GST: An Overview

GST (Goods And Service Tax) is a type of indirect tax which has been implemented in more than 150 countries. France was the first country to implement it in 1954. India also implemented this tax and it came into effect from 1st July, 2017 . It was termed as "One Nation One Tax". The basic principle to adopt GST was to eliminate various taxes like Central Excise Duty, Service Tax, Octroi Tax, VAT etc. GST has various slabs rates i.e. 5%, 12%, 18% & 28%.

India has chosen Canadian model of dual GST. It has its own importance in India and these are as under-

1. Reduced Tax burden for consumer.
2. Uniformity in tax rates.
3. Enhance economic growth- It helps in bringing FDI's in the country.
4. Get rid of multiple taxes.
5. Transparent and Simplified tax structure.
6. Good administration.
7. Competitiveness in global market- It helps the domestic manufacturers to compete better with global market.
8. Reduced Transaction Costs.

Now, every aspect has some cons as well, hence, the shortcomings of GST are listed below -

1. Came into effect in the middle of financial year.
2. Increased in the operational costs.
3. Online Taxation system.
4. Increased costs due to its software purchase.
5. Conflicts between various parties- For eg. Various political parties raise their voices for petroleum products to fall under GST slabs.

But by hammering the last nail, one could easily analyze its pros and cons through this example-

BEFORE INTRODUCTION OF GST-

Suppose say a manufacturer buys raw material from a Vendor. He needs to pay a VAT

(Value Added Tax-12.5%) along with the cost of the product. The manufacturer incurs some 

cost to produce the product. He then adds some profit to it and sells it to Wholesaler. The 

Whole Saler again needs to pay tax (VAT+Excise Duty=12.5%+12.5%=25%) on the product.

The Wholesaler again adds some profit on the product before selling the product to retailer.The Retailer again needs to pay VAT (12.5%) for this product. Then he adds some profit 

margin and again sells it to customers. For the same product before reaching customers

hands multiple taxes are levied on it and hence received by him/er.

AFTER GST IMPLEMENTATION-

Suppose say the manufacturer after adding his profit sells the product to the Wholesaler at

Rs.140. The Wholesaler then sells the product to the retailer at Rs.154 after adding a profit 

of 10% margin. The retailer then again adds 10% as profit which makes the cost of the 

product Rs.169.5 and a 12% CGST + 12% SGST is added to this product which the cost of 

the product stand at Rs.210.18. So, by the implementation of GST the cost of the product 

can be reduced.