Why Goods And Service Tax (GST) ? Reasons For Introduction Of GST ?

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Presently the tax structure of India is very complex and Central and State both are charging taxes on goods. Although tax credit mechanism is in place but that too needs to be rationalized. Central is also imposing taxes on services. Looking to the global developments and tax structure of developed countries GST is the need of the hour. The need of GST can further be explained in the following points :-

1. In the present tax structure there is no system of providing input credit mechanism in between taxes levied by state and the centre. Thus, cascading effect arises.

2. There are various definitional issues related to manufacturing, sale, service, valuation etc arises. These needs to be rationalized.

3. Several transactions take the character of sales as well as services, thus there is complexity in determining the nature of transaction.

4. The mechanism of imposing taxes, exemptions, abatements, other benefits are different in state and centre.

5. Existing law has resulted in significant number of issues related to interpretation or various provisions and the category of the products and the nature of services.

6. Credit mechanism is also very narrow with several conditions alongwith procedural formalities which makes the compliances difficult.

7. Administration mechanics of the centre and state and even in different states is different.

8. India needs comprehensive levy and collection on both goods and services at the same rate with the benefit of input credit.

9. Limited number of tax rates.

10. Subsume multiple taxes like luxury tax, entertainment tax, octroi etc.

11. Common law and procedure is the need of the hour.

12. Strong administration of the legal compliances.

Thus we need GST so that a businessman can focus on the overall growth and development along with timely compliances of the legal formalities.

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