GST is an indirect tax imposed on goods and services. There is no differentiation between goods and services as GST is levied at each stage in the supply chain. 100 % input tax credit is available throughout the supply chain.
This tax is said to be the merger of all the indirect taxes previously imposed, such as, VAT, CENVAT, Service tax, etc. It is a single rated tax.
GST will avoid the problem of double taxation which was prevalent in the current scenario. Suppose a manufacturer produces Product X. He sells it in the market, now he will pay CENVAT (Excise Duty) to the Central Government and VAT (Sales Tax) to the State Government. But after GST he will be required to pay only the GST at a single rate, thereby the problem of double taxation is removed. It will provide a single window clearance for all Indirect Taxes.
More than 140 countries are using GST and the standard GST rates ranges between 15-20 %. There are two GST models:
1. Single GST, i.e., Central GST, the revenue is shared between States and Central Government.
2. Dual GST, i.e., Central GST and State GST, Central and State Govt. recovers tax separately.
Most of the countries are following the Single GST model.
As per Kelkar Committee recommendations, the Dual GST should be followed in India with Center rates ranges between 16-20% and the States rates between 12-14%. But keeping the current situation in mind, the Centre rates can fall between 10-14%. Further States have been given autonomy to set the rates within specified range.
The conclusion is that GST will remove the high tax burden and simplified tax structure so that better compliance can be made.
