GST – It is a type of value added tax, which will replace
the indirect taxes levied on goods and services.
Value added tax is a
multi-stage tax, here tax is levied at each stage of value addition. Eg: - When
wood is converted to paper, there is value addition. Similarly when this paper
is converted to a greeting card, there is value addition. In VAT, the tax will
be levied only to the value added at each stage.
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| source:www.kinibiz.com |
Why GST?
India presently has multitude of indirect taxes. This
creates confusion, tax evasion and inefficiency. To reform the present system
to create a unified tax collection, GST is being introduced.
GST will :
- · Simplify the tax structure (the multitude of the indirect taxes will be abolished after GST)
- · Broaden tax base and rationalise tax collection.
- · To create a common tax base across states. (States and centre will implement GST)
- · Increase growth by increasing export and import
What is objection regarding GST?
States fear loss of revenue and fiscal autonomy.
Solution: Compensation formula after consultation with
states.
