HOW HAS GST BOOSTED COLLECTION OF INCOME TAX

INTRODUCTION

India is notorious for its complex Tax system. for brand spanking new businesses and start-ups, it becomes impossible to navigate through various direct and indirect taxes. Constant changes to taxes like Service Tax are making things even worst. But now, the items are set to vary with new Goods and repair tax – commonly referred to as GST.

The taxation powers are defined clearly within the Indian Constitution. Centre collects all the direct taxes (income tax, corporate taxes etc.) alongside the Indirect taxes like Service Tax, Excise duty and customs. The States collect indirect taxes like VAT on goods, CST and native Taxes. These revenues states keep with themselves. Earlier rather than VAT, States had sales taxes on various goods. Now states have replaced sales taxes with VAT. Each state has adopted its own structure of VAT with different duties and structure. A Finance Commission is appointed to seem at the transfer of a particular percentage of the taxes collected by the Centre to the State. The Finance Commission defines the principles and conditions for the transfer of resources.

GST BOOSTED COLLECTION OF INCOME TAX

GST is an extended version useful Added Tax (VAT) and aims to hide all goods and services. VAT covers mostly goods and GST covers all goods and services. The States can only tax the sale of products. Hence, States cannot tax services and therefore the Centre cannot tax sales of products. Hence, implementation of GST was always seen as a priority for States as they surrender their powers to tax.

The GST is imposed at different rates on different items. the speed of GST is eighteen for soaps and 28% on washing detergents. GST on movie tickets is predicated on slabs, with 18% GST for tickets that cost but Rs. 100 and 28% GST on tickets costing quite Rs.100. the speed of under-construction property booking is 12%. Some industries and products were exempted by the govt and remain untaxed under GST, like dairy products, products of milling industries, fresh vegetables & fruits, meat products, and other groceries and necessities.

Need for GST- Goods and Services Tax: As per the reports of Task Force on Goods and Services Tax (2009), the Indian taxation system led to misallocation of resources and lower productivity in terms of economic process, international trade, and overall development of the Indian economy. Therefore, there was an emergent got to replace the prevailing legal system with a replacement engine of taxation of products and services to achieve the subsequent objectives

1. The proposed GST seems to be supported the above principle. Following are the supporting reasons to adopt GST.
2. Present system allows for multiplicity of taxes; the introduction of GST is probably going to rationalize it.
3. Many areas of Services which are exempted from taxation. After the introduction of GST, they're going to also get covered.
4. Existing taxes i.e., Excise, VAT, CST, Entry Tax have the cascading effects of taxes. Therefore, we find yourself in paying tax on tax. GST will replace existing taxes.
5. GST will cause credit availability on interstate purchases and reduction within the cascading effect of tax on the value of products and services.
6. Compliance requirements.
7. Also, the variability of VAT tax laws within the country with disparate tax rates and dissimilar tax practices divides the country into separate economic spheres thereby creating tariff and non-tariff barriers thereby hindering the free flow of trade the country.

The corporate growth has not been affected significantly as their sources are impeccable. Finally, bonds also are becoming popular. because the companies who had lost their charm before the financial crisis, these are being ignored and their NPAs are to be sooner or later to be written off or forgotten. During the last two years fiscal deficit by the centre was given some weight and it's coming down, but the tax buoyancy might be higher as GST is implemented and hence investment issue is tackled straightaway. Alongside GST, tax is additionally getting to be managed efficiently and hence the arrogance on the revenue mobilization would keep increasing because the new budget comes in. because the oil prices are climbing and a few relaxations in excise duty has been given whether it might be possible to offer subsidy because the international prices are rising. Since worker class may take a while to regulate within the income mainstreaming, some relief is predicted to tend to them by way of freebies.

Many micro industry workers returned back to villages and therefore the rate of growth of companies went as low as 1%. The MSME sector has been recovering from drastic changes and its impact on the revenue but demonetization forced the MSME sector to be friendlier and more accommodating towards digital arenas and made them more accommodating towards change. While these are a number of the consequences of demonetization on national and economic front, demonetization gave individuals several lessons that have changed the way we glance at managing finances. Demonetization made sure that we monetize our earning to urge the simplest returns possible whether it's by turning to monthly investment schemes to save lots of better or by turning our safe cash pile into a simple withdrawal FD (fixed deposit). the govt revenue will see a rise due to demonetization and its initial effects are already prevalent within the tax filing post note ban. Demonetization has played crucial role in bringing digitalization and financial planning into the forefront for several.

