Goods and Service Tax

The introduction of the GST (122nd AMENDMENT BILL) would be a significant step in the field of indirect tax reforms in India.The GST Bill proposes to empower both States and the Centre to levy the GST, which will subsume the services tax, excise duties, stamp duties, entry tax,octroi,state VAT and central sales tax.It proposes that the Centre be empowered to tax sales of goods and States get to tax services. At present, the Centre can tax services but not sales and distribution of goods. States can currently tax sales and distribution of goods but not services.Further,GST would be collected at the point of consumption rather than the place of production.In principle, it is the same as the Value-added Tax (VAT) — already adopted by all Indian States — but with a wider base. While the VAT — which replaced the sales tax — was imposed only on goods, the GST will be a VAT on goods and services.

GST would be applicable on supply of goods or services as against the present concept of tax on the manufacture/sale of goods/provision of services.GST would apply to all goods and services except alcohol for human consumption. GST on petroleum products would be applicable from a date to be recommended by the GST Council.

Benefits:

• By subsuming a large number of central and state taxes into a single tax, it would mitigate cascading effect or double taxation in a major way.GST regime can boost India’s growth by up to 2.5 percentage points. Production costs would be cut,thereby making exports more competitive.
• India would become one seamless market and this would result in economic integration.Trucks won't need to wait on inter-state borders. 
• GST would simplify the indirect tax administration, broaden the tax base and result in better tax compliance.
• GST will improve ease of doing business.

Sticking Points:

The parliament may,by law, provide for compensation to states for revenue losses arising out of the implementation of the GST ,on the GST council recommendation. This would be up to a five year period.Consensus eludes the Centre and the States on the issues of compensation, petrol tax.Since the GST will be levied on consumption of goods and services, states that are net producers stand to lose revenue. States must not however lose sight of the long term gains.