Goods & Service Tax

GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer's point and service provider's point up to the retailer's level. It is essentially a tax only on value addition at each stage, and a supplier at each stage is permitted to set-off, through a tax credit mechanism, the GST paid on the purchase of goods and services as available for set-off on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

Stage of supply chain Purchase value of Input Value addition Value at which supply of goods and services made to next stage Rate of GST GST on output Input Tax credit Net GST= GST on output - Input tax credit

Manufacturer 100 30 130 10% 13 10 13-10 = 3

Whole seller 130 20 150 10% 15 13 15-13 = 2

Retailer 150 10 160 10% 16 15 16-15 = 1

This new levy would replace almost all of the indirect taxes. In particular, it would replace the following indirect taxes:

At Central level

• Central Excise Duty

• Service Tax

• Additional Excise Duties

• CVD (levied on imports in lieu of Excise duty)

• SAD (levied on imports in lieu of VAT)

• Excise Duty levied on Medicinal and Toiletries preparations,

• Surcharges and cesses

• Central Sales Tax

At State level

• VAT/Sales tax

• Entertainment tax (unless it is levied by the local bodies)

• Luxury Tax

• Taxes on lottery, betting and gambling

• Entry tax not in lieu of Octroi

• Cesses and Surcharges

GST is different from the current tax structure in many ways. Currently, taxes treat goods and services differently. As mentioned above, ‘goods’ attract Excise at manufacturing level and VAT at the time of sale. In contrast, services attract only one levy i.e. Services tax on provision of taxable services.

A product or service passes through many stages till it reaches the final consumer....