India’s GST: Objectives, Types, Impact, Implementation & Benefits

India experienced a significant transformation by introducing GST, Goods and Services Tax that potentially changed the indirect tax system. GST replaced indirect taxes like service tax, excise, value-added tax(VAT), etc. The Goods and Services Tax became operative on 29th March 2017 and was implemented nationwide on 1st July 2017. The Goods and Services Tax(GST) united several indirect taxes under a single tax imposed on the cost of products and services, that helped in maintaining the tax system, modernizing the fiscal system, and abolishing the distortion of the tax on goods and services.

What is GST?

On 1st July 2017, the Goods and Services Tax was introduced all over India with the aim that it shall be a single indirect tax system imposed on goods and services. Implementation of this act was mainly done to simplify the tax system and establish a single, national market. In the process, all the participants in the supply chain are charged GST, except the final consumer, at various points during the production and distribution process, from manufacturing to consumption. Goods and Services Tax includes a range of products and services that fall under four major brackets: 5%, 12%, 18%, and 28%. Certain necessities are exempted from tax and some products have additional cess applied to them. 

GST replaced the following taxes:

1. VAT
2. Entertainment tax
3. Octroi
4. Tax on Lottery
5. Luxury Tax
6. Purchase Tax
7. Service Tax
8. Additional excise duty
9. Central excise duty, and more.

Objectives

1. Streamlining the tax system: The Goods and Services Tax replaced numerous central and state taxes and became a single unified tax system, it aimed to streamline the complicated tax system being followed in India. This reformation made business easier as well as lightened the heavy burden that was on the taxpayers in terms of compliance.
2. Complicated National Market: GST established a single national market through state-by-state transformation of tax rates and procedures. It promoted the smooth transportation of products and services nationwide and removed hurdles to interstate trade.
3. Removal of Contingent Tax: GST eliminated the cascading effect of taxes by allowing input tax credits at every stage of the supply chain, This ensured that taxes were levied only on the value addition at each stage, promoting efficiency and reducing the overall tax burden on consumers.

Historical Development

Headed by Vijay L. Kelkar, Atal Bihari Vajpayee the then Prime Minister initially floated the notion of a Goods and Services tax(GST) in the year 2000. Although it was first implemented in France as a tax regime in 1954, it was eventually adopted by several other countries. GST first emerged in India from the recommendations made by numerous expert committees. However, the introduction of GST accelerated in 2014 when the Bharatiya Janata Party(BJP) was elected as the appropriate government. The GST Bill was ultimately approved on March 29, 2017, after years of discussions and debate between the central and state governments.

Types of GST in India

There are primarily four types of GST: Central Goods and Services Tax(CGST), State Goods and Services Tax(SGST), Integrated Goods and Services Tax(IGST), and Union Territory Goods and Services Tax(UTGST). 

CGST

Central tax imposes taxes on the states(intra-state) on the supplies of goods and services also known as the Central Goods and Services Tax. The central government receives the revenue gathered under the CGST.  It is governed by the CGST Act.

SGST

State Goods and Services Taxes are imposed by the appropriate state governments on intrastate deliveries of goods and supplies and are received by the same. It is governed by the SGST Act.

UTGST i.e. Union Territory Goods and Services Tax is imposed on the supplies of goods and services in the union territories like Chandigarh, Puducherry, etc.

ITGST

Integrated Goods and Services Taxes are imposed by the central government on the interstate imports, exports, and sales of goods and services. It is governed by the IGST Act. After the tax is collected it is divided among the respective states by the Central Government. 

Advantages of GST

1. Simple Tax System: The Goods and Services Tax (GST) replaced numerous indirect taxes, such as Value-Added Tax (VAT), service tax, excise duty, etc., with a single, integrated tax structure. As a result, the tax system has been simplified widely and GST also has lessened the burden on the businesses and the taxpayers in terms of compliance. 
2. Boost to GDP Growth: The GST has improved economic efficiency by streamlining the indirect tax system and removing hurdles to interstate trade. Over time, these profits in efficiency have resulted in faster growth of GDP. A more constructive tax system stimulates consumption and investment, which promotes economic growth.
3. Strengthen Tax Compliance: Businesses now find it easier to abide by tax laws because of GST’s online tax filing and compliance system. 

Socio-Legal Impact

The Goods and Services Tax was implemented in July 2017 in India, and since then has has several noteworthy socio-legal effects. Socioeconomically speaking, the Goods and Services Tax has removed many trade and international hurdles, resulting in the formation of and integrated market. GST has enhanced the smooth flow of products and services all across the states, fostering India’s economic growth. Moreover, by uniting the tax system and lessening the burden of taxes, GST has helped businesses and consumers. Furthermore, it has aided in regulating inflation and maintaining price stability. GST brought numerous significant changes in tax rules and compliance methods making businesses adjust to the new laws. As an outcome digital compliance and transparency have been given more emphasis in tax administration. 

In all, GST has made conducting business easier. Still, issues with intergovernmental revenue sharing, legal burden, and early implementation flaws have emerged, underscoring the necessity of ongoing reform and enhancement of the fiscal system to address socio-legal issues and guarantee fair outcomes for all stakeholders.

Conclusion

In conclusion the Goods and Services(GST) is an emerging and evolving tax reform in India. Originally aimed to simplify the taxation system and foster economic growth, GST also lightened the heavy burdens on the taxpayers in terms of compliance. It initially encountered many challenges and criticisms but still successfully created a unified market and boosted the GDP of India. It replaced many central and state taxes making the Indian indirect tax system simplified and one. GST to date continues to develop, promote equitable growth, foster compliance and boost India’s tax system.