January 26, 2019

GST and Indian Tax System

What is GST?
 Full form of GST:- Goods and Service Tax.  

Meaning of GST: GST is an indirect tax that will lead to the abolition of all other taxes such as service tax, central sales tax, stated level sales tax,excise duty and value-added tax (VAT). Both Central and state governments will impose GST on almost all goods and services produced in India or imported into the country. Exports will not be subjected to GST. Direct taxes such as corporate tax, capital gain tax and income tax will be affected. The highest rate of GST will be around 15 percent in the first year but after first year come down to 12 percent for second year. 

GST council: The GST  council will be chaired by Union Finance Minister and have a Minister of state for Finance Ministers as its members. While the center will have one-third votes, States together will have two-third say. To adapt a resolution , third-fourth majority would be required. The approval came on the day when the constitution Amendment Act on GST came into effect. GST is a single indirect tax, which will subsume most of the central and state levies such as value added tax,Excise duty,Service tax,Central sales tax,additional Customs Duty and special additional duty of customs.  The GST can be implemented only through a Constitution (122nd Amendment) Bill,2016 which means it needs to be approved by not less than two-thirds of the members present and voting in each House of Parliament. The GST must also be ratified by the legislatures of at least one-half of the States. According to the Article 279A(1) of the amended Constitution, the GST Council has to be constituted by the President within 60 days of the commencement of Article 279A 
GST Bill :- The GST constitution amendment bill needs to be ratified by at least 16 of the 31 states assemblies, including the assemblies of Union Territories Delhi and Puducherry. It would receive a presidential confirmation when that is done and the empowered committee of finance ministers would turn into the GST council to draft the subsequent Bills to be tabled in Parliament in the winter session to enable a rollout of GST by April 1,2017 , however, Congress and Left leaders believe the April deadline to be unrealistic given that much of GST related infrastructure is not ready yet. Date of implementation:-  The Union Government has set target to roll out of the GST from 1st April 2017. 

Administration of GST in India:- There will be two components of GST- central GST and State GST in order to comply with federal structure of India. Thus both center and state have authority to simultaneously levy GST across the value chain. GST will be levied on every supply of goods and services. State will levy and collect the state Goods and Services Tax on all transactions within a state and center will levy and collect Central Goods and Services.
GST Rates:- A Committee headed by Chief Economic Advisor Arvind Subramanian has suggested a standard GST rate of 18 percentage, while assuming the low end of the rate at 12 percentage and upper end at 40 percentage on sin goods that are seen as harmful to the society. 

About other taxes- 

( I ) Direct Taxes-  

Income Tax: Income tax levied on personal income. 
Capital Gain Tax: it is part of income tax levied on income of shares, house property etc.  
Corporate tax: Corporate tax is levied on registered companies and corporations 30 percent. 
Wealth tax: it is levied only on unproductive assets such as guest houses, jewellery, residential bungalows.           On Gift Tax ,Minimum Alternative Tax, Zero Tax  we have no proper facts.         

(II) Indirect Taxes:-  Customs Duty: it is levied on Exports and Imports. About 99 percent of customs comes from import duties.
 Stamp Duty: it is levied on sale of the assets and properties
 Excise Duty: it is levied on domestic production of goods. 
Sales Tax: Largest yield to state government comes from State tax (VAT). VAT tax recommended by LK Jha in  1976 and implemented from 2003-04. 
Service Tax: this tax was recommended by Raja Chellaiah Committee from 1994-95. 
 Luxury Tax: it is levied on who stayed customers in star hotels etc. 
 Land Tax: it is levied on agricultural lands.
 Advertisement Tax: levied on Media and other advertisements.

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