The bottom of the many bills you receive nowadays reads: sales tax, VAT@14.5 per cent. It then gives you the total. If it is a hotel bill, chances are it will include service tax and a luxury tax, too. If you are a manufacturer of a product, you would have paid some tax for the raw material, then an octroi or entry tax depending on how many states the material-bearing truck has crossed, and then excise duty etc. Of course, there will be a VAT charged eventually!
So, many things we buy have been taxed many times.
This will change once the Goods and Services Tax (GST) comes through. The bottom of the bill will show just the GST. It will subsume the half a dozen indirect taxes being levied now and will make for a single uniform tax on goods and services across the country, making India one uniform common market.
Also read: All you need to know about GST bill
It will soon be a good bye to excise duty, service tax, value added tax, luxury tax, entertainment tax and entry tax. Multiple taxes will be a thing of the past.
And, a resident in Kerala will pay the same amount of tax for a product or service, that a resident of Uttar Pradesh will pay, though there will be a Central GST and state GST.
The implementation of GST is thus, expected to provide simplified and transparent tax structure, tax certainty on every product and service by removing shortcomings in the many layers between producting and purchase. It will also improve competitiveness of export. The multiple taxes make Indian products expensive and put off overseas importers.
It will reduce the "cascading of tax effect" on cost. Meaning, nothing in the final cost will reflect anything taxed twice—from the growth or purchase of the raw material at the first point, till the product lands in your hand.
And, Finance Minister Arun Jaitely expects it to add a 2 per cent growth to the GDP. Good news for the government.
By eliminating the many taxes at many stages and states, a different tax for a different product and a different service, the GST will in itself become the biggest tax reform in India. The administration of many taxes and the correlation of it by the government was a nightmare, often leading to leakages and errors.
But in the run up to the GST Bill getting passed, industry and trade bodies have expressed many concerns that are points of detail. While firms across the entire value chain expect a smooth transition to the GST, the telecom industry has urged the government to come out with a clear cut position with regard to levying of taxes on Value Added Services.
Also read: Cabinet approves key changes in GST Bill
ASSOCHAM Secretary GeneralD S. Rawat said the government should clarify the applicable tax on value added services. This would help move the industry seamlessly to the GST, adding to the dynamic growth of the sector. “Certain value added services like ringtones are subjected to entertainment tax in some states,” he pointed out, adding, that given the broad framework of GST, the telecom service providers may face significant challenges even under it.
The sector wanted the GST law to provide “clear and comprehensive provisions with respect to coverage of 'telecom services' for providing clarity of levy of taxes on VAS, infrastructure sharing and e-commerce transactions”.
The Consumer Electronics and Appliances Manufacturers Association (CEAMA) is excited about the impending GST. "Removal of 1 per cent tax on interstate transactions is surely good news for the consumer electronics industry. It will end state rules for companies who have been manufacturing units in India, create a national market for goods to be supplied and definitely reduce logistics cost for them," says Manish Sharma, president of CEAMA. He is confident that the amendments will give a boost to the local manufacturing institutions and create employment.
“We have been receiving large number of representations from trade and industry and various chambers of commerce. This is a very healthy exercise and all these suggestions and views will go into making an ideal GST, which will come sometime after the constitutional amendment is passed by the Parliament, state assemblies and gets nod of the honourable President," added Mahender Singh, director general (GST), Central Board of Excise and Customs (CBEC). He said they were considered, discussed and various aspects in them would be incorporated in the final GST law which will come into effect in due course.