When GST Came to India

Goods and Services Tax abbreviated as GST, aggressed the nation when passed in parliament in the year 2017. For a long time, GST created hustle-bustle in the nation. Keeping in mind the hubbub caused by GST, this article unveils the underlying concept of when GST came to India. The following article will make the acquaintance of Goods and Services Tax (GST) to you and along with that guide you to clear the idea in this regard.

From the prior complicated taxation system till the actual day GST taxation regime. This article will address what GST exactly is, and how it came into existence, when it came to India, its types, its characteristics, merits and demerits, its need, and other important conformities that come under GST.

Now let’s quickly dive in

Also read: A Complete Guide to GST and GST Certification Course

Prior Taxation System Prevailed in India

Before GST, an intricate taxation system existed there in India. The former tax status was all-encompassing of both the state and central government.

In actual fact, the states used to collect taxes by utilizing Value-added tax or VAT. VAT deals with the tax placed on a specific product at each step of the supply chain from manufacturing to the selling point. Incrementally, taxes applied at each stage issued a cascading effect of tax. Consequently, taxes levied by the state government are closely allied to central government taxes. So, the imposition of VAT erupted that leads to a tax-on-tax effect also termed as the cascading effect of taxes.

What is GST?

GST – an abbreviation of Goods and Service Tax – is considered as an individual tax charged on supply, sales, purchases, and intake of goods and services. Its journey started in a committee in the year 2000 at that time the reigning PM Atal Bihari Vajpayee put forward this bill, which finally took place after 17 years. As in the year, 2017 a bill was passed in parliament for this law to come into effect.

For the entire nation, GST was validated as a multistep. When the GST came in India, at that time it has expelled a plethora of taxes like VAT, sales tax, purchase tax, service tax, luxury tax, entertainment tax, excise tax, etc., and itself turn out to be a unified tax regime.

Track the details about the Journey of GST in India

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Origin of GST

GST was first implemented in France in the year 1954. Since that time, more than a dozen of nations like Canada, Japan, Germany, Italy, Australia, the UK, Nigeria, South Korea, Singapore, Spain, and Vietnam have enforced the GST. Later, China had applied it in 1994, whereas Russia has put it into practice at the beginning of the year 1991.

The genesis of GST in India traced back to 2000 when the idea of utilizing it in the country was first given by the father of GST, Minister Atal Bihari Vajpayee. Being the state finance minister, he framed an EC also called Empowered Committee, in order to form an arrangement of GST based on value-added tax. Subsequently, in 2004 on the basis of that particular structure made by the finance minister of India, a bill was passed in parliament in concern with GST.

Afterward, in 2011 it is established as the first amendment in the constitution, and in 2013 standing committee has tabled its final report on GST. Hereafter, 2 years in 2015 bill was passed in Lok Sabha but yet not in Rajya Sabha. 2016 proceed with four supplementary bills under GST in Rajya Sabha. Then finally in 2017, India has promulgated a GST law, which came into the operation on 1st July 2017. After 17 years law was finally evolved.

Check Out: Top 9 GST Certification Courses for Students

Types of GST

There are three notable types of GST. Each of them has its existence that is detailed below:

1. CGST

Central Goods and Services Tax, shortened as CGST. Under this CGST, the central government accumulates the revenue from the purchase and sale of products and services across the intrastate dealings. Basically, this type deals with CGST.

2. SGST

State Goods and Services Tax, shortened as SGST. In this component, the state government assembles the revenue of sales and purchase of goods and services across the intrastate dealings. This constitutes SGST.

3. IGST

Integrated Goods and Services Tax, shortened as IGST. It is a sort of integrated tax which is collectively gathered by both central and state governments across the interstate, with equal distribution.

Delve into: Learn How GST Works in Australia

Let’s figure out IGST with an instance.

Suppose, there is a sale of INR 2,00,000 at an 18% GST rate from Mumbai to Pune. Then at an 18% GST rate, the applicable GST would be 36,000. Consequently, the collected revenue of INR 36,000 will be equally distributed between central and state governments as each will receive a share of INR 18,000. That is how it operates.

Learn more about How GST Works

Call for GST in India

The prior taxation system of India provokes an effect called the tax-on-tax effect also termed as the cascading effect of taxes. This particular effect aims something like when one trader sells certain commodities to other traders, then he is supposed to pay for an already charged tax as well.

For an instance, Trader A sells his commodities to Trader B and issues certain taxes on it, then the second trader that is Trader B resale those goods to Trader C by charging him with some new taxes and the already paid tax, this process goes on. This process is named as cascading effect.  This effect causes a rise in prices. So, in order to eliminate inflation, GST came to India. Thus, the call for GST becomes prevalent.

