Goods and Service Tax (GST) India – A summary


Indian system of taxation of goods and services is characterized by cascading, distortionary tax on production of goods and services which leads to miss-allocation of resources, hampering productivity and slower economic growth. To remove this hurdle, a pure and simple tax system like GST (Goods and Service Tax) is need of the hour in the country.

An ideal tax system collects taxes at various stages of manufacturing, supply, wholesale, retailing and lastly at the final consumption. It is based on the add-on value by the manufacturer, supplier and retailer at each stage of the value chain. Tax paid at each stage is based on the amount of value added and not on the entire amount.

Let’s take an example:

GST blog(final)

Note: excise duty has been charged on raw material and under current taxation system excise duty is not included in input credit. But under the GST there will be only one uniform tax structure so that there is no need to pay additional charge (i.e. excise duty).
From the above example we can see that by implementation of GST, concept of double taxation will be eliminated as there will be only one uniform tax structure.

Critics argue that GST is a value added process similar to VAT (value added tax), but VAT was already there in the Indian economy. So what was the need of implementation of GST?

Under the VAT, rates and regulation vary across different states and there is a tendency that different States cuts their rates to attract more investments which results in lowering govt. revenues. Under GST there will be uniform tax structure where the tax revenue will be divided among states and center according the to the consumption cycle. Moreover VAT was only there for services not for the goods.

The most significant question here is, that why would a government implement such a provision which only decreases its revenue? What could possibly be the logic behind it? Presently the government has long term prospects in their mind, it is clearly a long term strategy which will lead to higher investments, higher output, more employment opportunities, and higher economic growth but during the initial phase of implementation, it is expected that there will be hike in inflation rates, more administrative cost and stiff protest from the opposition.

This blog is written by Jatin aggarwal ICoFP Student, Delhi Campus


13 Replies to “Goods and Service Tax (GST) India – A summary”

  1. Deepak says:

    Informative article thanks for sharing with us.

    1. Admin says:

      Thanks!. And keep it up with your website as well.

  2. DA says:

    Thank you for the information


    Thank you for giving nice and very clear information about Gst bill. It is good and very understanable.

  4. Aditya says:

    Thanks for the information

  5. Pratik Jatin Bhansali says:

    Dear Sir,
    We belong to the Trade of Tea. Currently there is no Excise Duty on Raw Material.
    Currently we pay 5% VAT or 1-2% in case of online Auction purchase.
    As far as we know the lowest Tax regime will be 12% GST.
    How we will benifit. All of a sudden if the tax is increased from 5 to 12% it will have a inflationary impact on the most affortable beverage that the nation consumes.

    1. Pratap Parekh says:

      What will be the status of those manufacturing industrial units which are covered under” Tax Holidays Units ”
      & as per Govt. guidelines these tax benefits are to continue till end of certain period ( e.g. say 2019 or so )
      once the GST is implemented in India.

  6. Anonymous says:

    wonderful info on GST …

  7. amar says:

    amazing info on the GST…

  8. Ashish Kumar says:

    good show, nice way to get to know about gst in india.


    nice info on gst nd very helpful

  10. Dharmesh Prajapati says:

    We are waiting up coming GST new RATS & Form

  11. Anonymous says:

    Precious information on gst

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