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    How GST would change Taxation in India – Part 2

    By

    October 25, 2015

    Continuing from Part 1, let us now see the following aspects of the proposed GST regime –

    7)     Proposed GST Model in India –

    Dual GST with two concurrent components –

    • Central GST to be levied and collected by the Centre and State GST to be levied and collected by the States. On intra-State supplies of goods or services in India – CGST and SGST will levy.
    • And on inter-State supplies of goods or services in India – IGST (Integrated GST) will be levied and collected by the Centre.
    • IGST applicable to Import of goods and services and additional Tax of 1% on Inter State Taxable supply of Goods by State of Origin.
    • CGST and input SGST will be allowed to set off from each of them respectively and IGST but cross utilisation will not be permitted.
    • Whereas, IGST would be available for set off from CGST, SGST but not IGST itself.
    • The tax rate is proposed is termed as ‘Revenue Neutral rate’ (RNR) and estimated to be between 16-27%

    Set Off heads allowed

    Take a look at taxes to be subsumed by CGST and SGST–

    Certain components of tobacco, petroleum, liquor are likely to be outside the ambit of GST.

    8)     An Illustration –

    Present Scenario (Intra-State Trade of Goods)

    Proposed GST Scenario (Intra-State Trade of Goods)

    Comparison (Trade of Goods)

    9)     Present Structure vs. GST –

    GST Ecosystem and Stakeholders involved

    10)     Conclusion – GST is the Way Forward!

    According to the National Council of Applied Economic Research, Government’s tax revenue will increase by about 0.5 %, while GDP growth could go up by 1-1.5%.

    All stake holders need to get ready for a Dual GST – whether we like it or not.

    It can only be said that the impact will be tremendous; if we understand the urgency of measures, the financial gains will be all pervasive.

     

    The golden rule for collection of tax is given by world’s oldest economist Sage Kautilya alias Chanakya in 350BC, when he said “The King should collect tax from different persons as the humble bee collects honey from different flowers without making any harm to them”. 

    Thus, GST should be brought out in same spirit – while taking care of Govt. finances it shall also enhance collective progress.

    Views presented in the article are those of the author and not of ED.

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