GOODS & SERVICES

TAX (GST)
- UMANG SINGH
(PGT ECONOMICS)
Goods & Services Tax
Goods and Services Tax (GST) is a
single tax levied on the
manufacture, sale and
consumption of goods and services
at a national level.
• In this system, GST is levied only on the Value-Added at every stage of production. This
will ensure that there is No Cascading Effect of Taxes (Tax on Tax paid) on inputs that are
used in manufacturing of Goods.
 • For example: If a tax of 15% is levied on Rs. 2 lakhs at the first stage, the
tax outflow would be Rs. 30,000. At the next stage when the same goods
are sold for Rs. 2.5 lakhs the tax would have been Rs. 37,500 (Rs. 2.5
Lakhs x 15%) but since there is a set off of Rs. 30,000 available, the actual
tax at that stage will be Rs. 7,500 (Rs. 37,500 – Rs. 30,000).
Tax 15%
But Net Tax =
Stage 1: on Stage 2: Cost Taxable Tax 15%
7,500
Cost = 2,00,000 = Cost = Incurred = Amount = of 2,50,000 30,000 Set (37,500-
2,00,000/- Rs 2,30,000/- 20,000 2,50,000/- = 37,500/- Off 30,000)
30,000/-
Simply put, when the final tax is
calculated, the tax already paid on
input / raw material is deducted
and then tax is levied only on the
cost of the goods produced.
How is the GST
different from
current system?
 Differences Old Regime GST Regime
Nature of A Combination of Value Added Tax Tax incidence (Tax Burden) at the
Regime (VAT) Point of Sale.
which is a Destination-based tax and
origin based taxes such as Excise
Duties etc.
Tax Base Goods & Services are taxed separately, Comprehensive base of goods &
subject to some exemptions services included.
(Complicated)
Multiplicity Multiple tax rates Single tax rate (Slab Rates)
of tax rates
Tax Incomplete set off mechanism for tax Complete set-off should be
Cascading paid in available in the entire chain of
the supply chain (e.g. No Set Off production and distribution to
available for eliminate tax cascading effect
VAT against Service Tax or Excise
Duty)
Why is it considered
a better system?
 GST IS BETTER !
• There were multiple indirect taxes — Central taxes such as excise duty, service tax and
countervailing duty, and State taxes, such as VAT, entertainment tax and luxury tax.
This results in high tax rates. Accordingly, GST seeks to eliminate multiplicity of
taxes, rates, exemptions and such exceptions to achieve uniformity of taxes across the
country.
• Further, it would provide greater certainty and transparency of taxes leading to
increase in Revenue of Government.
• Also, the differences across states fragment the national market along state
boundaries. GST is likely to replace all these taxes with a simple levy, lowering
effective tax on goods and creating a national market in goods and services.
What is the GST
model India plans
to adopt?
 MODEL OF GST ADOPTED

• Most countries have a unified GST system. However, India has opted for a
dual GST system prevalent in Brazil and Canada. Under this model, both
the Centre and states have the right to levy and collect tax on the sale of
goods and services.
What are the key
benefits of
implementing a
GST?
 BENEFITS OF IMPLEMENTING GST

• GST will simplify India's tax structure, broaden the tax base, and create a common market
across states. This will lead to increased compliance and will support India's GDP growth.
• It will be beneficial for India Inc. as the average tax burden on companies will fall due to
transparent set-off mechanism and elimination of cascading taxes leading to reduced
production costs and increased export competitiveness.
• Implementation of GST may lead to a fall in costs in many cases making several products
competitive leading to benefits for the manufacturers and also making some of them
competitive on the world stage. Over a period of time the consumer will reap the benefits of
the process through lower costs.
 Hope you have now understood the
basic concept of Goods and Services
Tax.

Thanks !!!