All you need to know about GST

| Tuesday, July 19, 2016 - 15:24
First Published |
All you need to know about GST, GST, Goods and Services Tax, BJP, Bharatiya Janata Party, Congress, Parliament. Monsoon session, Arun Jaitley, Finance Minister, Rahul Gandhi, Consumers

GST to replace all indirect taxes on goods and services

New Delhi: In a major breakthrough on the first day of the monsoon session of the Parliament, Congress has moved an inch closer to the constitutional amendment bill for the Goods and Services Tax. The bill had been passed in the BJP-dominated Lok Sabha in 2015 but could not get through in the Rajya Sabha last year where BJP is in minority. However, this time around, the Congress has agreed upon a five-hour debate on the proposal.

It was Congress that first mentioned about GST in 2009 but denies agreeing on the specifics of the bill re-drafted by NDA in 2014.

Though the Congress has agreed on a debate session over the proposal of the bill, it will be interesting to see whether it is going to be a genuine and productive debate or would it simply disrupt the discussions by attacking the government on recent political shortcomings/controversies. It was actually a token of mutual understanding between the Centre and the opposition, the former agreeing on Congress’ pitch on discussing the recent unrest in Kashmir.

The much talked about bill has now become a matter of household discussions. Let us throw some light on the GST bill.


The GST bill, officially known as the Constitution Amendment Bill, 2014 proposes a Value added Tax (VAT) to be implemented in India once it passes in Rajya Sabha.


GST stands for ‘Goods and Services Tax’, and is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and State governments except the basic custom duty (import). It is aimed at being comprehensive for most goods and services.

In GST, the consumer pays the final tax but an efficient input tax credit system ensures that there is no cascading of taxes.


Presently, there are over 150 countries that have implemented GST, globally also known as VAT. France was the first country to introduce VAT and the most recent to join the bandwagon is Malaysia. Other countries include New Zealand, Oz and all EU countries. The US, however, does not have the GST.


GST, if implemented, is expected to avoid cascading of taxes. Let’s take an example of a raw material manufacturing company to understand this. The only tax that an XYZ company that provides raw materials will incur is of the material cost and not the manufacturing or transportation cost. Hence, double tax has been avoided here. In other words, the tax will be imposed only at the destination point.

Experts say that GST is likely to boost India’s economic development by breaking tax barriers between states. It is a long term plan that will minimize corruption.


The most renewed concern on the BJP-proposed GST is that it has opted for a dual GST model, meaning that the tax will be administered both by the Central and state government. The best GST systems across the world use a single GST.

Critics claim that CGST, SGST and IGST are nothing but new names for Central Excise/Service Tax, VAT and CST, and hence GST brings nothing new to the table.

Second, it does not matter if the indirect tax is being levied by the state or the Central government, the burden on consumer remains unchanged. In fact, tax to be paid by consumers would increase. It is here that the opposition is attacking the government. Since taxes are distributed across the chain, the consumer prices are likely to rise to maintain the current tax revenue levels. 

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