GST Introduction

GST, an indirect tax applicable throughout the country, plays a pivotal role in unifying India into a cohesive and seamless market. Unlike taxes imposed on production, trade, or specific services, GST is levied on the supply of goods and services. It operates on a destination principle, meaning it is taxed in the state where the goods or services are consumed.

This comprehensive tax structure applies to the entire supply chain, from manufacturers to end consumers. At each stage, input tax credits are available, allowing for the offset of taxes paid in previous stages, effectively making GST a tax only on value addition. Consequently, the final consumer bears only the GST charged by the last seller in the supply chain, with the benefit of set-off at earlier stages. Presently, many items incur tax rates ranging from 40% to 50%. However, with the implementation of GST, a uniform tax rate may be applied, thereby reducing the tax burden on consumers.

Appropriateness Of GST

With the 101st Constitution Amendment Act coming into effect on September 8th, 2016, and the announcement of the GST Council on September 15th, the path to GST rollout is now clear. The government is committed to introducing GST, the most significant indirect tax reform, effective from April 1, 2017. One of the major challenges is to prepare the indirect tax authorities at both the Central and State levels, as well as educate stakeholders on the concepts, processes, and procedures of GST.

Manufacturers who produce and sell (domestic or interstate) goods.
Service providers or recipients in the case of Reverse Charge Mechanism.
Traders who sell goods (intra-state or interstate).

That Are Kept Outside The Domain Of GST

Certain items remain outside the scope of GST. These include liquor for human consumption, petroleum products, and electricity. For such goods, the current taxation framework (VAT and central excise) will remain in place. However, in the case of tobacco and tobacco products, GST will be applicable, and the central government retains the authority to levy central excise duty as well.