Explanation
Statement 1 is correct: One of the primary objectives of the Goods and Services Tax (GST) is to replace multiple indirect taxes like VAT, service tax, excise duty, etc., that were levied by both the central and state governments. By creating a uniform tax structure, GST promotes the creation of a single national market, eliminating the cascading effect of taxes and simplifying the tax system.
Statement 2 is incorrect: GST is a domestic tax reform aimed at simplifying the indirect tax structure within India. It primarily affects internal trade and taxation and does not have a direct impact on the Current Account Deficit (CAD), which is influenced by factors like imports, exports, remittances, and foreign investments. While improved efficiency might contribute indirectly to exports, the effect on CAD would not be drastic.
Statement 3 is incorrect: While GST is expected to boost economic growth by improving tax compliance, reducing logistics costs, and promoting ease of doing business, claiming that it will enormously grow the economy to the extent that India will over-take China in the near future seems exaggerated and unrealistic. Goods and Services Tax (GST) Definition It is a comprehensive tax levied on the manufacture, sale, and consumption of goods and services. Established By the 101st Constitutional Amendment Act, on the lines of "One Nation One Tax". Powers The Parliament and the state legislatures have concurrent powers to implement GST Features Applicable on supply side Destination based Taxation Dual GST(Centre and the States simultaneously levying tax on a common base.) GST rates to be mutually decided(CGST, SGST & IGST) Multiple Rates Merged Taxes Central Value Added Tax, Additional Customs Duty, Special Additional Duty of Customs, Central Sales Tax, Service Tax, State VAT (Sales tax) Tax Slabs 5%, 12%, 18% and 28%. 3-Tiers of GST Centre levies the CENTRAL GST (CGST) State levies STATE GST (SGST) Centre levies INTEGRATED GST (IGST) on transactions IGST When the commodity is produced in one state and is traded to another state (interstate trade). In this case, the share of SGST should go to the consuming state (as the GST is a destination-based tax). Compensation Parliament will compensate for any loss faced by the state As per the GST Act, states are guaranteed compensation for any revenue shortfall below 14% growth (base year 2015-16) for the first five years ending 2022. GST compensation is paid using funds specifically collected as compensation cess- is levied on products considered to be sin or luxury goods. Input Tax Credit It is a mechanism to avoid cascading of taxes. It means at the time of paying tax on output, one can reduce the tax one has already paid on inputs and just pay the balance amount. Cross utilisation of input tax credit is available Reverse Charge Mechanism The receiver becomes liable to pay the tax, i.e., the chargeability gets reversed. Self-invoicing is to be done when you have purchased from an unregistered supplier and such purchase of goods or services falls under reverse charge. E-Way Bill System It is an electronic way bill for movement of goods which can be generated on the e-Way Bill Portal Objective:
Facilitate faster movement of goods.
Improve the turnaround time of vehicles.
It helps track intra-state as well as inter-state movements of goods of value exceeding Rs 50,000, for sales beyond 10 km in the Goods and Services Tax (GST) regime. Commodities Outside GST Alcohol for human consumption, Petroleum products, Electricity, The supply of goods to the SEZ, Supply of goods that come under zero rate Fresh vegetables, fresh milk, cereal, meat etc. Raw materials. NOTE: Lottery, Gambling and Betting are also taxable under the Goods and Services Tax (GST) Act, 2017 Advantages Disadvantages Lesser compliance (returns, maintaining books of record, issuance of invoices). A limited territory of business. Limited tax liability. No Input Tax Credit available to composition dealers High liquidity as taxes are at a lower rate. The taxpayer will not be eligible to supply non-taxable goods under GST such as alcohol and goods through an e-commerce portal.
