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June 30, 2017

What is Goods and Services Tax (GST) : Highlights

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Goods and Services Tax (GST)

The government is going to roll out the Goods and Services Tax (GST) from tomorrow (1st July 2017). Being the major step in Indian Economy, the GST has became the most discussed topic nowadays. So you surely will get questions about GST in your upcoming competitive exams (especially banking exams). So here is a quick view on GST in questions and answers format. Happy Reading :)

What is Goods and Services Tax (GST) ? 

Article 366 (12A) of the Constitution as amended by 101st Constitutional Amendment Act, 2016 defines the Goods and Services tax (GST) as a tax on supply of goods or services or both
GST is a destination based tax on consumption of goods and services. 
In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

Why was the Constitution of India amended in the context of GST ?

Currently, the fiscal powers bet-ween the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains. The Centre has the powers to levy tax on the manufacture of goods. While the States have the powers to levy tax on the sale of goods. In the case of Inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax. 
Introduction of the GST required amendments to the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax. The Constitution of India has been amended by the Constitution (One Hundred and First Amendment) Act, 2016 for this purpose. Article 246A of the Constitution empowers the Centre and the States to levy and collect the GST. 

What are the benefits which the Country will accrue from GST ? 

Introduction of GST would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. 
For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%. Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. 
There may also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved tax compliance. Last but not the least, this tax, because of its transparent character, would be easier to administer. 

What would be the role of GST Council ?

A GST Council would be consti-tuted comprising the Union Fina-nce Minister (Who will be the Chairman of the Council), the Min-ister of State (Revenue) and the State Finance/Taxation Ministers to make recommendations to the Union and the States on various issues. 

How will decisions be taken by GST Council ?

The Constitution (One Hundred and First Amendment) Act, 2016 provides that every decision of the GST Council shall be taken at a meeting by a majority of not less than 3/4th of the weighted votes of the members present and voting. The vote of the Central Government shall have a weightage of 1/3rd of the votes cast and the votes of all the State Governments taken together shall have a weightage of 2/3rd of the total votes cast in that meeting. One half of the total number of members of the GST Council shall constitute the quorum at its meetings. 

Who is liable to pay GST under the GST regime ? 

Under the GST regime, tax is payable by the taxable person on the supply of goods and/or services. Liability to pay tax arises when the taxable person crosses the turnover threshold of Rs.20 lakhs (Rs.10 lakhs for NE & Special Category States) except in certain specified cases where the taxable person is liable to pay GST even though he has not crossed the threshold limit. 

What is HSN ? 

HARMONISED SYSTEM OF NOMENCLATURE(HSN)code shall be used for classifying the goods under the GST regime. 

What is GSTN and its role in the GST regime ? 

GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders for implementation of GST.

B. Srinivasa Rao
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