The 122nd constitutional amendment marked the beginning of the much awaited and discussed indirect tax reform, GST i.e. Goods and Services Tax which saw the light after being signed by the President and ratified by more than fifty percent of the state legislatures. The basic objective behind this reform was to overcome the intense obstacles in the erstwhile indirect tax regime like multiplicity of indirect taxes across the country, cumbersome and complicated taxpaying processes, cascading effect of tax, etc.
GST in its most simplified meaning can be explained as a value added tax levied at various points of supply chain of Goods and Services with credit available for any tax already paid in acquiring input for the final supply. The new tax system will unify various indirect taxes; establish consumption based taxation; create a platform for unified market; enable better tax collection; promote competition in the market, accelerate movement of goods across the nation by removing various hurdles like sales tax check-posts etc and will contribute in the ease of doing business in the country.
Beside various advantages and benefits that GST promises to deliver, the driving force for government to promote this reform is multifarious, as it taxes the value added by each factor equally; it being a consumption tax amounts to large and suitable source of revenue for the government and it promotes self enforcing mechanism. International organizations like IMF and OECD have promoted GST at international arena and have worked towards its better implementation across developed and developing nations of the world. At national level Kelkar Committee was constituted under Fiscal Responsibility and Budget Management Act, 2003 with a special Task team which reported on the then prevailing indirect tax system both at state and central level and recommended implementation of GST.
The structure of GST is floored at two different levels wherein a complete authority is given to Central Government for collecting and imposing central tax under the head Central Goods and Services Tax, ‘CGST’, and respective State Governments for collecting and imposing state tax within the state (intra-state transactions) under the head State Goods and Services Tax, ‘SGST’. Further in case of inter-state transactions both Central and State Governments are entitled to taxes collected under the head Integrated Goods and Services Tax, ‘IGST’. The various taxes on input paid at one level are available for set off as Input tax Credit (ITC) only in that level, which means that cross utilization of input tax credit will not be allowed amongst CGST and SGST except in case of inter-state goods and services where both state and center has its say. The present GST act also envisage on the unified tax event that is taxable supply, which has been defined widely to cover all kinds of supply which could not be tapped under the erstwhile system of indirect taxation.
Thus, GST with its changed provisions and amendment in the draft bill, will certainly revolutionaries the indirect taxation regime of the nation.