KRG INTERNATIONAL BLOG

GST in India and its coverage

GST is a destination-based tax that will replace the current Central taxes and duties such as Excise Duty, Service Tax, Countervailing Duty (CVD), Special Additional Duty (SAD) of Customes, Central charges and cesses and local States taxes i.e. Valur Added Tax (VAT), Central Sales Tax (CST), Octroi, Entry Tax, Purchase Tax, Luxury Tax, Taxes on lottery, betting and gambling, State cesses and surcharges and Entertainment tax.

It will be a dual levy with State/Union Territory GST and Central GST. Moreover, inter-State supplies would attract an Integrated GST, which would be the sum total of CGST and SGST/UTGGST.

Petroleum Products, i.e. petroleum crude, high speed diesel, motor spirit, aviation turbine fuel, natural gas will be brought under the ambit of GST from 1st' July' 2017. Alcohol for human consumption has been kept outside the purview of GST.

Consensus between Central and State Government has been reached on four-tier rate structure viz. 5%, 12%, 18% and 28% for essential commodities.

Benefits of GST

GST has been envisaged as a more efficient tax system, neutral in its application and attractive in distribution. The advantages of GST are:

• Wider tax base, necessary for lowering the tax rates and eliminating classification disputes.
• Elimination of multiplicity of taxes and their cascading effects.
• Rationalization of tax structure and simplification of compliance procedures
• Harmonization of Centre and State tax administrations, which would reduce duplication and compliance costs.
• Automation of compliance procedures to reduces error and increase efficiency

Destination principle

The GST structure would follow the destination principle. Accordingly, import would be subject to GST, while exports would be zero-rated. In the case of inter-state transactions within India, the State tax would apply in the State of destination as opposed to that of origin.