An outer look on the upcoming Goods and Services Tax in India listing its merits and demerits.

1. GST Goods and Services Tax

2. GST? GST is one indirect tax that will make
India oneunified market.
GST is a single tax on the supply of
goods and servicesright from the
manufacturer to the consumer.

3. Problems inthe current structure

4. 1.Multiplicity of Taxes
Presently, the Constitution empowers the Central Government to
levy excise dutyon manufacturing andservice tax on the supplyof
services. Further, it empowers the StateGovernments to levy sales
tax or valueaddedtax (VAT) on the saleof goods. This exclusive
division offiscal powers has led toa multiplicity ofindirect taxes
in the country. In addition, central sales tax (CST)is levied on
inter-State sale of goods by the Central Government, but collected
andretained by the exporting States. Further, many States levy an
entry tax on the entry ofgoods in local areas. TaxesbyUnion
Government, State Governments andthe local governments have
resulted in difficulties and harassment to thetax payer.He hasto
contact several authorities andmaintain separate records for each ofthem.

5. 2.Complex
Thetaxes are levied by central government as well as state
government. So, a person has to maintainaccounts which will
comply with all the applicable laws. This multiplicity of taxes at
the State and Central levels has resulted ina complex indirect tax
structurein the countrythat is ridden with hidden costs for the
trade.

6. 3.Cascading effects of taxes
Incurrentindirect tax structure inIndia,thereis cascading of
taxes dueto ‘tax ontax’. No credit of excise dutyand service tax
paid at the stage of manufactureis available to the traders while
payingthe State level sales tax orVAT, and vice versa. Further,no
credit of State taxes paid inone State can be availed inother
States. Hence, theprices of goods and services get artificially
inflated to the extent of this ‘tax on tax’.

7. 4.MultipleCompliance
A business person might have to comply with multiple compliance
interms of indirect taxes in India.
For example,
Kerala VATMonthly-15days-returnfrequency-15days
M.P. VAT Quarter-30thof month following qtr.-upto 10th of following month

8. 5.TaxArbitrage
Theproblem of tax arbitragefor a single nation poses an invisible
barrierfor freetrade.In many cases,a smalldifferencein rate of
tax canresultin manifold implications and thus, can inducethe
businessto move into a lowertax territory.
For example,
Himachal Pradesh 5.00% -13.75
Karnataka5.00%- 13.50
Kerala 4.04%- 12.625
MadhyaPradesh 5.00%- 13.00
Maharashtra 5.00%- 12.50

9. New features
1. It shallbea destinationbasedtaxation
2. It shallhavea DualAdministration– Centreandstate
3. Statewise determinationoftaxableperson–no more
4. centralizedregistration
5. Seamlesscreditamongstgoodsandservices

10. Concerns over the newsystem
1. WithheterogeneousStatelawsonVAT, thedebateonthe necessity foraGST hasbeenreignited[15].The bestGST systems across the world
use a singleGST, whileIndia has optedfora dual-GSTmodel. CriticsclaimthatCGST, SGSTandIGST arenothingbut newnamesforCentral
Excise/ServiceTax, VATand CST,andhence GST brings nothingnewtothetable.
2. The conceptofvalue-addedhasneverbeenutilizedin thelevyofservice,astheDelhiHighCourtisattemptingtoprovein thecaseofHome
SolutionRetail,while underCentralExcise thefocusison definingand refiningthedefinitionofmanufacture,insteadoffocusingon value
additions.
3. TheRevenuecan beverystubbornwhenitcomes torefunds,astheMaharashtraGovernmentproves,andsoftwareentitiesthat applied for
refundsonexcessservicetaxpaidon inputsdiscovered.
4. The all-newCenvatCreditRules,2014do littletoclarify eligibilityforinputcredits,byusinggeneraltermssuchas"anygoods whichhaveno
relationshipwhatsoeverwiththemanufactureofa finalproduct"and"servicesusedprimarilyforpersonaluseor
consumptionofanyemployee"

11. Credits
wikipedia.org
gstindia.com