Here are some frequently asked questions about the Goods and Services Tax that must be answered.
Mumbai: As all eyes remain glued to the midnight launch of the Goods and Services Tax, there are some basic questions that crop up in relation to this new indirect tax system that must be addressed.
A grand programme will mark the launch at the Central Hall of Parliament in the esteemed presence of President Pranab Mukherjee, Prime Minister Narendra Modi, Vice President Hamid Ansari and Finance Minister Arun Jaitley.
Here are some frequently asked questions about GST:
What is GST?
The Goods and Services Tax is an umbrella tax that will subsume a string of taxes into one consolidated tax. The tax which the customer will pay will only be levied on the final item he purchases. The tax that every person in the value chain will pay will be levied only on the value-added at each stage, with a complete set-off for taxes paid earlier.
Why we need GST?
Since Independence, India has had a fragmented tax system with a host of taxes like octroi, service tax, VAT, etc existing at every stage of the trade chain – from production to sale. This led to the problem of ‘tax upon tax’ which has for so many years burnt a hole in the pocket of the common man, who is the end consumer.
Moreover, each state in India had its own taxes, meaning the same item or service could attract different prices in different states. GST will stitch together this patchwork of taxes from across states and across supply chains.
What is the structure of GST?
GST will be a four-tiered tax system with applicable tax slabs of 5 per cent, 12 per cent, 18 per cent and 28 per cent.
What is input tax credit that GST promises?
The taxes paid by a manufacturer while purchasing raw material or services before production, are known as input taxes. The tax collected during the final sale of the product or the service is called output tax. Input tax credit means the difference in output tax and input tax, which traders can file and get.
Will GST help in tax evasion?
The Goods and Services Tax Network (GSTN) will allot specific numbers to all traders and manufacturers registering themselves with the system. Like the PAN, these numbers will help the government keep a tab on these traders and the tax returns they file.
Will GST be beneficial for people in general?
Whether GST will be beneficial or not, only time will tell. Ideally it should bring down prices of most items because it gets rid of the cascading ‘tax-on-tax’ effect. However, GST on various items is likely to rise while the opposite can also happen. Essential items like fruits, vegetables, milk, eggs, paneer, newspapers, contraceptives, etc are exempt from GST.