Goods and Services Tax (GST) is a comprehensive indirect tax system introduced in India on 1st July 2017. It subsumed various indirect taxes that were levied by the Central and State Governments, simplifying the tax structure in India. The GST has had significant revenue implications since its introduction.
Indirect taxes subsumed in GST:
• Central Excise Duty
• Service Tax
• Additional Excise Duty
• Additional Customs Duty (Countervailing Duty)
• Special Additional Duty of Customs
• State VAT/Sales Tax
• Central Sales Tax
• Entertainment Tax
• Luxury Tax
• Entry Tax
• Purchase Tax
• Taxes on Lotteries, Betting, and Gambling
• Cesses and Surcharges
Revenue implications of GST:
• Increase in tax revenue: The GST has led to an increase in tax revenue for both the Central and State Governments. The simplified tax structure and increased compliance have led to an increase in the tax base and higher tax collections.
• Reduction in tax evasion: The GST has made it difficult for businesses to evade taxes, as it is a destination-based tax system. The GST has led to increased transparency in transactions and reduced the scope for tax evasion.
• Boost to the formal sector: The GST has boosted the formal sector, as it has led to the registration of a large number of previously unregistered businesses. This has led to increased tax revenue and increased competition in the formal sector.
• Impact on inflation: The GST initially led to an increase in inflation due to the higher tax rates. However, with the rationalization of tax rates and increased compliance, the impact on inflation has reduced over time.
The introduction of the Goods and Services Tax (GST) in India has led to the subsuming of various indirect taxes and simplification of the tax structure. It has had significant revenue implications, including an increase in tax revenue, reduction in tax evasion, and a boost to the formal sector. While the GST initially had an impact on inflation, it has reduced over time with the rationalization of tax rates. The GST has been a significant reform in India’s tax system and has led to increased efficiency and transparency in the tax regime.