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Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition.
In simple words, GST is an indirect tax levied on the supply of goods and services. GST Law has replaced many indirect tax laws that previously existed in India.
GST tax is applicable in five slabs namely NIL, 5%, 12%, 18% and 28% for all items in India.
There are 3 applicable taxes under GST
- CGST: Collected by the Central Government on an intra-state sale (Eg: Within Karnataka)
- SGST: Collected by the State Government on an intra-state sale (Eg: Within Karnataka)
- IGST: Collected by the Central Government for inter-state sale (Eg: Karnataka to Tamil Nadu)
- More competitive business environment: It will shift the burden of taxes from the manufactures in India where the tax system is unfairly skewed towards the consumers. Manufacturers will pay lesser taxes and there will be an environment of greater competitiveness and more freedom in business.
2.Uniform tax rates across states: Would we not like to decrease our rates to attract more people towards our products if we could? Similarly to be competitive states sometimes cut the VAT rates. This is to attract more investors in line with the human nature, causing a loss of revenue to both the states and the center.
3. Better inter-state trade: Currently there are no tax credits provided for inter-state trade and hence uniform rates across all the states would boost the trade in the country between different states.
4. No confusion: All confusion regarding what is a manufacturing or service activity will be removed. All economic activities will be "economic activities" only and will be taxed.
5. No cascading effect: There will be no taxes on taxes. Only once will there be a tax- a single indirect tax.
6. Ease on many fronts: This will be easier to understand, easier to administer and easier to dispense with. Hence ease of administration and understanding will be of great help.
7. Widening tax base: More people will pay taxes. The tax rates are reduced but the emerging number of participants will make up for the loss, the government has suggested.
1. Increased monopoly of Center: There will be even more centralisation in fiscal matters. The Centre will fix the percentage of revenue to be shared with the states. Thus the autonomy of states will be compromised.
2. States lose a share of revenue: Some of the states may even suffer a loss on the account of tax sharing and the center itself may decide on the one-time compensation. The government may increase the state taxes by 1-2% to compensate them.
3. The Jharkhand-esque conundrum: The states like Jharkhand which are more goods-driven and lesser services-driven will thus be sharing their sales revenue with the Center but don't have enough services to compensate like Karnataka. This is going to hurt some states.
4. Burden on taxpayers: The money that was not taken from the producer under the system of tax credit in GST will be recovered from the consumers, which definitely is a negative for the "consumer community".