Goods and Services Tax (GST) is a country-wide indirect tax that will replace various indirect taxes like Central Excise Duty, Service Tax, State Sales Tax, Octroi and Value Added Taxes levied by different states. All these taxes will get subsumed in GST to create a unified market across India.
It will be applicable across the supply chain – from manufacturing to consumption. It will allow constituents of the supply chain to claim credit of input taxes paid at each stage in the subsequent stage of value addition, which means that a tax will be imposed only on value addition at each stage. For the end consumer, this will be the only tax levied by the dealer she has obtained goods or services from.
The GST structure has two components – central GST and state GST – that will be levied simultaneously on all transactions, except the exempted ones. As the nomenclature suggests, the central government will collect the former, while the states will be in control of the latter for transactions within the states.
A long-awaited reform, GST became a reality after the Rajya Sabha in August this year passed the GST constitutional amendment bill, which was subsequently ratified by the required number of states and secured the Presidential assent in September 2016. The central government is aiming for a GST rollout by April 2017, though final negotiations with the states on several aspects are still on.