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Goods and Service Tax (GST) - An Overview

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Vincent

Goods and Service tax (GST): Introduced for the first time by France in 1954 is a comprehensive value added system operational in more than 140 countries today.

It is collected on the value added on goods and services at each stage of production via a tax credit mechanism. It is like a last point retail tax, as the consumers being the last node in the supply chain have to bear this tax.

Many countries have a unified GST system. However, countries like Brazil and Canada follow a dual system wherein GST is levied by both federal and state or provincial governments.

In India a dual GST is being proposed with a central tax (CSGT) and a state tax (SSGT) to be implemented from April 1, 2010.

Here are some questions on GST and their answers:-

Will dual GST be levied in addition to the existing taxes?

GST will take the place of central excise duty (Cenvat), service tax, and additional duties of customs at the Central level; and value-added tax, central sales tax, entertainment tax, luxury tax, octroi, lottery taxes, electricity duty, state surcharges at the state level.

What will be the rate of GST?

The Government and the EC are expected to keep the rates around 14-16%.Today, services are taxed at 10% and the combined incidence of indirect taxes on most goods is around 20%.

Will prices go up after the implementation of GST?

The prices are expected to fall in the long run as the burden of the tax can be shifted to he final consumers by the producers.

What are the implications of GST on imports and exports?

It will not be applicable for exports as they are zero-rated. Imports will however be subject to the rates of the tax.

What are the benefits of shifting to a dual GST system?

Dual GST is expected to be a simple and transparent tax structure with...

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