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Goods and Services Tax
(GST)

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Introduction
Indirect taxes in India have driven businesses to restructure and model their supply chain and systems
owing to multiplicity of taxes and costs involved.
With hopes that the Goods and Services Tax (GST) will see the light of the day, the way India does
business will change, forever.
Total tax collection in India (direct & indirect), currently stands at Rs 14.6 lakh crore, of which almost
34 per cent comprises indirect taxes, with Rs 2.8 lakh crore coming from excise and Rs 2.1 lakh crore
from service tax.
With the implementation of the GST (Goods and Services Tax), the entire indirect tax system in India
(excise, state-level VAT, service tax) is expected to evolve.
After GST, the percentage of indirect tax is expected to increase in India.

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Not covered under the GST purview
1. Petroleum products
2. Entertainment and amusement tax levied and collected by panchayat/municipality/district
council
3. Tax on alcohol/liquor consumption
4. Stamp duty, customs duty
5. Tax on consumption and sale of electricity

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GST objectives & Challenges
Objectives :
1. Ensuring availability of input credit across the value chain
2. Minimising cascading effect of taxation
3. Simplification of tax administration and compliance
4. Harmonisation of tax base, laws, and administration procedures across the country
5. Minimising tax rate slabs to avoid classification issues
6. Prevention of unhealthy competition among states
7. Increasing the tax base and raising compliance
Implementation challenges:
1. Lack of adaptation
2. Lack of trained staff
3. Double registration can increase compliances and cost
4. Lack of clear mechanism to control tax evasion
5. Hard to estimate the exact impact of GST

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Impact on Inflation
 Under the proposed GST, effective tax rate on goods (comprising around 70-75 per cent of the CPI
basket) will decline.
 A significant proportion (35 - 40 per cent) of goods (majorly agriculture products) are not subject to
tax and we expect a status quo in future.
 At present, services-oriented components constitute 25-30 per cent of the CPI basket with a major
share belonging to housing, transport and communication sector .
 Service tax is not imposed on certain (12 per cent of the CPI basket) services and these services are
expected remain exempt under GST regime.
 A hike in tax rate on services is unlikely to have any material direct impact on CPI.

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Impact on Different Sectors

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