Meaning: - The Goods and Services Tax (GST) is a comprehensive value added tax (VAT) on the supply of goods or services. France was the first country to introduce this value added tax system in 1954 devised by a public servant. In India, due to non consensus between central and state government, the proposal is to introduce a Dual GST regime i.e. Central and State GST. Dual GST: - Many countries in the world have a single unified GST system i.e. a single tax applicable throughout the country. However, in federal countries like Brazil and Canada, a dual GST system is prevalent whereby GST is levied by both the federal and state or provincial governments. In India, a dual GST is proposed whereby a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of every transaction of supply of goods and services. Impact on Prices of Goods and Services:-The GST is expected to foster increased efficiencies in the economic system thereby lowering the cost of supply of goods and services. Further, in the Indian context, there is an expectation that the aggregate incidence of the dual GST will be lower than the present incidence of the multiple indirect taxes in force. Consequently, the implementation of the GST is expected to bring about, if not in the near term but in the medium to long term, a reduction in the prices of goods and services. The expectation is that the dealers would start passing on the benefit of the reduced tax incidence to the customers by way of reduced prices. As regards services, it could be that their short term prices would go up given the expectation of an increase in the tax rate from the present 10% to approximately 14% to 16%. Benefits of Dual GST: – The Dual GST is expected to be a simple and transparent tax with one or two CGST and SGST rates. The dual GST is expected to result in:- • Reduction in the number of taxes at the Central and State level • Decrease in effective tax rate for many goods
• Removal of the current cascading effect of taxes • Reduction of transaction costs of the taxpayers through simplified tax compliance • Increased tax collections due to wider tax base and better compliance
Certainty of implementation:- The Finance Minister has made a categorical statement in Parliament that GST will be implemented on April 1, 2013. In his subsequent media interactions, he has further indicated that he is keen to implement the GST even if some of the States are not ready or willing to implement GST by this date. Accordingly, based on the present indications, as also on the basis of our subsequent interactions with senior Government Officials, we believe that the April 1, 2013 timeline for introduction of the dual GST will be met. Who would be impacted: All businesses, whether engaged in sales / supply of goods or supply of services, would be impacted by GST. The impact would be on supply chains, ERP, product pricing, dealer margins etc. Applicability to service providers :-Unlike the transition from the sales tax regime to the VAT, where only businesses dealing in goods were affected, in the case of GST, as the name suggests, both goods and service providers will be impacted. Thus, even pure service providers need to plan for the transition to the GST. Time to Plan for GST:-The draft laws will clarify finer aspects of GST such as rates, classification and compliances. However, based on the material in the public domain, one can begin with spreading awareness among various stakeholders within the organization and identifying broad areas of action before the draft laws are published. Experience of VAT implementation suggests that there may not be enough lead-time available between the date of announcement of GST implementation and the actual date of GST implementation. Taxable event:- The “Taxable event” will be the supply of goods & the supply of services Hence, the current taxable events such as...
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