Goods and Services Tax (GST)
What is Goods and Services Tax?
- Introduced through the 101st Constitution Amendment Act, 2016.
- one of the biggest indirect tax reforms in the country
- introduced with the slogan of ‘One Nation One Tax’.
- It is a consumption tax
- The GST avoids the cascading effect or tax on tax - which increases the tax burden on the end consumer.
- Indirect taxes such as excise duty, VAT, service tax, and luxury tax have all been absorbed by GST.
GST tax structure:
- Central GST covers excise duty, service tax, etc
- State GST covers VAT, luxury tax,etc.
- Inter-state trade will be covered by the Integrated GST (IGST).
Record GST revenues:
- April 2022, the first month of the new financial year has witnessed record Goods and Services Tax (GST) collections of around ₹1.67 lakh crore. This is the highest monthly collection in the five years since the introduction of the GST.
Significance:
- Reduced fiscal pressure - More revenue to the Central and State Governments
- Fund compensation payments due to states:
- Issue of compensation payments will become easier if GST collections remain at these levels.
- Aid in the payment of outstanding compensation dues to states (approximately 78,700 crore)
- The increased tax revenue, combined with improved compliance, would provide the GST Council with a much-needed opportunity to consider GST rate slab rationalisation.
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