What is GST (Good and Services Tax)
GST is a single indirect tax applied to the supply of goods and services across India. It was introduced through the 101st Constitutional Amendment Act 2016, impletement from 1st July 2017.
Main Components
- Central GST, state GST, UT GST: Applied on intra-state transactions (within a state/UT).
- Integrated GST: Applied on inter-state transactions (between states), collected by the centre and shared with states.
- It is destination based tax, that is the tax revenue goes to the state or UT where the goods or services are finally consumed.
Need for Goods and Services Tax
The Government proposed GST after the implementation of VAT (Value Added Tax). GST aimed at making a single tax pan-India by integrating the taxes of the state and centre.
The Government of India believed that by a created a single market throughout India might help the Industry, business, etc in a big way. Going by the experts opinions, GST has the potential to increase the GDP up to 2%.
The GST bill was passed in the parliament on 29 March 2017 and came into effect on July 1, 2017.
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Suggestion for GST in the First Proposal
The GST is to be collected the same as VAT, and it is imposed pan-India with Uniformity. That is, a single rate throughout the country.
Taxes subsumed under GST
The taxes subsumed under GST are four central taxes such as CENVAT, service tax, stamp duty, and central sales tax. Also, nine state taxes such as excise duty, sales tax/vat, entry tax, lease tax, works contract tax, luxury tax, turnover tax, and octroi, and cess are to be merged into GST.
Implementation of GST
The Government of India decided to introduce GST in the financial year 2010-2011 after the Kelkar Committee Report in 2006, but the process was delayed due to various reasons such as disputes between the state and central governments, etc.
Finally, the 101st Amendment Bill, 2016, was cleared by Parliament in August 2016, and by September 2016, the GST Council was created.
The council had the power to make recommendations to the Union and states on rates, floor rates, exceptions, etc and the new federal GST was implemented on July 1, 2017.
GST rates in India
It is a new Indirect tax that is applied to all except Alcoholic liquor and five petroleum products such as crude petroleum, motor spirit/petrol, high-speed diesel, natural gas, and aviation turbine fuel.
Central excise duty, duties of excise(Medicinal and Toilet preparations), additional duties of excise (Goods of special importance), additional duties of excise (textile and textile products), additional duties of customs/ countervailing duties (CVD), and special additional duty of customs (SAD), service tax, and central surcharges and cesses, these 8 cental taxed subsumed under Goods and Services Tax.
State VAT, Central sales tax, luxury tax, entry tax, entertainment and amusement tax (except Local Bodies), taxes on advertisement, purchase tax, lottery tax, betting and gambling, and state surcharges and cesses; these nine states are merged into GST.
The method of declaring ‘goods of special importance’ is dropped. For the inter-state transactions of goods and services, an “Integrated GST” will be levied.
The upper limit for the exception from levy of GST would be 20 Lakh rupees for the normal states and 10 lakh rupees for the special category states.
The upper limit for getting the composition would be 50 lakh rupees, with the service providers kept out of it. States to get compensation for five years for loss of revenue due to implementation of Goods and Services Tax ( for the base year will be 2015-16) with a growth rate of 14%.
Small amendments in rules may be allowed with the approval of the chairperson if required. All exemptions/incentives on indirect taxes will be withdrawn with an obligation to pay GST. If any of them continue, it will be administered by way of a reimbursement mechanism.
Bands of rates of goods under GST shall be 5,12,18, and 28, and also there would be a category of exempt goods. Further, a cess would be levied on certain goods such as luxury cars, aerated drinks, pan masala, and tobacco products, over and above the rate of 28 per cent (for payment of compensation to the states).
Keeping in mind the structure of the federal system, there will be two taxes: CGST(Central GST) and SGST (State GST).
Both the centre and states levy GST across the value chain on every supply of goods and services. States assess 90% of assesses with annual turnover below 1.5 crore rupees, while 10% by the centre. For taxpayers with over 1.5 crore rupees turnover, the split is 50:50 between the centre and states.
Conclusion
We have discussed what GST is and what taxes are subsumed under it. Kindly check the latest GST rates, as it changes regularly.
GST in the News
1. Goods and Services Tax 2.0 Reforms
The 56th meeting of the GST Council has approved the next-generation reforms, known as GST 2.0. Thereby, the GST Council restructured the Tax slabs. The earlier system of four main slabs that is (5%, 12%, 18% and 28% ) has been replaced with a simpler two-rate structure. Merit Rate: 5% and Standard Rate:18%.
A special demerit rate of 40% has been introduced for goods considered harmful or luxurious such as pan masala, tobacco, cigarettes, high-end cards and aerated drinks.
The 12% slab has been removed for most products, but it continues for bricks under a special composition scheme to support the construction sector.
Tobacco products will continue under the 28% slab with compensation cess, instead of shifting immediately to the 40% demerit slab.
