Why gst was introduced

Yet, to gain enough Senate numbers to pass its controversial legislation in federal parliament, the government was forced to make some key concessions. These involved agreeing to GST exemptions on items such as basic food and healthcare items, education courses and childcare costs. Two decades on, the GST is well and truly entrenched in Australia, but it remains controversial. After a number of extensive reviews, there are widespread calls for a major overhaul of the existing system.

There have already been adjustments along the way. In , the tax was amended to capture services provided in Australia by foreign companies such as streaming service Netflix. Rather than spending money, more working Australians are saving it. At the same time, in line with an ageing population base, a growing proportion of Australians are spending more of their money on GST-free healthcare items.

There is also ongoing leakage of GST revenue from some businesses avoiding declaring taxable income through cash transactions. Lower growth in GST revenue places increasing pressure on states and territories to find a solution, with their GST funding streams becoming less stable.

Yet with all the carve-outs, it has not raised the revenue that it was hoped to. Nobody likes to pay tax. Fehily hopes to see some reform on GST, such as broadening the base and deepening the rate, providing appropriate compensation, this being part of an overhaul of a broader tax reform. He says changing patterns of consumption over more than a decade means GST revenue as a percentage of gross domestic product is not growing at the same pace as the economy. Also, due to GST being a nationwide tax and having a centralised surveillance system, the clampdown on defaulters is quicker and far more efficient.

Hence, GST has curbed tax evasion and minimised tax fraud from taking place to a large extent. GST has helped in widening the tax base in India.

Previously, each of the tax laws had a different threshold limit for registration based on turnover. As GST is a consolidated tax levied on both goods and services both, it has increased tax-registered businesses. Besides, the stricter laws surrounding input tax credits have helped bring certain unorganised sectors under the tax net.

For example, the construction industry in India. Previously, taxpayers faced a lot of hardships dealing with different tax authorities under each tax law. Besides, while return filing was online, most of the assessment and refund procedures took place offline. Now, GST procedures are carried out almost entirely online. Everything is done with a click of a button, from registration to return filing to refunds to e-way bill generation. It has contributed to the overall ease of doing business in India and simplified taxpayer compliance to a massive extent.

The government also plans to introduce a centralised portal soon for all indirect tax compliance such as e-invoicing, e-way bills and GST return filing. A single indirect tax system reduces the need for multiple documentation for the supply of goods. GST minimises transportation cycle times, improves supply chain and turnaround time, and leads to warehouse consolidation, among other benefits.

With the e-way bill system under GST, the removal of interstate checkpoints is most beneficial to the sector in improving transit and destination efficiency. Ultimately, it helps in cutting down the high logistics and warehousing costs. Introducing GST has also led to an increase in consumption and indirect tax revenues. Due to the cascading effect of taxes under the previous regime, the prices of goods in India were higher than in global markets.

Even between states, the lower VAT rates in certain states led to an imbalance of purchases in these states. Having uniform GST rates have contributed to overall competitive pricing across India and on the global front. This has hence increased consumption and led to higher revenues, which has been another important objective achieved. GST has mainly removed the cascading effect on the sale of goods and services. Removal of the cascading effect has impacted the cost of goods.

Since the GST regime eliminates the tax on tax, the cost of goods decreases. Also, GST is mainly technologically driven. All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.

This revenue will go to Central Government. The dealer has to collect Rs. In the earlier indirect tax regime, there were many indirect taxes levied by both the state and the centre. Every state had a different set of rules and regulations. The government proposes to introduce GST with effect from 1st July Currently, fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains.

The Centre has the powers to levy tax on the manufacture of goods except alcoholic liquor for human consumption, opium , narcotics etc. In case of inter-states sales, the Centre has the powers to levy a tax the Central Sales Tax but, the tax is collected and retained entirely by the originating States. As for services, it is the Centre alone that is empowered to levy Service Tax. Since the States are not empowered to levy any tax on the sale or purchase of goods in the course of their importation into or exportations from India, the Centre levies and collects this tax in addition to the Basic Customs Duty.

The assignment of concurrent jurisdiction to the Centre and the States for the levy of GST required a unique institutional mechanism that would ensure that decisions about the structure, design and operation of GST are taken jointly by the two. To address all these and other issues, the Constitution nd Amendment Bill was introduced in the 16th Lok Sabha on The Bill provides for a levy of GST on supply of all goods or services except alcohol for human consumption.

The Central Government will have the power to levy excise duty in addition to GST, on tobacco and tobacco products. Vikas Vasal Contributor. Armaan Joshi Editor. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations.

GST offers both national and international benefits: Nationally, it eases the job of the manufacturer by clubbing different taxes into one and boosts economic unification. Internationally, it brings India at par with the global market by following a universally-accepted tax regime. Imports of goods are treated as inter-state supplies. In addition to IGST, imports will also be subject to customs duties as applicable.

Exceptions: GST has a dual structure wherein both the Centre and the states have the power to simultaneously levy the tax on supply of goods and services. GST is not applicable on export and supply of goods made to Special Economic Zones known as zero-rated supply.

Separate provisions for goods and services have been incorporated under GST law to determine the nature of supply. The location of the supplier and the place of supply of goods or services determine whether the transaction is intra- or inter-state supply.

Ever since its introduction in , the GST rates have been revised a few times. As mentioned above, the applicable GST rates have been classified into a four-tier rate structure. Earlier, the tax system in India had multiple taxes at the central and the state level which often confused the taxpayers.