Also check: Top 12 GST Certification Courses in Chandigarh

Characteristics of GST

Moving on to the characteristics; GST has salient characteristics mentioned as follows:

1. GST dealt separately with its three types those are CGST, SGST, and IGST.

2. It encircles around 17 taxes that comprise both state and central grades. These includes:

• Central Excise Duty
• State excise duty
• Service Tax
• Countervailing Duties (CVD)
• SAD or Special Additional Duty
• Compensation Tax
• State Value Added Tax (VAT)
• CST or Central Sales Tax
• Entertainment Tax
• Purchase Tax
• Luxury Tax
• Entry Tax
• Octroi Tax
• Sales Tax on an advertisement
• Taxes on lottery
• Tax on Gambling
• Tax on betting

3. Unified tax rate for one nation.

4. Added value at each step of processing or manufacturing

5. Denial of Tax-on-tax effect

6. Free circulation of credits

7. Alcohol, Tabaco, and Petroleum are out of the reach of tax.

Merits of GST

The unified GST tax regime came as a radical or progressive reform in the taxation structure of India. Here, discover some of the benefits of this tax structure:

1. GST resulted in the eradication of the cascading effect prevailing in India due to the old taxation scheme.

2. Another merit comes in form of wiping out the inflation from India. As reported by Wikipedia, the reduction of tax anticipates around 25-30%.

3. It leads to a new threshold for enrollment.

4. Number of conformities is lesser. As of now, to maintain the compliances, the expenses are lesser.

5. When GST came to India, it becomes fortunate in terms of more liability and powerful agreements.

6. GST also hyped up the growth of gross domestic product (GDP) supporting state and central authority, procedures, business people, ordinary people, and the entire country.

7. It has enhanced the efficacy in organization and administration.

Also check: Outline of GST and Benefits of GST Certification Course

Demerits of GST

Besides the favorable effects, some shortcomings come along with the GST. Have a look at them down:

1. It becomes a complete online taxation system, as all the practices are taken up in an online mode. From the enrollment to listing the returns and refunds, all are operated on the GSTN portal. Therefore, some of the small-scale enterprises are confronted with challenges.

2. Due to additional software purchases, new software and training employees have to undergo additional expenditure which is another demerit in this context.

3. If it fails to be under GST, then it may bring some penalties.

4. Small and Medium Enterprises (SME) will have to face multiplication of tax.

How GST influenced India?

The GST regime brought a new and innovative system in India, together with the better management of the taxes and duties. Ultimately, it has had a trendsetting mark in India’s economy. Here’s how few simplified radical reforms with statistics specify the influence of GST in India:

1. Increased revenue base: There’s a substantial shift in revenue base as more and more taxpayers & contributors are adopting this regime which changes the compliance depositions.

2. Collection of Taxes: Undeniably, the amount of collected taxes has perceived an upsurge in taxes that are collected through online means.

3. Rate reasoning: The Government is taking some serious steps for streamlining the GST rates.

4. E-way billing: It has introduced E-way billing for better service in transactions.

5. E-voicing: E-voicing system came into existence on 1^st October 2020. Under this arrangement taxpayers and companies are bound to get a referral code through this invoice. This authenticates the reliability of such invoices.

All these points combinedly contributed to the impact of Indian tax regulations to a great extent.

Openings of New Opportunities due to GST

GST has amalgamated multiple taxes with its encounter. Moreover, it has provided the gateway of new opportunities to the nation. Now, every business and organization is required to adhere to GST. The illustration of researchers shows that GST has created a desire for 1.3 million finance professionals. There are numerous job niches that come under this such as:

1.Taxation Manager

2. Taxation Research Analyst

3. Accountants

4. Reconciliatory

5.GST Compliance Practice

6. GST Consultancy Practice

7. GST Trainer

8. GST Practitioner

Now if you are having the question of how to become a GST Trainer or GST Practitioner, then get yourself enroll in the GST Practitioner Course. These courses are available via offline and online modes.

Must Read: Top GST Certification Courses in India

GST FAQs

Q1. What was the objective of GST?

The main objective behind introducing the Goods and Services Tax was to eradicate the tax-on-tax effect or cascading effect of taxes completely from the nation. Instead of effect, they aim to launch a law that is an amalgamation of 17 taxes.

Q2. What is the GST or Goods and Services Tax Law?

GST refers to Goods and Services Tax. It is considered as an individual tax charged on supply, sales, purchases, and intake of goods and services.

Q3. What is the tax-exempt status of GST? 

Enterprises or Businesses and individuals are free from GST taxation, only if there yearly aggregation is less than a particular time. At the time of GST commencement on 1st July 2017, all businesses and individuals having less than Rs. 20 lakhs as their yearly accumulation were allowed for GST exemption.

Q4. How many types of GST are there in India?

There are three notable types:

1. Central Goods and Services Tax (CGST)

2. State Goods and Services Tax (SGST)

3. Integrated Goods and Services Tax (IGST)

Q5. How to calculate GST?

GST calculation formula is – GST Amount= Original Price* GST % / 100

Q6. When GST has to be paid?

According to the GST guidelines, each enrolled common taxpayer has to make his/her GST paid by the end of the 20th of every month along with the compliance of GSTR 3B  return. Its payable mode code is online as well.

Conclusion

In nutshell, the abuzz that is created in the nation when GST came to India is quite irrefutable. The unified regime has brought remarkable compliances like e-way billing, e-voicing, rate rationalizing to strengthen the nation.

Besides this, it has relegated multiple taxes which were levied during the former system. Thereby, clearly expelled the cascading effect from the country. Moreover, it has offered dual benefits by minimizing tax burdens and maximizing revenue on tax.

I hope that this article helps you to figure out the urge of when GST came to India.