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INSIGHT ON GOODS AND SERVICES TAX (GST)

What is GST? How does it work?

GST is one of the biggest Indirect Tax Reforms in India. GST is a simpler, efficient and effective tax system in the country, which subsumes the total indirect tax structure into one single payable tax. GST is one indirect tax for the whole nation, which will make India one unified common market.

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. 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.

GST- Role of Company Secretaries in GSTGST is expected to help in ease of doing business in India and creating job opportunities. The professionals will have immense potential to practice for tax compliance by filing of returns, interpretation of law, advising on the correct procedure, annual audit etc.,

The role of Company Secretaries under GST regime is enormous and will further increase with recognition under Sections 42- Tax Audit and 50- Special Audit of Model GST Law. As increased role derives with it more responsibilities, so Company Secretaries should get ready to substantiate Government's faith on the profession.

Company Secretaries can extend the following services under the GST Act

  1. Issue certificate certifying the fact of non-passing of the GST burden (Report for GST on refund process)
  2. Act as Authorised Representative in the matter of registration under Goods and Services Tax Act (Report on GST Registration).
  3. Act as an Authorised Representative for acting as an agent for the taxpayer (Report on GST Payment Process).

How will GST benefit the Make in India

If there is any measure that will strengthen the Make in India effort, especially in goods, it is the goods and services tax (GST).

There are a number of reasons how GST will benefit to the Nation: Some of those are as follows.

  1. It is expected that the total incidence of duty on manufacturing (goods) will come down from the present level of 26.5 per cent (Centre: 14 per cent, state value-added tax: 12.5 per cent). This will happen mainly through a more balanced sharing of the tax burden between the goods and the services sector.
  2. It will create a level playing field between imports and domestic manufacturing. Today, the effective central excise duty rate on non-oil domestic manufacturing is nine per cent but the countervailing duty (CVD) neutralization on the import side is only six per cent, creating a negative protection against domestic industry. This will go away with the introduction of the GST with the phasing out of all exemptions, including CVD exemptions, and the same GST rate will apply to both imports and domestic manufacturing.
  3. Today the general perception is that it is more profitable to trade than to manufacture. An important reason for this is that the tax burden on trading is much less than on manufacturing, which is compounded by tax leakages in the trading segment of the value chain. Concurrent taxation by the Centre and the States of the same taxable base from raw material to retail will facilitate better compliance verification. This will create a level playing field between domestic manufacturing and trading.
  4. Lower threshold limits for manufacturing under GST will prevent fragmentation of units. Today, a number of medium and large units are masquerading as small units to avail of exemption benefits, because "small" is defined on the basis of turnover rather than ownership. The GST will encourage small units to grow and reap the benefits of scale. Compliant units will benefit from a level playing field.

Positive Impact on Indian Economy:

  • Better compliance and revenue buoyancy replacing the cascading effect [tax on tax] created by existing indirect taxes. Tax incidence for consumers may fall. Lower transaction cost for final consumers.
  • By merging all levies on goods and services into one, GST acquires a very simple and transparent character.
  • Uniformity in tax regime with only one or two tax rates across the supply chain as against multiple tax structure as of present.
  • Increased tax collections due to wide coverage of goods and services.
  • Improvement in cost competitiveness of goods and services in the international market.

Therefore, Goods and Services Tax (GST), is expected to provide the benefits of simplification of tax regime, broadening of tax base, elimination of tax cascades, enhancing export competitiveness, ensuring greater regional equity and improvement of transparency.

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