GST (India): An Overview

The whole nation has been talking about GST- what it is, what its pros and cons are, whether it is better than the conventional tax system- ever since the beginning of the year and even more after its roll out in the country on 1^st July, 2017. Here we will peek into GST with a general perspective based on facts and figures.

WHAT IS GST?

The Goods and Services Tax (India) is a single comprehensive and destination-based indirect tax system that would replace the conventional cascading taxes levied upon by the central and state governments. It is the biggest indirect tax reforms in the country ever since its inception. It is introduced to get rid of, or more appropriately, to combine several indirect taxes like central excise tax, additional excise tax, Value Added Tax(VAT), service tax, sales tax and  additional customs tax.

GST AROUND THE WORLD:

The first country in the world to implement GST was France, in the year 1954. The Value Added Tax, as is called in France and many other countries, was introduced with the aim of reducing the arising number of cases relating to tax evasion due to very high sales tax and tariffs. Monaco implemented a similar tax regime in the same year; Ivory Coast in 1960; Brazil and Honduras in 1964; Germany in 1968; and today, only 35 out of total 195 countries in the world do not have GST or the kind implemented in their countries. Which means there are 160 countries that have implemented GST/VAT: 53 in Europe, 44 in Africa, 26 is Asia, 19 in Caribbean, Central and North America, 11 in South America and 7 in Oceania.

                India has the highest GST rate in the world at 28%, followed by Argentina at 27%.

GST IN INDIA:

As we have all heard about by now, Indian GST basically has four rate slabs i.e. 5%, 12%, 18% and 28%. However, there are some items- mostly food staples- on which GST rate is 0%. You will find that other countries especially from Europe have only one single rate for everything and everybody, unlike India. This is because of the existence of very less or no poor people in these countries. No wonder, it is unimaginable a situation in India where a poor man pays the same tax as the rich.

                The Indian GST follows the Canadian model of dual GST- a federal structure whereby both centre and state governments can levy and collect taxes.

                GST appears to be mentioned for the first time in India on 28^th February, 2006 while presenting the Budget speech by Former Finance Minister of India, P. Chidambaram. After years of on and off debate, it came about in the Indian economic system through the 122^nd amendment bill, which was passed in Rajya Sabha in April, 2017, and thus leading to the 101^st Constitutional Amendment Act. This act added Article 246(A), Article 269(A) and Article 279-A in the Constitution, amended schedule 7 and also made necessary changes in the existing articles U/A 249, 250, 268, etc.

All necessary changes in the new tax system are being examined, legislated and implemented by the GST Council that was constituted by the President through Article 279-A. The Council is composed of Union Finance Minister as the chairman, Union Minister of State in charge of Revenue or Finance and one nominated member from each state who is in charge of finance or taxation.

CONCLUSION:

Though many people have different positive and negative opinions on GST or the way it was implemented in India, it is really too early to establish a concrete stance at this time. But witnessing the success of GST in many other countries that have implemented it have made more people hope for the better. It, along with the many different changes that the country is embracing, can make India free of the many vices and challenges that it faces today. Transparency and accountability will shoot up. When the tax system is simpler, tax evasion is more difficult, which will again be checked by the rapid digitalization that India is going through. In the Ease of Doing Business report published by World Bank on October 31, India rose 30 ranks to 100^th from 130^th rank last years. This is a great sign of improvement, and with GST on the roll, we can only hope for similar or better improvements in the near future.

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