BASICS CONCEPTS OF GOODS AND SERVICES TAX (GST)

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This article is written by Diprava Ghosh of Adamas University, an intern under Legal Vidhiya

ABSTRACT: –

The Goods and Services Tax (GST) is a value-added tax that is now being argued about in India. GST is known as The Good and services tax. GST is not a straight point tax which imposed by the Indian government on goods and services, which was proposed on July 1, 2017. The object of proposed GST in India is to Develop National Market, which means one nation one tax. In the whole India, where GST came from, there is unity in the tax system. It’s an Act. It’s mentioned under a single domestic indirect form taxation law for the whole India.

KEYWORD: – Tax, GST, Services, Goods, Proposed, Act.

INTRODUCTION: –

GST, or Goods and Services Tax, is a destination-based tax on the delivery of certain products and services. It was implemented to replace those indirect taxes which existed without it, in order to make the taxation process easier and less complicated. Example – As taxation on VAT, excise, customs duty, and so on.

The point of consumption Is taken into account while calculating GST as opposed to the point of origin, which was the emphasis of prior taxes. Most commodities had a statutory tax rate of roughly 26.5% before the introduction of GST; after it, most goods are anticipated to have a tax rate in the 18% range.

In this time tax are held individual roles on Goods and services. Through a tax credit method, this tax is collected on value-added goods and services at every point of sale or purchase along the supply chain. GST came into existence on July 1, 2017. GST is a significant indirect tax reform in India, replacing the old system. It removes defects and makes the tax system more productive. Dual GST applies to both the central and state governments, with some products excluded. GST is paid by consumers.

HISTORICAL BACKGROUND OF GST: –

After execution of VAT at central level, Government of India was sharp to present VAT at the state level. The execution of VAT by one means or another dominated the dialog on GST. Somewhere in between, the Kerala assignment drive within the year 2003 proposed a comprehensive Products and Benefit Assess (GST) based on VAT rule.

It pointed out that there’s no question that India incorporates an unfaltering force with respect to changes and tax assessment; be that as it may, there’s a require of an unused comprehensive GST which should be based on VAT standards. Separated from the Kelkar proposal, talks on GST were in cold capacity until 2006.The hush was broken by the previous Fund Serve P. Chidambaram in his budget speech for the Year 2006-2007. He was definitive whereas talking approximately the execution of GST. He demonstrated the have to be the nation to meet from existing framework to the national GST. On 12^th August 2016 Assam State first ratify GST bill.

TYPE OF GOODS AND SERVICES TAX: –

We know there are Four types of GST are available. Those are –

Integrated Goods and Services Tax (IGST)
State Goods and Services Tax (SGST)
Central Goods and Services Tax (CGST)
Union Territory Goods

and Services Tax (UTGST)

Each of them has a unique taxing rate.

This Act imposes an Integrated products and Services Tax on the provision of any goods or services in the course of interstate trade or commerce. Example – Joy is a seller who is selling goods from Kolkata to a buyer in another state Delhi. Then he has to pay IGST because he is a seller who selling his goods to another state.
The State Goods and Services Tax is a tax under the GST regime that’s applicable on interstate transaction. The calculation of SGST is SGST / UTGST = Applicable GST Rate / 2.
The Central Good and Services Tax, All taxes that were previously imposed as central indirect taxes are now included. For the flow of commodities and services inside the state, the central authority imposes them. Intrastate refers to a state’s boundaries.
The UGST means union territory goods and services tax which are applicable to the supplies that take place in the Union Territories of Jammu & Kashmir, Ladakh, Andaman and Nicobar, Chandigarh, Dadra & Nagar Haveli and Daman & Diu, and Lakshadweep. So, the UTGST rates are 0%, 5%, 12%, 18% and 28% respectively. Further, the exemption rules for goods and services are also similar to SGST.

ADVANTAGES OF GST: –

GST eliminates cascading effect of tax.
Simple & easy online procedure.
Defined treatment for e-commerce operators.
Improved efficiency of logistics.
Unorganised sector is regulated under GST.

GST has improved business efficiency by reducing tax payable, enabling industries to redefine supply chains, internal and external arrangements. It has also reduced tax payable for small businesses, with exemptions for turnovers under 20 lakhs. The composition scheme, for companies with up to 75 lakhs turnover, aims to reduce corruption and sales without receipt. GST also provides accountability and regulations for unorganized sectors, reducing taxes on certain goods and 7.5% on others. It has a uniform taxation process, centralized registration, reduced tax multiplicity, and increased production.

DISADVANTAGES: – Industries faced many challenges which ranged from new and unique concept, high tax rate on certain goods and services unclear treatment of transaction complex documentation ambiguity on aspects related to anti-profiteering, GST Refund etc.

