Contents
Contents
1. Prologue
2. Definition
3. Components of GST
4. Various GST Tax rates applicable
5. Tax Laws before GST
6. Items exempted from GST
7. GST impact on Indian Economy
8. Impact of GST on various sectors in India
9. Advantages
10. Disadvantages
Prologue
Goods and Services Tax or Indian version of GST is a destination based tax proposed by the government with the aim to eliminate several indirect taxes like VAT, Central Excise Duty, Sales Tax, Service Tax, etc. It is fondly described as one tax for one nation. However, unlike GST of other countries, Indian GST is anything but one tax. It is actually a culmination of three taxes – Central Goods and Service Tax (CGST), Integrated / Interstate Goods and Service Tax (IGST) and State Goods and Service Tax (SGST).
CGST and SGST both will be levied on intra-state supply of goods and services while IGST will be applicable on inter-state supply of goods and services in India. Since it is a destination based tax, it will be levied at all stages right from manufacturer up to the final consumer with credit of taxes paid at previous stages available as set off. In short, tax will be levied only on value addition and the final burden of tax will be borne by the ultimate consumer.
Goods and Service Tax in India came into force on 1st July,2017.
DefinitionGST (Goods and Services Tax) is the biggest indirect tax reform of India. GST is a single tax on the supply of goods and services. It is a destination based tax. GST has subsumed taxes like Central Excise Law, Service Tax Law, VAT, Entry Tax, Octroi, etc.
GST is expected to bring together state economies and improve overall economic growth of the nation.
GST is a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by states and Central. Businesses are required to obtain a GST Identification Number in every state they are registered.There are around 160 countries in the world that have GST in place. GST is a destination based taxed where the tax is collected by the State where goods are consumed. GST has been implemented in India from July 1, 2017 and it has adopted the Dual GST model in which both States and Central levies tax on Goods or Services or both.SGST – State GST, collected by the State Govt.
CGST – Central GST, collected by the Central Govt.
IGST – Integrated GST, collected by the Central Govt.
UTGST – Union territory GST, collected by union territory government
Components Of GST
There are 3 taxes applicable under this system: CGST, SGST & IGST.CGST: Collected by the Central Government on an intra-state sale (Eg: Within Maharashtra)
SGST: Collected by the State Government on an intra-state sale (Eg: Within Maharashtra)
IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Tamil Nadu)
In most cases, the tax structure under the new regime will be as follows:
Transaction New Regime Old Regime Details
Sale within the State CGST + SGST VAT + Central Excise/Service tax Revenue will be shared equally between the Centre and the State
Sale to another State IGST Central Sales Tax + Excise/Service Tax There will only be one type of tax (central) in case of inter-state sales. The Center will then share the IGST revenue based on the destination of goods.
IllustrationLet us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs. 50,000. The tax rate is 18% comprising of only IGST.In such case, the dealer has to charge Rs. 9,000 as IGST. This revenue will go to the Central Government
The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate on the good is 12%. This rate comprises of CGST at 6% and SGST at 6%.The dealer has to collect Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will go to the Central Government and Rs. 3,000 will go to the Gujarat government as the sale is within the state.Various GST tax rates applicable
The Government announced that GST would be applicable in four taxes rates – 5%, 12%, 18%, and 28%. Few items have been kept out of GST. The states are interested in keeping few things out of the field of GST which are sensitive to their states like UP wants puja material out of tax net while few want cotton and silk yarn out. All the Goods and Services would be charged with any of the mentioned rates as decided by the GST council. Nearly 81% of items have been kept under 18% tax slab and only 19% of the goods will be taxed above 18%. What are the GST rates for the house hold expenses?Now, let us categorize all house hold expenses into 5 buckets i.e. Food, Entertainment, Personal Care, Transportation and communication services.
Food items – Earlier tax 12.5% – New Tax under GST – 5% – Positive news
Entertainment – Earlier tax 30% – New Tax under GST – 28% – Positive news
Transportation – Earlier tax 15% – New Tax under GST – 18% – Negative news
Personal Care – Earlier tax 28% – New Tax under GST – 18% – Positive news
Communication (mobile and Internet services) – Earlier taxes 15% – New Tax under GST – 18% – Negative news
How does GST Rates look for high consuming products for a common man?The following are the rates of few items that are of use for a common man:Sugar, tea, coffee (not instant) and edible oil to fall under 5% slab.
Cereals and milk have been exempted from GST.
Capital and intermediate goods would be taxed at 18%, which is expected to be a good boon for the industrial growth.
Components Of GST
There are 3 taxes applicable under this system: CGST, SGST & IGST.
CGST: Collected by the Central Government on an intra-state sale (Eg: Within Maharashtra)
SGST: Collected by the State Government on an intra-state sale (Eg: Within Maharashtra)
IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Tamil Nadu)
In most cases, the tax structure under the new regime will be as follows:
Transaction Sale within the State Sale to another State
New Regime CGST + SGST IGST
Old Regime VAT Central Sales Tax +
+ Central Excise Excise/Service Tax
/Service tax
Details Revenue will be There will only be
shared equally one type of tax
between the (central) in case of
Centre and the State inter-state sales. The
Center will then share
the IGST revenue based
on the destination of goods.
Sale within the StateCGST + SGSTVAT + Central Excise/Service tax
Revenue will be shared equally between the Centre and the State
Sale to another State
IGSTCentral Sales Tax + Excise/Service Tax
There will only be one type of tax (central) in case of inter-state sales. The Center will then share the IGST revenue based on the destination of goods.
Illustration
Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs. 50,000. The tax rate is 18% comprising of only IGST.
In such case, the dealer has to charge Rs. 9,000 as IGST. This revenue will go to the Central Government
The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate on the good is 12%. This rate comprises of CGST at 6% and SGST at 6%.
The dealer has to collect Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will go to the Central Government and Rs. 3,000 will go to the Gujarat government as the sale is within the state.
Various GST tax rates applicable
The Government announced that GST would be applicable in four taxes rates – 5%, 12%, 18%, and 28%. Few items have been kept out of GST. The states are interested in keeping few things out of the field of GST which are sensitive to their states like UP wants puja material out of tax net while few want cotton and silk yarn out. All the Goods and Services would be charged with any of the mentioned rates as decided by the GST council. Nearly 81% of items have been kept under 18% tax slab and only 19% of the goods will be taxed above 18%.