On July 1, 2017, the Goods and Services Tax (GST) will be rolled out. And the motto of ‘one country, one tax’ will finally become a reality. The new tax will shift the focus from a tax on production to a tax on consumption and, thereby, entail to create a single national market or, as an expert would say, a single commercial union.
The GST has been billed as the biggest tax reform (in the indirect taxation) since Independence and seeks to have uniform taxation for various goods and services across the country. It will unite India as a single market by folding a plethora of state and central levies into itself.
Announced by the presiding government in 2000, the GST is finally becoming a reality after 17 years. Under the new regime, taxpayers will pay one consolidated tax instead of a variety of taxes. These include State Value-Added Tax (VAT), Central Excise, Service Tax, Entry Tax or Octroi, Customs Duty, Central Surcharge & Cess, Luxury Tax, Entertainment Tax, and Purchase Tax along with a few other indirect taxes.
Mostly, GST will be applied to all goods and services, barring alcohol. Eventually, even petrol and petroleum products will be subject to it.
Thus, in the new regime, GST would be payable on the price actually paid or payable, termed as a “transaction value.” The transaction value or actual paid price will include packing cost, commission, and all other expenses incurred for sales. This tax will be payable at the final point of consumption.
What Happens Under A Goods and Services Tax Regime
The GST doesn’t discriminate between goods and the services and will, therefore, tax both of them at a flat rate. This will remove the multiplicity of taxes and hassles of computation. Indian SMBs will now have to ensure that their processes, including accounting and data management, are efficiently organised so as to be able to file a compliance report three times a month.