The GST Bill is acknowledged as The 122nd Amendment Constitution Bill, 2014 is a VAT (value added tax) to be put into action in India, from April 2016. GST signifies Goods and Services Tax, supposed to be an inclusive tax assessment on the manufacture, sell, and devouring of goods and also it includes National level services. The Bill will change all roundabout taxes imposed on goods, services, and supplies by the Central India and State Governments. Rajya Sabha passed the Bill on 3rd August 2016.
As the economy freed up 25 years ago, it began to be the biggest reform of India’s indirect tax levying body, The GST bill looks ready to become reality. Here’s what will happen if Parliament approved the bill.
Phase 1: Manufacturing
Imagine one manufacturer of clothing, buys raw material of shirts such as thread, cloth, buttons, and tailoring equipment which is worth 100 Indian rupees. Also, a number which involves the tax that is worth 10 Indian rupees along with raw materials which make a shirt.
In this process of manufacturing, the manufacturer involves a value to the materials which he/she started out with. Let the value involved by he/she is 30, then the gross value of the product will be 100 + 30 = 130 Indian rupees. At 10% tax rate, the tax of the shirt will be rupees 13. But under the act of GST, the prevalence of the manufacturer is 3 Indian rupees (13-10) as he already paid the tax on raw materials (Rupees 10).
Phase 2: Wholesale
On this phase, the manufacturer will pass the goods to the wholesaler who will purchase the shirt for rupees 130 and involve a value based on his margin, let it be rupees 20. Then the gross value will be rupees 130 + 20 = 150 Indian rupees.
After this, a tax of 10% which we know is 15 but under GST the wholesaler will pay only rupees 2 (15-13) as he/she paid rupees 13 to the manufacturer.
Phase 3: Retail
The final stage where the retailer who buys the shirt from the wholesaler for rupees 150 and involves a value of his margin, let it be rupees 10 then the gross amount of the product will be 160 Indian rupees.
At this point, the tax (10%) will be rupees 16 but he will pay only 1 rupee (16-15) as he already paid the tax to the wholesaler and the GST will take effect on this way.