produced in India or imported into the country.
2. What categories are exempt from GST?
Exports will not be subject to GST. Direct taxes, such as income tax, corporate tax and capital gains tax will not be affected.
3. How will GST benefit the economy?
It will simplify India's tax structure, broaden the tax base, and create a common market across states. This will lead to increased compliance and increase India's tax-to-gross domestic product ratio. According to a report by the National Council of Applied Economic Research, GST is expected to increase economic growth by between 0.9 per cent and 1.7 per cent. Exports are expected to increase by between 3.2 per cent and 6.3 percent, while imports will likel rise 2.4-4.7 per cent, the study found.
4. How will GST benefit corporate?
It will be beneficial for India Inc as the average tax burden on companies will fall. Reducing production costs will make exporters more competitive.
5. Will goods and services become costly?
The highest rate of taxation under GST will be around 15 per cent in the first year, and eventually come down to 12 per cent in the second year. By comparison, the current rate of the various indirect taxes levied in India amounts to roughly 20 per cent. Goods deemed necessary or of basic importance will be taxed at a lower rate.
6. Will state governments lose out?
Some states fear that a uniform tax rate, if lower than their existing rates, will dent collections. However, the central government has said it will compensate states for the potential revenue loss. The reduced and uniform taxation will help more pouring of money in the state.
7. Can states decide to opt out of GST?
In a deviation from its earlier stand, the government has agreed for a phased roll-out of GST. States will also have the flexibility to opt out of GST.
8. How will it become a reality?
The GST can be implemented only through a Constitutional Amendment Bill, which means it needs to be approved by not less than two-thirds of the members present and voting in each House of Parliament. The GST must also be ratified by the legislatures of at least one-half of the states.