Indirect Tax System in India

 GST stands for Goods and Service Tax. Vishwanath Pratap Singh who was the 7th Prime Minister of India first initiated GST act in 1986. After that in 2007, the prevailing government suggested to deploy GST Act and the proposal has been presented in Lok Sabha in 2011 and again the same proposal was presented in Lok Sabha in Dec 2014. GST Act was passed in 2015. 

After the approval of Rajya Sabha GST act was launched from 1st July 2017 and it was referred as 101 Amendment of Constitution. GST has become a revolutionary change in indirect taxes after crossing 25 years of economic amelioration. Goods & Services Tax is a comprehensive, multi- stage, destination-based tax that will be levied on every value addition. Goods and Service Tax (GST) implemented in India to bring in the ‘one nation one tax’ system, but its effect on various industries will be slightly different. The first level of differentiation will come in depending on whether the industry deals with manufacturing, distributing and retailing or is providing a service.

India has got a well-structured and simplified taxation system, wherein an authoritative segregation has been done among the Central Government, the different State Governments as well as the Local Bodies. The Department of Revenue under the Government of India's Ministry of Finance is solely responsible for the computation of tax. This department levy taxes on individuals or organizations for income, customs duties,service tax and central excise. Local bodies have got the power to compute and levy taxes on properties and other utility services like drainage, water supply and many others. The past 15 years have witnessed tremendousreformations of the taxation system in India. Apart from the rationalization of the rates of tax, simplification of the different laws of taxation has even been done during this period.The large quantity of taxes at the State and Central levels has brought about a complex indirect tax structure in the nation that is ridden with concealed expenses for the trade and industry. 

Firstly, there is no consistency of assessment rates and structure crosswise over States. Also, there is falling of charges because of 'tax on tax'. No credit of excise duty and service tax paid at the phase of manufacture is available to the traders while paying the State level sales tax or VAT, and vice-versa. Further, no credit of State taxes paid in one State can be benefited in different States. Due this tax on tax prices of goods and services get unnaturally inflated. The rrangement of GST would stamp a reasonable takeoff from the plan of dissemination of monetary forces conceived in the Constitution. The proposed dual GST conceives tax assessment of the same assessable occasion, i.e., supply of products and enterprises, at the same time by both the Center and the States. The credit of GST paid on input at each phase of value addition would be available for the discharge of GST liability on the output, thereby ensuring GST is charged only on the component of value addition at each stage. Indian indirect tax will become simpler after GST. It is expected to decrease cost of creation and inflation in the economy, accordingly making the Indian trade and industry more competitive, locally and additionally globally.It is likewise expected that arrangement of GST will encourage a typical or consistent Indian market and contribute essentially to the development of the economy.

Retail sector is one of the key pillars for Indian economy and it accounts for around 10% of GDP. GST will usher in wide changes in various industries and sectors and Retail industry is not an exception. With the implementation of GST, which is likely to be done by April 2017, three sectors will benefit the most: retail, FMCG and consumer companies and logistics business. In the retail sector, the implementation means a seamless integration of goods and service transaction across the states. It will have benefit at different stages of the value chain.

First, the procurement of raw materials: movement of goods would become less cumbersome, which opens gates for more suppliers /vendors to merge. Following this, a wider base of distributors would be available as state boundary paperwork will not be a hurdle, resulting to better access and low transportation costs. A favorable environment for a supply chain will reduce in transit inventory that will further reduce the working capital requirement. Simplified taxes & availability of input tax credits can also help fetch better margins. Along with saving costs at back-end, GST implementation will be an answer to the major pain point for the industry Rentals. Rentals are one of the main costs of retailing industry and it attracts service tax at 14.5 per cent. Currently, the retailers cannot set off these costs like the other industries. This they feel is an additional cost of operating in this industry which is unfair to them. Under GST, taxes on services would be available forset off against taxes on goods. Thus, the retailers would be positively impacted.

Mr. Rohith. R, Head, Dept. of Commerce, Al Shifa College of Arts and Science, Kizhattoor, Perinthalmanna