Goods and Service Tax (GST)- Gearing Up for the New Face of Indian Taxation

Reforms is a continuous process. Reforms in indirect taxes have a close link with the general economy. In India liberalization started way back in 1986 and the process of key reforms in indirect taxes started with introduction of MODVAT and has continued since then.

The introduction of Goods and Services Tax (GST) has been one of the biggest tax reforms in recent history in India.

Goods and Service Tax commonly known as “GST” is also known as Value Added Tax (VAT) in few countries. GST in India is consumption based tax wherein the basic principle is to tax the value addition at each business stage. To achieve this, tax paid on purchases is allowed as a set off/ credit against liability on output/income.

GST is levied on all transaction of goods and services. In principle, GST does not differentiate between ‘goods’ and ‘services’.

GST is different from the current tax structure in many ways. Currently, taxes treat goods and services differently. ‘Goods’ attract Excise at manufacturing level and VAT at the time of sale. In contrast, services attract only one levy i.e. Services tax on provision of taxable services.

In GST regime goods and services would lose its importance as both would be treated at par for taxing purpose. An interstate transaction in goods and services for a consideration would attract IGST and for an intrastate transaction CGST and SGST will be levied. As also State Government now gets the power to tax services and Central Government gets the power to levy tax at the distribution and retail level.

GST will subsume Excise, VAT, CST, Service tax, Luxury tax, Entry tax of current tax regime.

GST is proposed to be implemented in following manner:

  • Central GST (CGST) levied by Central Government on local transaction
  • State GST (SGST) levied by States Government on local transaction
  • Integrated GST (SGST) levied by Central Government on inter-state transaction

GST is targeted to be implemented from 1 April 2017. Following are the current status of GST:

  • Consensus between Centre and State- Completed
  • State compensation framework- Completed
  • Agreement on CAB- Completed
  • Agreement on Taxing framework- Completed
  • GST- Design & System structure- In Progress
  • CAB approval- Completed
  • President approval of CAG- Completed
  • Setting up of GST council- In Progress
  • GST rollout & Implementation- Not yet started

In our next blog we will touch upon the concept of Goods, Services as per GST and few aspects on time and location of supply of goods and service.

We at SAGlobal, have vast knowledge and implementation experience of Microsoft Dynamics ERP in Global taxation projects across the world. For more details on GST implementation for your business, please contact us.

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About the Author

Ritwik Bhattacharyya

Ritwik Bhattacharyya

Ritwik Bhattacharyya is Assistant Manager Projects for sa.global, where he manages the Implementation and development projects for Microsoft Dynamics 365. Ritwik has over 15 years of ERP experience with 12 years in Microsoft Dynamics. Ritwik has worked extensively on the development of Indian localization in Microsoft Dynamics 365 in AX v3.0 onwards. Currently he is working closely on the developments of GST in Dynamics 365.

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