AGREEMENT ON INFORMATION SHARING

In October 2016, GSTN signed a memorandum of understanding with the Ministry of Commerce and Industry for sharing of exchange realization and import-export code data. The move is predicted to strengthen the processing of export transactions of taxpayers under GST, increase transparency and reduce human interface.

A similar information-sharing agreement is predicted to be signed very soon with the Central Board of Direct Taxes (CBDT).

Similarly, another jurisdiction may make an invitation to India for exchange of data under the tax treaties. There are differing types of tax treaties just like the Double Taxation Avoidance Agreement (DTAA), Tax Information Exchange Agreement (TIEA), Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC), etc.

In the changing economy, it's become important to take care of higher standards for accounting information for the taxpayer thereby promoting transparency and good governance. States got to increase financial stability also as devise how to combat criminal activity. it's become necessary to reinforce the jurisdiction’s reputation as a legitimate offshore financial centre, and assist the mixing of the offshore financial centre jurisdiction into the international economic system and global community. EOI facilitates of these requirements to be met by countries which give for EOI clause under their Double Taxation Avoidance Agreements (“DTAA”). These requirements also can be met by countries once they enter into Tax Information Exchange Agreements (“TIEAs”) with other jurisdictions.

WINDOW DRESSING AND EVASION OF INCOME TAX

A major implication of this information sharing would be that the tax evaders who window dress their books at the year-end to reduce their liabilities will find it harder to try to so. Such actions were possible before because the tax Department didn't have any access to the info which is filed under the state VAT laws. However, under the new regime, GSTN are going to be the only repository to all or any these transactions and therefore the tax Department will have a transparent picture of the entire sales and purchases, and eventually the general profitability, of each business.

Disparagingly, when the tax authorities are ready to perk up the infrastructure for GST implementation to form the system more conducive for straightforward GST registration procedure and convenient GST Return Filing mechanism in order that the business entities everywhere India can easily adapt to the tax regime, there are still some deceitful money magnates who find a safety valve to GST payment. In most cases, they manage to try to so by understating their sales figure while the GST Return Filing procedure.

The government is currently performing on the to switch the annual GST return, filing model. on get a 360-degree profile of a taxpayer, the GST authorities will rework the annual GSTR-9 form. The new model will possibly require all details of taxpayers’ tax return filing on assess if the sales turnover is modest.

HOW GST CHANGED THE ENTIRE SCENARIO

Primarily, the concept of GST was introduced and proposed in India a couple of years back, but implementation has been done by the present BJP government under the able leadership of Prime Minister Shri Narendra Modi on Dominion Day, 2017. The new government was in strong favour for the implementation of GST in India by seeing many positive implications as discussed above within the paper. All sectors in India - manufacturing, service, telecom, automobile and little SMEs will bear the impact of GST. one among the most important taxation reform- GST will bind the whole nation under one taxation system rate. As forecasted by experts, GST will improvise tax collections and step-up India's economic development and break all tax barriers between Central and State Governments. No doubt, GST will give India a transparent and transparent taxation system, but it's also surrounded by various challenges as discussed during this paper. there's a requirement for more analytical based research for successful implementation. Annual FDI inflows within the country are expected to rise to US$ 75 billion over subsequent five years and India is getting to achieve US$ 100 billion worth of FDI inflows within the next two years. With such high-value goals and targets, Indian society is destined to be the centre stage of the planet.

For the Consumers; Single and transparent tax proportionate to the worth of products and services: thanks to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages useful addition, the value of most goods and services within the country today are laden with many hidden taxes. Under GST, there would be just one tax from the manufacturer to the buyer, resulting in transparency of taxes paid to the ultimateconsumer.

Relief in overall tax burden: due to efficiency gains and prevention of leakages, the general tax burden on most commodities will come down, which can benefit consumers.