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In India , GST came into effect on 1st July based on the provisions in Central Goods and Service Tax(CGST), Integrated Goods and Service Tax (IGST), Union Territory GST( UTGST) and Bill to compensate states. A common tax rate system may causes revenue loss to the state governments. As a compensation the central government empowered state government to impose cess on all goods notified by the central government including luxury items . The state governments can avail these compensation for the loss of revenue for a period of five years.
The introduction of GST will replace various tax presently being levied by the central and state government. Central Excise Duty, Additional Excise Duty, Additional Customs Duty, Special additional duty, etc will be subsumed in the central level and State Value Added Tax , Central Sales Tax, Entertainment Tax, Purchase Tax, Luxuary Tax etc. will be subsumed in the state level. The imposition and leviying of tax was very complex then. For the purpose of simplifying tax administration, the governmemnt prescribed five tax slabs either 0%, 5 %, 12%, 18% and 28% . All the commodities exept essential commodities and gold are taxed in these five slabs. The essential commodities will be taxed at zero percentage or it is exempt from tax and the gold comes under 3 percentage tax rate. The Central and State governments can together expand this tax rate upto 40% but it shoul be the maximum rate of tax with a proportion of 20% each.
The new tax system has certain charecteristics to arrest the evils of former tax system. The prime obective of the present system of taxation is to shift the tax burden from the stage of production to the consumption stage. It widens the scope for tax revenue and turnes a hike in the growth rate of GDP.
September 2017