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Goods and Services Tax
Goods and Services Tax (GST) is an indirect tax system introduced in India on July 1, 2017, which subsumed multiple indirect taxes levied by the central and state governments, such as VAT, excise duty, and service tax. GST is a value-added tax that is levied on the supply of goods and services, from the manufacturer to the consumer and is designed to create a common national market by eliminating barriers to interstate trade.
Goods and Services Tax History
The history of GST in India dates back to the year 2000 when the then Prime Minister Atal Bihari Vajpayee first proposed the idea of GST. The recommendation for the introduction of Goods and Services Tax (GST) in India was made by the Kelkar Task Force on indirect taxes in 2003.
The task force, headed by Vijay Kelkar, recommended the implementation of GST to simplify the complex indirect tax system and improve tax compliance. The task force’s report became the basis for the subsequent discussions and negotiations.
However, it was not until 2014 that the newly elected government under Prime Minister Narendra Modi formed a committee to draft the GST Bill. After several rounds of discussions and negotiations with various stakeholders, the GST Bill was finally passed in 2016 by the Indian Parliament, and it came into effect on July 1, 2017.
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Goods and Services Tax Objectives
The main objective of the Goods and Services Tax (GST) in India is to create a unified and simplified tax system, by replacing multiple indirect taxes levied by the central and state governments with a single, comprehensive tax. The introduction of GST aims to achieve the following objectives:
- Simplify the Tax Structure: GST aims to simplify the complex indirect tax structure by replacing multiple taxes with a single tax, reducing compliance costs, and making tax administration more efficient.
- Create a Common Market: GST creates a common national market by eliminating barriers to inter-state trade, enabling a seamless flow of goods and services across state borders.
- Promote Economic Growth: GST is expected to reduce the tax burden on businesses, encourage entrepreneurship, and increase investment in the country, thereby promoting economic growth.
- Improve Tax Compliance: GST is expected to reduce tax evasion by creating a comprehensive and transparent tax system and promoting greater tax compliance among businesses and individuals.
- Ensure Social Justice: GST provides for a uniform tax rate across the country, ensuring social justice and reducing the tax burden on the common man.
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Some of the key features of GST include:
|Destination-based consumption tax||GST is levied at the point of consumption of goods and services, rather than at the point of origin or production.|
|Dual GST model||GST is levied by both the central and state governments, under a dual GST model.|
|Multiple tax rates||GST is levied at four tax rates: 5%, 12%, 18%, and 28% when it was introduced. However, these slabs keep changing with changing needs of the economy.|
|Input tax credit||Businesses can claim input tax credits for taxes paid on purchases of goods and services, which can be set off against their GST liability.|
|Online tax filing and payment||GST returns can be filed online, and taxes can be paid through the GST portal.|
|GST Council||The GST Council is a constitutional body responsible for making recommendations on GST-related issues and making key decisions on GST rates and other matters.|
|Exemptions and thresholds||Small businesses with a turnover of up to Rs. 20 lahks are exempt from GST, while businesses with a turnover of up to Rs. 1.5 crore can opt for a simplified tax regime.|
|Anti-profiteering measures||The government has put in place anti-profiteering measures to ensure that businesses pass on the benefits of reduced tax rates and input tax credits to consumers.|
|GSTN||The GST Network (GSTN) is a non-profit, public-private partnership responsible for providing IT infrastructure and services for the implementation of GST.|
|GST compliance rating||Businesses are given a GST compliance rating based on their timely filing of returns and payment of taxes, which can impact their ability to do business with other GST-registered entities.|
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Taxes Subsumed Under GST
GST replaced the following taxes and brought them under a unified tax regime. There is a list of Taxes Subsumed Under GST.
- Central Excise Duty
- Service Tax
- Additional Excise Duty
- Additional Customs Duty (Countervailing Duty)
- Special Additional Duty of Customs
- Value Added Tax (VAT)
- Central Sales Tax
- Entry Tax
- Entertainment Tax (other than the tax levied by local bodies)
- Luxury Tax
- Taxes on Lottery, Betting, and Gambling
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GST Council Structure
The GST Council is a constitutional body in India responsible for overseeing the implementation and administration of Goods and Services Tax (GST) in the country. The Council is chaired by the Union Finance Minister and consists of state Finance Ministers as members.
GST Council Functions
The functions of the GST Council are as follows:
- Recommend Tax Rates: The Council recommends tax rates for goods and services, taking into account revenue implications and the interests of various stakeholders.
- Decide on Exemptions and Thresholds: The Council decides on exemptions, thresholds, and other matters related to GST.
- Resolve Disputes: The Council resolves disputes between the central and state governments or between different states, related to GST implementation or revenue sharing.
- Review Tax Revenue: The Council reviews the tax revenue position and suggests measures to improve revenue collection.
- Monitor Implementation: The Council monitors the implementation of GST and suggests measures to improve its functioning.
- Recommend Changes: The Council recommends changes to the GST Act, rules, and procedures as required.
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Goods and Services Tax UPSC
The Goods and Services Tax (GST) is an important topic for the UPSC Syllabus as it is a significant tax reform implemented in India. The UPSC has been known to frequently asked questions related to GST in its Civil Services Exam, both in the Preliminary and Mains stages.
Candidates preparing for the UPSC exam should have a thorough understanding of the various aspects of GST such as its history, objectives, advantages, challenges, and impact on the Indian economy. They should also be aware of the GST Council, its composition, functions, and decision-making process.
For aspirants who are looking to prepare for the UPSC exam, there are various resources available, such as StudyIQ UPSC Online Coaching and UPSC Mock Test, which can help them learn about GST in depth.
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