Goods and Services Tax (GST) has been introduced on July 1,
2017. "One nation, one tax" is believed to be transformative, revolutionary and
visionary. In simple terms, it intends to unite indirect taxes under an aegis
and expedite Indian businesses to be globally viable. The Indian GST case is
deliberated for effectual tax collection, checking corruption, and facilitating
smooth inter-state movement of goods etc. GST was set out in the midnight of
June 30 from Parliament's historic Central Hall, as a reminiscent of India's
tryst with destiny moment at the midnight of August 14, 1947, with the address
of President Pranab Mukherjee and Prime Minister
It has fixed four-tier tax slabs of 5, 12, 18 and 28 per cent for services. It
asserts to subsume all central and state rates into a single national tax. We
have created six tax rates, and, yet, left numerous bits and pieces to the
liking of the states and the Centre. The leading revenue spawning items, such as
petroleum and alcohol - that bestow more than 40 percent of the state revenue -
are outside the ambit of the GST. The states will linger on to levy dues as per
The GST is centered on the input tax credit method, a
consumption based tax charged on the supply of Goods and Services which means;
it is to be levied and collected at each stage of sale or purchase of goods or
services. The GST essentially has to be remunerated by the provider of goods and
services. However, in some cases, the responsibility to pay the tax tumbles on
the buyer too. This reverse charge is, though, pertinent only under certain
The dominant part about GST is its self-governing mechanism to check tax evasion
and magnify the tax net through a couple of clauses in this tax regime. The
notable deterrent for the tax department in going after tax evaders is the
paucity of manpower. It's challenging to check the small evaders.
Now that it is up and running, GST thrives to seize at least
17 state and federal taxes. To ideate, GST was not an overnight thought.
Independent India's biggest economic reform till date, the goods and services
tax is here and after a myriad of revisions. It is a gigantic parting from the
current system, where a single rate of 17 per cent is levied on maximum
services. It has been an extensive expedition of over 17 years which originated
with the intent of amalgamation of indirect tax regime in the motherland. The
kernels of GST in India were first seeded in the year 2000 by Atal Bihari
Vajpayee, the then Prime Minister of the nation. A period further in 2005, the
then finance minister P.
GST has been a component of European tax orientation for over
50 years. It is also broadly acknowledged and favoured form of indirect tax in
the Asia Pacific region. It is riveting to note that there are over 40 models of
GST presently in power running through the system of various economies in the
world, each with its own distinctive features.
Countries like Singapore and New Zealand tax almost
everything under the sun at a single and consistent rate. Indonesia represents
five positive rates, a zero rate and over 30 exemptions of categories within it.
However, in China, GST is pertinent only to goods and the provision of repairs,
processing, and replacement services. It is merely recoverable on goods used in
the production process and GST on static assets is not recoverable.
GST is a federal tax in Australia, collected by the Centre
and circulated to the States without any conflict arising through the process.
On the other hand, the GST model of Brazil is much sovereign in comparison to
other nations and has a dividing rule of taxes between the states and the
center. In almost all cases, GST rates are prefaced between 16 to 20 percent and
India has enwrapped hints from this and specked the similar pattern.
An additional aspect stumbled upon and recognized by most of
the GST countries lies in the indicator that GST will be inflationary,
particularly if the effective tax rate is greater than what persisted before. By
way of example, Singapore inspected a spike in inflation in 1994 when it hosted
the GST. That insinuates the administrators to watch for fluctuations in the
prices after imposition of the tax. Malaysia was able to palliate this menace as
a price control on account to an extent of the GST.
As well, the India GST system stations the small and medium
enterprises (SMEs) and large-scale industries at the same level by keeping the
exemption brink very competitive without any tax disparity. There is a task
ahead for SMEs to be able to invest, change and read in the way similar to
From the examples studied, there is no refuting the fact that
general public, businesses, and firms may show resistance at first in the
acceptance of GST but it can be dealt with avant-garde planning, preparation and
providing passable time to industry to get accustomed, unrelenting dialogues
amongst businesses and administrators, involving industry after the
implementation has proved to smoothen GST implementation in many countries. Of
course, GST is recognized to be a smooth tax collection system regardless of
teething troubles in the preliminary implementation period.