GST tax (1)

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GST tax
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Goods and Services tax
As the name suggests, Goods and Services tax is a
tax levied when a consumer buys a good or
service. It is meant to be a single,
comprehensive tax that will subsume all the other
smaller indirect taxes on consumption like
service tax, etc. This is how it is done in most
developed countries.
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What is GST
Goods and Services Tax (in short GST) is by far
one of the most awaited tax reforms in the
country. With the emerging consensus amongst the
political parties and the push voiced by the
industry, there is a lot of expectation that the
Constitutional Amendment Bill will be passed in
this Monsoon Session. If this happens, the
Government is likely to push the implementation
of GST with effect from 1st April 2017.
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Implications of GST
With GST rate, it is anticipated that the tax
base will be comprehensive, as virtually all
goods and services will be taxable, with minimum
exemptions. GST will be a game changing reform
for the Indian economy by creating a common
Indian market and reducing the cascading effect
of tax on the cost of goods and services. It will
impact the tax structure, tax incidence, tax
computation, tax payment, compliance, credit
utilization and reporting, leading to a complete
overhaul of the current indirect tax system. GST
will have a far-reaching impact on almost all the
aspects of the business operations in the
country, for instance, pricing of products and
services, supply chain optimization, IT,
accounting, and tax compliance systems.
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Things need to know about the GST impact

• Inter-state procurement could prove viable
• May open opportunities to consolidate
  suppliers/vendors
• Additional duty/CVD and Special Additional duty
  components of customs duty to be replaced
• Changes in tax system could warrant changes in
  both procurement and distribution arrangements
• Current arrangements for distribution of finished
  goods may no longer be optimal with the removal
  of the concept of excise duty on manufacturing
• Current network structure and product flows may
  need review and possible alteration
• Tax savings resulting from the GST structure
  would require repricing of products
• Margins or price mark-ups would also need to be
  re-examined
• Potential changes to accounting and IT systems in
  areas of master data, supply chain transactions,
  system design
• Existing open transactions and balances as on the
  cut-off date need to be migrated out to ensure
  smooth transition to GST
• Changes to supply chain reports (e.g., purchase
  register, sales register, services register),
  other tax reports and forms (e.g., invoices,
  purchase orders) need review
• Appropriate measures such as training of
  employees, compliance under GST, customer
  education, and tracking of inventory credit are
  needed to ensure smooth transition to the GST
  regime

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Benefits of GST registration
GST has been envisaged as an efficient tax
system, neutral in its application and
distributionally attractive. The advantages of
GST are

• Wider tax base, necessary for lowering tax rates
  and eliminating classification disputes
• Elimination of multiplicity of taxes and their
  cascading effects
• Rationalization of tax structure and
  simplification of compliance procedures
• Harmonization of center and state tax
  administrations, which would reduce duplication
  and compliance costs
• Automation of compliance procedures to reduce
  errors and increase efficiency

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Financial services
The GST tax rate is based on the destination
based consumption principle. It means that the
GST liability would finally accrue at the point
where the goods were supplied to or where the
service was consumed. This means the final
customer will pay the GST. The very concept would
not find easy acceptance with the people. A lot
of education and learning has to be propagated
for the people to understand the implications.
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