Goods and Services Tax (GST) is a combination of all the indirect taxes levied on the taxpayer. It has replaced a long list of indirect taxes whose cascading effect would have earlier affected the normal man of the country. With the introduction of Integrated Goods and Services Tax, 2017, the economy of the country witnessed a sea change.
The Country has adopted a dual model of the tax where the Tax is collected both by the Union and States and distributed among them equally. The model consists of four slabs i.e. 5%, 12%, 18% and 28%.
The tax is well tested world- wide and well implemented in the Country as well. France was the first country to introduce GST in the year 1954. Following this many other Economies including India adopted this system of taxation.
With the 122nd Constitutional Amendment Bill and 101st Amendment, the provisions of this tax were introduced in the Constitution. Article 246(A) , 269(A) and 279(A) of the Constitution are the sources of this tax.
Article 246(A) enumerates that both the Centre and the States have the power to levy tax on intra-state movement goods and services. However, only the Centre has power to levy taxes on inter-state supply of goods and services.
Article 269(A) enumerates that import and exports are deemed to be inter-state supply of goods and services and Centre has exclusive power on this. However, the tax is divided between both the Centre and the States.
Article 279(A) enumerates the establishment of a federal body to decide and discuss the disputes and to regulate the Goods and Services Tax. This body is known as GST Council which consists of Union Finance Minister and Finance Ministers of the States. The Council has one third votes for the Centre and two thirds votes for the States. The disputes are decided on the basis of majority.
The introduction of this tax earlier created a haphazard situation for the economy and small tax payers. However, it has been clearly evident that with the passage of time, it has boosted the economy on a large scale.
The minimum threshold limit for which the registration of GST is compulsory is the turnover of 20 Lakhs and the limit is 10 Lakhs in some specified regions.Thus, the small taxpayers and shopkeepers are kept outside the purview of this to prevent them from complicated processes of filing returns.
Overall considering all the aspects of this Tax, it benefits the taxpayers in two forms, firstly by way of Composition Scheme and secondly by way of Input Tax Credit.
Composition Scheme is a special scheme framed by the Council to encompass the taxpayers who have a small or medium scale business. All the individuals and enterprises that have a turnover of less than 1 Crore are entitled to the benefits granted under this scheme. The threshold limit has been reduced to 75 Lakhs in certain specified regions. All the taxpayers covered under the scheme have to pay only % of the tax in normal circumstances in the case of manufacturers and traders and the rate is 5% for the food and beverage industry. The taxpayers covered under the scheme can avail the benefits under the scheme like these they don’t need to raise the tax invoice. The tax payers under Composition Scheme cannot claim input tax credit.
The framers have also provided benefits to the medium and large scale producers. After the payment of tax, the tax payer can claim the tax paid on input. This credit is known as Input Tax Credit. This has benefited the manufactures and producers on a large scale as all the input incurred by them is availed by them in the form of this credit which in turn increases the turnover and profits of the taxpayers. The taxpayer needs to file return and raise invoice in order to avail the Input Tax Credit. All the necessary documents and formalities must be fulfilled to avail the benefits of the input tax credit.
Moreover, many initiatives have been taken day in and out to educate the people and create awareness about the working of this system. Some of these initiatives are GST POINT, BEGINNERS GUIED TO GST, GST App, GST Webinars, and GST Newsletter etc. to teach and guide people about the working of the system and filing returns. This has benefited the tax payers on a large scale. Many Para – Legal Organizations are also working to create awareness and education regarding this system.
Analyzing the evolution and development of this regime, it can be observed that from 2017 to 2019, the Indian Economy has witnessed a sea change. Initially it appeared a mammoth task for the taxpayers and the economy to adapt within it and the economy was adamant to accept the global change. However, with the passage of time, slowly and gradually the economy has adapted the change and availed all the possible benefits within the system which has boosted the economy on a large scale.
The Goods and Services Tax Regime is a fair, efficient and transparent system which has linked the economy and created a transparent system which nullifies the chances of tax evasion.
All the loopholes in the system have been overcome with time and will continue to evolve with the dynamic needs of the changing world. Goods and Services Tax is an amendable bill and will continue to adapt itself with the changing time.
In a bird eye view, considering all the aspects Goods and Services Tax has boosted the economy and inculcated an efficient system solving the needs of the tax payers and the economy at large.