FAQ on GST

1.what is goods and services tax?

The GST  is an unified indirect tax that will replace all indirect taxes levied on goods and services by the Indian Central and State governments. It is aimed at being comprehensive for most goods and services with minimum exemptions.

2.what is value added tax?

A value added tax (VAT) is a form of consumption tax. It is a tax only on the "value added" to a product, material or service, from an accounting view, by his stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes he had previously paid on the inputs.

The "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs.

3. how GST is different from VAT as followed by the states?

If the Value Added Tax (VAT) is considered to be a major improvement over the pre-existing Central excise duty at the national level and the sales tax system at the State level, then the Goods and Services Tax (GST) will be a further significant breakthrough – the next logical step - towards a comprehensive indirect tax reform in the country.

4.How is GST going to be implemented in India?

GST is to have two components- central GST and state GST – with separate rates, reflecting revenue considerations and acceptability. They would be administered and collected separately. Cross utilization of input credit is not allowed except for IGST.

5.Why cant we have an unified GST?

need for upholding the powers of Central and State Governments in their taxation matters.(fiscal federalism )

6.What are advantages of implementing GST ?

•  Cascading effect of taxes
•  Improvement in transparency and reduction in tax evasion

7. Why we need GST ?

•  non-inclusion of several Central taxes in the overall framework of CENVAT, such as additional customs duty, surcharges,etc.,
•  Non capture of valu addition chain beyond the production
•  Non inclusion of several state taxes like luxury tax, entertainment tax  etc.
• Cascading effect of CENVAT on the state taxes 
•   Removal of central sales taxes

8.What are the taxes to be subsumed under GST ?

it is recommended that the following Central Taxes should be,to begin with, subsumed under the Goods and Services Tax:

ü  (i) Central Excise Duty

ü  (ii) Additional Excise Duties

ü  (iii) The Excise Duty levied under the Medicinal and

ü  Toiletries Preparation Act

ü  (iv) Service Tax

ü  (v) Additional Customs Duty, commonly known as

ü  Countervailing Duty (CVD)

ü  (vi) Special Additional Duty of Customs - 4% (SAD)

ü  (vii) Surcharges, and

ü  (viii) Cesses.

Following State taxes and levies would be, to begin with,subsumed under GST:

ü  (i) VAT / Sales tax

ü  (ii) Entertainment tax (unless it is levied by the local

ü  bodies).

ü  (iii) Luxury tax

ü  (iv) Taxes on lottery, betting and gambling.

ü  (v) State Cesses and Surcharges in so far as they

ü  relate to supply of goods and services.

ü  (vi) Entry tax not in lieu of Octroi.