GS Question

The salient features of the Constitution (One Hundred and First Amendment) Act, 2016, also known as the Goods and Services Tax (GST) Act, are as follows:

1. Introduction of GST: The Act introduced a unified taxation system, known as the Goods and Services Tax (GST), replacing various indirect taxes levied by the State and Central governments. It aimed to create a common national market for goods and services, streamlining taxation processes and reducing cascading effects.

2. Dual GST Structure: The Act established a dual GST structure, with two components - the Central Goods and Services Tax (CGST) levied by the Central government and the State Goods and Services Tax (SGST) imposed by the respective State governments. Both taxes are levied on intra-state transactions.

3. Integrated Goods and Services Tax (IGST): For inter-state transactions, the Act introduced the concept of Integrated Goods and Services Tax (IGST) levied by the Central government. IGST ensures seamless movement of goods and services across state borders, avoiding the complexities of multiple taxes.

4. Creation of Goods and Services Tax Council: The Act established the Goods and Services Tax Council as a constitutional body. It comprises the Union Finance Minister as the Chairperson and the Finance Ministers of all the states as members. The Council is responsible for making recommendations on important GST-related matters such as rates, exemptions, dispute resolution, etc.

5. The Threshold for GST Registration: The Act established a threshold for GST registration, allowing small businesses with an annual turnover below a specified limit to be exempted from GST. This threshold may vary based on different states and industries.

6. Input Tax Credit: The Act introduced the concept of Input Tax Credit, allowing businesses to claim credits for taxes paid on inputs used in the production process. The provision helps avoid double taxation and reduces overall tax liability.

As for its efficacy, the GST Act has significantly contributed to removing the cascading effect of taxes and has worked towards creating a common national market for goods and services. It has simplified the taxation process by replacing multiple indirect taxes and unifying them under one system. However, the efficacy of any tax reform also depends on its implementation and administration. The GST Act faced initial challenges during its implementation, including technological issues and adjustment difficulties for businesses. Over time, many of these challenges have been addressed, and the GST system has been evolving to better serve its objectives. While the Act has made significant progress towards creating a common national market, continuous improvements and reforms may still be needed for optimal effectiveness.