It raises the purchasing of software that aids in the GST filing process. When the SMEs earn a total income of Rs.75 lakhs, trade-off cannot claim input tax credit. This has an impact on the consumer because the company that produces has suspended their reward plan. Financial sector became expensive as there is increase of 3% from 15% to 18%, it increased the real estate market by 8% to 12% fall on demand after implementation. GST raises operating expenses. The tax rate on SMEs is higher. It is difficult to adapt complete online taxation, and this may incur some costs. The officials who work with taxation in India have received little GST training. GST has been levied on several things that are essential in nature, including as wheelchairs and Braille paper. GST has not covered all the products or goods.

OBJECTIVE OF GST: –

Main objective of GST would be to eliminate the double taxation i.e., cascading effects of taxes on production and distribution cost goods and services.

→ One Country – One Tax

→ Uniform GST Registration, payment and input tax credit

→ Subsume all indirect taxes at Centre and State level

→ Reduce tax evasion and corruption Increase productivity

→ Reducing economic distortions

POSITIVE IMPACT OF GST IN INDIA: –

Knowing that GST is imposed on the taxpayer when the goods or services are consumed is important since GST is imposed on the supply of goods and services throughout India. There are Four GST categories we know.

Simplified tax structure.
Support for small and medium enterprises.
More funds for production.
Enhanced operations throughout India.
Increased volume of export.
Transparency.
Fewer Tax
Reduce the cost of doing business.

If everything has this positive side, there will also be a negative side. Which we have to accept.

NEGATIVE IMPACT OF GST IN INDIA: –

Negative Effects are: –

Impact on the average person: Since GST is an indirect tax, it raises prices to recoup its costs. This has an adverse effect on the average person because it also affects middle-class and lower-middle class individuals.
GST’s detrimental effects on the market: In general, enterprises continue to struggle with their systems for claiming input tax credits, making it difficult for them to efficiently manage their working capital needs. This is what caused GST to have a bad effect on the market.
GST may have caused short-term inflation and may have burdened small businesses with increased compliance costs.
It may have had the potential to disrupt the supply chain and may have led to a decrease in exports.
During the initial phase, some states may have faced revenue loss while others may have benefited.

RECENT CASE LAW: – The Karnataka Authority of Advance Ruling (AAR) has determined that Chocolate Peanut Chikkies are subject to 18% GST, whereas other chikkies are subject to 5% GST.M.P. Ravi Prasad and Kiran Reddy T.’s bench ruled that the product “Chocolate Peanut Chickies” contained cocoa powder. Chapter 18 discusses cocoa and cocoa preparations. Chocolate and other food preparations using cocoa are covered in chapter heading 1806; sugar confectionery containing cocoa is covered in chapter heading 1806 90 20. As an example, the product “Chocolate Peanut Chikkies,” which contains cocoa powder, falls under the chapter heading 1806 90 20 and is subject to 18% GST.The applicant is in the business of producing nutritional food products.

They plan to make sesame chikkies, chocolate peanut chikkies, amaranth chikkies, crushed peanut chikkies, spirulina chikkies, and dry fruit chikkies, among other things. The applicant requested an advance judgement on the classification of the chikki variety and the associated GST.Confectioneries are sugar formulations that are offered in a solid or semi-solid form and are generally acceptable for immediate or direct consumption without further processing, according to the AAR. Chikkis, which are jaggery-based products intended for direct consumption as snacks, fall under the category of sugar Confectioneries.According to the AAR, chapter 17 of the Customs Tariff Act of 1962 covers sugar and sugar candy, and chapter header 1704 addresses sugar confectionery (including white chocolate) that does not contain cocoa.

As a result, all sugar candy that does not contain cocoa falls under category 1704.The AAR determined that all items save ‘Chocolate Peanut Chikkies’ do not include cocoa, and hence ‘Sesame Chikkies, Amaranth Chikkies, Crushed Peanut Chickies, Spirulina Chikkies and Dry Fruit Chickies’ are firmly covered by Sugar Confectionery and thus come under heading 1704.

ILLUSTRATION: – Let us assume that a dealer in Gujrat had sold the goods to a dealer in Punjab worth Rupees. 50,000. The tax rate is 18% comprising of only IGST.In such a case, the dealer has to charge IGST of Rupees. 9,000. This revenue will go Central Government.

CONCLUSION: –

GST will be a game changer for the Indian economy by creating a common market for goods and services and lowering the cascading effect of tax on the cost of products and services. It will have an impact on the Tax Structure, Tax Incidence, Tax Computation, Tax Payment, Compliance, Credit Utilisation, and Reporting, resulting in a comprehensive overhaul of the current taxation system.

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