What is the GST?

By UK India Business Council (UKIBC)

India's Goods and Services tax looks set to change the face of the Indian economy - in this section we look at the contents and format of the Bill

What is it?

  • The GST is a single tax on goods and services across India, applied to manufacturers and consumers alike. It has been heralded widely as the starting point of a single market across India, improving economic efficiency and productivity.
  • It will effectively act as a ‘Free Trade Agreement between India and itself,’ in the words of India Economist at J.P. Morgan, Sajjid Chinoy. It will remove the current web of taxes and tariffs between states, making it much easier to conduct business operations across the whole country.

What will be its format?

  • The GST will be in dual format, meaning it will have a federal structure.
  • There will be three types of taxes – central, state and integrated GST to tackle inter-state transactions.

Which sectors will benefit most?

  • Manufacturing and retail and consumer sectors are expected to benefit the most from the introduction of GST, giving further momentum to the Government’s “Make in India” campaign.

What goods aren’t included?

  • One of the main pitfalls of the GST is the exclusion of alcohol and key petroleum products, which will continue with their existing tax arrangements.
  • This waters down one of the key aims of the bill – which is to create a single market applying to all goods and services.

What taxes will the GST replace?

In terms of central taxes, the GST will replace:

  • Central Excise Duty
  • Service Tax
  • Additional Customs Duty (CVD)
  • Special Additional Duty of Customs (SAD)
  • Central Sales Tax
  • Central surcharges and cesses

The state taxes the GST will replace include:

  • Value Added Tax
  • Octroi and Entry Tax
  • Purchase Tax
  • Luxury Tax
  • Taxes on lottery, betting & gambling
  • State cesses and surcharges
  • Entertainment tax
  • Central Sales Tax

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