Assignment on Goods and Services Tax (GST)
1. Introduction to GST
Goods and Services Tax (GST) is a comprehensive indirect tax levied on the manufacture,
sale, and consumption of goods and services across India. It is a destination-based tax that
aims to replace a host of indirect taxes such as VAT, Service Tax, Excise Duty, and others.
GST was implemented on July 1, 2017, and is one of the biggest tax reforms in Indian
history. By unifying the country into a single market, GST promotes ease of doing business,
increases transparency, and reduces the cascading effect of multiple taxes. It is applicable to
all businesses involved in the supply of goods and services, ensuring a consistent tax
structure throughout the country.
2. Historical Background
The idea of implementing GST in India was first proposed in 2000 by the Vajpayee
government. Several committees and task forces worked on the structure and framework of
GST over the years. After extensive discussions with stakeholders, the Constitution (122nd
Amendment) Bill was passed in 2016. GST was finally launched on July 1, 2017, unifying
various indirect taxes into a single system. The journey of GST implementation took over 17
years, involving complex negotiations between the Centre and the States. It marked a
paradigm shift in the Indian taxation landscape, aiming to create a seamless national
market.
3. Objectives of GST
The primary objectives of GST are to eliminate the cascading effect of multiple taxes, create
a unified national market, and simplify the tax structure. GST aims to enhance tax
compliance through transparency and digital processes. It also seeks to reduce the overall
tax burden on consumers by providing input tax credit to businesses. Additionally, GST is
expected to increase government revenues by widening the tax base and improving
efficiency in tax administration. By harmonizing the tax system, it supports the vision of
'One Nation, One Tax'.
4. Key Features of GST
GST has several defining features that make it a modern and efficient tax system. It follows a
dual model where both the Central and State governments levy tax on a common base. It is
levied at every stage of the supply chain, with full input tax credit. The tax is destination-
based, meaning the revenue goes to the state where the goods or services are consumed.
GST is completely technology-driven, involving online registration, return filing, and tax
payment. It promotes transparency and accountability in the system by reducing manual
interventions and corruption.
4.1. Single Tax Structure
One of the major features of GST is its single tax structure, which replaced multiple indirect
taxes like VAT, CST, Service Tax, Excise Duty, and others. Earlier, businesses had to comply
with various tax laws, creating confusion and inefficiency. With GST, there is a uniform tax
rate across the country, leading to ease of doing business. It simplifies the tax structure for
manufacturers, service providers, and traders alike. A single tax also ensures better
compliance, reduces disputes, and improves tax administration.
4.2. Input Tax Credit
Input Tax Credit (ITC) is a key component of the GST system. It allows businesses to claim
credit for the tax paid on purchases used for furtherance of business. This eliminates the
cascading effect of taxes, where tax is paid on tax. For example, if a manufacturer pays GST
on raw materials and also on the final product, the tax on raw materials can be deducted
from the total tax payable. ITC promotes transparency and reduces the overall tax burden,
thereby lowering the cost of production and prices for consumers.
4.3. Destination-Based Taxation
GST is a destination-based tax, meaning the tax revenue is collected by the state where the
goods or services are consumed, not where they are produced. This is different from the
origin-based taxation system. It ensures a fair distribution of revenue among states and
encourages balanced regional development. For instance, if goods are manufactured in
Maharashtra and sold in Delhi, the tax collected will go to Delhi. This principle of taxation
promotes equity and eliminates unfair tax advantages to producing states.
