- 05 Apr 2022
- 3 min read
Why in News?
Gross collections of Goods and Services Tax (GST) rose to Rs 1.42 lakh crore in March 2022 (for sales in February), which is a 14.7% rise from March 2021 and a 45.6% spike from March 2020.
What are the reasons for the Rise of the GST?
- The sharp surge has come on the back of anti-evasion measures, “especially action against fake billers”, and a pick-up in economic activity.
- Rate rationalization measures undertaken by the GST Council to correct 'inverted duty structure'.
- Inverted Tax Structure refers to a situation where the rate of tax, that is GST, on inputs is higher than the rate of tax on output supplies or finished goods.
- Economic recovery and increased domestic consumption.
- The total number of e-way bills generated in February was 6.91 crore, higher than 6.88 crore seen a month ago, despite it being a shorter month, which indicates the “recovery of business activity at faster pace”.
What is Goods and Services Tax?
- GST was introduced through the 101st Constitution Amendment Act, 2016.
- It is one of the biggest indirect tax reforms in the country.
- It was introduced with the slogan of ‘One Nation One Tax’.
- The GST has subsumed indirect taxes like excise duty, Value Added Tax (VAT), service tax, luxury tax etc.
- It is essentially a consumption tax and is levied at the final consumption point.
- This has helped mitigate the double taxation, cascading effect of taxes, multiplicity of taxes, classification issues etc., and has led to a common national market.
- The GST that a merchant pays to procure goods or services (i.e. on inputs) can be set off later against the tax applicable on supply of final goods and services.
- The set off tax is called input tax credit.
- The GST avoids the cascading effect or tax on tax which increases the tax burden on the end consumer.
- Tax Structure under GST:
- Central GST to cover Excise duty, Service tax etc,
- State GST to cover VAT, luxury tax etc.
- Integrated GST (IGST) to cover inter-state trade.
- IGST per se is not a tax but a system to coordinate state and union taxes.
- It has a 4-tier tax structure for all goods and services under the slabs- 5%, 12%, 18% and 28%.