What Is GST In India-Special Features-Explained

What is a tax?

Before we are going to about GST we should know What is tax and by whom it is levied and why.

A tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the Government, a payment exacted by legislative authority. A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority". In simple words, tax is nothing but money that people have to pay to the Government, which is used to provide public services.

What is GST?

GST stands for “Goods and Services Tax”. It is a form of Indirect Tax which is levied by Government on almost every type Goods & Services that are being produced, imported or given. As we know before GST comes into force there were so many Indirect Taxes which are imposed on, depending upon the types of industries i.e. Excise Duty for Manufacturing Industry, Customs Duty on Import/Export of Goods & Services, Service Tax on service provided, Entertainment Tax, VAT, CST etc. But After GST Comes into force there is a single tax, Gods & Services Tax, on every type of industries (Excepting some Goods/Service which are out of GST regime or which are to be taxed special).

There was a saying “CST is not VATABLE”. That means you cannot use VAT credit to pay CST. But in GST as there is only single tax there is a seamless flow of tax and this is the main and important advantage of GST. That means now it can be used to adjust the output tax from input tax.

FEATURES OF INDIRECT TAXES

(i) An important source of revenue: Indirect taxes are a major source of tax revenues for Governments worldwide and continue to grow as more countries move to consumption oriented tax regimes. In India, indirect taxes contribute more than 50% of the total tax revenues of Central and State Governments.

(ii) Tax on commodities and services: It is levied on commodities at the time of manufacture or purchase or sale or import/export thereof. Hence, it is also known as commodity taxation. It is also levied on provision of services.

(iii) Shifting of burden: There is a clear shifting of tax burden in respect of indirect taxes. For example, GST paid by the supplier of the goods is recovered from the buyer by including the tax in the cost of the commodity.

(iv) No perception of direct pinch: Since, value of indirect taxes is generally inbuilt in the price of the commodity, most of the time the tax payer pays the same without actually knowing that he is paying tax to the Government. Thus, tax payer does not perceive a direct pinch while paying indirect taxes.

(v) Inflationary: Tax imposed on commodities and services causes an all-round price spiral. In other words, indirect taxation directly affects the prices of commodities and services and leads to inflationary trend.

(vi) Wider tax base: Unlike direct taxes, the indirect taxes have a wide tax base. Majority of the products or services are subject to indirect taxes with low thresholds.

(vii) Promotes social welfare: High taxes are imposed on the consumption of harmful products (also known as ‘sin goods’) such as alcoholic products, tobacco products etc. This not only checks their consumption but also enables the State to collect substantial revenue.

(viii)Regressive in nature: Generally, the indirect taxes are regressive in nature. The rich and the poor have to pay the same rate of indirect taxes on certain commodities of mass consumption. This may further increase the income disparities between the rich and the poor.