1st July is observed as GST (Goods and Services Tax) Day. This year marks the anniversary of the implementation of the historic tax reform of the Goods and Services Tax. The first GST Day was observed on 1 July 2018 to mark the first anniversary of the new indirect tax regime i.e. Goods and Services Tax (GST). GST was implemented in the intervening night of 30 June and 1 July 2017 in a function held in the Central Hall of Parliament.
What is gst
Significance of GST
1.Create a Unified Common Market: Help to create a unified common national market for India. It will also give a boost to foreign investment and “Make in India” campaign.
2.Streamline Taxation: Through harmonization of laws, procedures and rates of tax between Centre and States and across States.
3.Increase Tax Compliance: Improved environment for compliance as all returns are to be filed online, input credits to be verified online, encouraging more paper trail of transactions at each level of supply chain;
4.Discourage Tax evasion: Uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighbouring States and that between intra and inter-state sales
5.Bring about Certainty: Common procedures for registration of taxpayers, refund of taxes, uniform formats of tax return, common tax base, common system of classification of goods and services will lend greater certainty to taxation system;
6.Reduce Corruption: Greater use of IT will reduce human interface between the taxpayer and the tax administration, which will go a long way in reducing corruption;
7.Boost Secondary Sector: It will boost export and manufacturing activity, generate more employment and thus increase GDP (Gross Domestic Product) with gainful employment leading to substantive economic growth.
Issues Associated with GST
1.Multiple Tax Rates: Unlike many other economies which have implemented this tax regime, India has multiple tax rates. This hampers the progress of a single indirect tax rate for all the goods and services in the country.
2.New Cesses crop up: While GST scrapped multiplicity of taxes and cesses, a new levy in the form of compensation cess was introduced for luxury and sin goods. This was later expanded to include automobiles.
3.Trust Deficit: The Union government’s proclivity to levy and appropriate cess revenues for itself without sharing them with the states has lent credence to the wisdom of guaranteed compensation for states.
It turned out to be prescient as GST failed to live up to its economic promises and states’ revenues were protected through this guarantee.
4.Economy Outside GST purview: Nearly half the economy remains outside GST. E.g. petroleum, real estate, electricity duties remain outside GST purview.
5.The complexity of tax filings: The GST legislation requires the filing of the GST annual returns by specified categories of taxpayers along with a GST audit. But, filing annual returns is a complex and confusing one for the taxpayers. Apart from that, the annual filing also includes many details that are waived in the monthly and quarterly filings.
6.Higher Tax Rates: Though rates are rationalised, there is still 50 % of items are under the 18 % bracket. Apart from that, there are certain essential items to tackle the pandemic that was also taxed higher. For example, the 12% tax on oxygen concentrators, 5% on vaccines, and on relief supplies from abroad.
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