GST in India

The currently implemented indirect tax system in India is complex leading to inefficient tax collection and adversely affecting GDP growth. The introduction of MODVAT, then CENVAT and now VAT was India’s progress towards achieving an efficient system of taxation. Following VAT, GST in India will likely introduce tremendous improvement to the indirect tax framework in India. In this article, we look at some of the key aspects of GST in India.

GST Overview

The concept of GST in India was introduced by the Kelkar Task Force in 2004. The Kelkar Committee strongly recommended integrating GST on national basis and since then various other Committees and Commissions have worked the roadmap to unveiling GST in India.

GST when introduced in India would have a very wide and comprehensive tax base extending over all goods and services. It is envisioned that GST would have two components: CGST – Central Goods and Service Tax levied by the Central Government of India and SGST – State Goods and Service Tax levied by the respective State Government. The basic features of law and classification would be same for both CGST and SGST thereby avoiding any disputes.

Central Government Taxes under GST

The following are the central government taxes that would be subsumed under GST:

1. Central Excise Duty
2. Additional Excise Duties
3. Excise duty under the Medicinal and Toiletries Preparation Act
4. Service Tax
5. Additional Customs Duty
6. Special Additional Customs Duty
7. Surcharge and Surcharges
8. Cess

The following are the state government taxes that would be subsumed under GST:

1. VAT
2. Sales Tax
3. Entertainment tax
4. Luxury tax
5. Tax on lottery, betting and gambling
6. State Cess and Surcharges
7. Entry tax

Liability for paying GST in India

The liability for GST in India will finally fall on the person finally consuming the commodity. Therefore, the tax liability would be payable by the end consumer. Also, the tax revenue for the State Government from the SGST component would be calculated based on the State where the goods or services were consumed.

GST Rollout in India

The current Central government proposes to implement goods and Services Tax (GST) from April 1, 2016. GST rollout in India has been delayed for long due to the lack of consensus among states over crucial issues such as revenue loss to state, state government compensation structure, entry tax and tax on petroleum products. However, in a bid to roll out the GST, which would subsume excise and service taxes, the Centre has come out with a new Constitutional Amendment Bill. Therefore, the implementation of GST in India is expected shortly.