Page 49 - Banking Finance November 2017

ARTICLE

Cascading Effect: Issues of Present multi- expected to provide the much needed stimulant for eco-
nomic growth in India by transforming the existing base of
staged Tax System indirect taxation towards the free flow of goods and ser-
One of the primary goal of a taxation regime is always avoid- vices throughout the nation.
ance of "taxation over taxes" or "cascading effect" of inci-
dent taxes. Cascading effect of taxes is one of the major GST will turn India into one common national market, lead-
distortions of the Indian Taxation Regime. This cascading ing to greatest ease of doing business from the consumer's
caused due to levy of variety of charges by Union and State perception, the greatest benefit would be in terms of a
Govt., has raised the tax burden on Indian products and reduction in the overall tax burden which is currently esti-
made them less competitive in the international market. mated as 25-30%, free movement of goods from one state
to another and reduction in the paper work to a large ex-
The gargantuan sizes of corporate taxes owe much to this tent.
taxation structure and have led to adoption of tax evasion
practices. The common man finds himself throttled in the The Frame of Reference for GST in India
Gordian knot of multiple tax rates, laws and elaborated
In general, there ae mainly tow models of GST, Unitary and
processes and often fails to comply with these complex leg-
Dual. In the former, Union Government collects GST while
islations. The extra tax paid due to taxation of already taxed
amount is finally bore by the end user or consumer which is in the later both Union and State Government collects GST.
common man and strikes them badly in addition to inflation. India has chosen to adopt the Dual system of GST. A four-
tier structure has been formulated for the running GST re-

Federal Structure of our democracy allows both states and gimes in India which includes:
1. Central GST (CGST)
Centre to the levy taxes separately and this has caused the
cascading mainly. While Excise Duty, Service Tax and Cen- 2. State GST (SGST)
tral Sales Tax are levied by the Central Government, VAT, 3. Integrated GST (IGST)
Entry Tax, State Excise, Property Tax, Agriculture Tax, Luxury
4. Union Territories GST (UTGST)
Tax and Octroi, etc. is charged by the State Governments.

There are many possible transactions which come under the CGST and IGST are the concept of Union Government while
ambit of two or more of these taxes and the value of sec- other two is of state and UT's matter. IGST is applicable on
ond tax is arrived at by adding the value of first tax to value inter-state sales that will help in smooth transfer between
of transaction. The prevalent complex, multi-staged and States and Union.
cascading tax structure steals the advantage of availability
of cheap labour and other factors of production and brings Reasons for Adopting Dual GST System
the market price (post taxes) at par or above par the price India is a federal country where both center and states have
of international price. Hence the manufacturing industry of been assigned the powers to levy and collect taxes through
India is not able to compete with other countries due to high appropriate legislation. Both level of government have dis-
market prices if product. tinct responsibilities to perform, according to the division of

Goods & Service Tax (GST): An Inte-

grated Tax System
GST is a comprehensive and compendious indirect tax on
manufacture, sale and consumption of goods and services
throughout the India. Introduction of GST is a significant step
in the transformation of Indian indirect tax system. The sim-
plicity of the tax will lead to easier administration and en-
forcement. Amidst economic crisis across the globe, India
has posed a beacon of hope with ambitious growth targets,
supported by a strategic understanding named GST that is

BANKING FINANCE | NOVEMBER | 2017 | 49

Sashi Publications Pvt Ltd Call 8443808873/ 8232083010