GST or Goods and Services Tax is a comprehensive single tax levied on the supply of goods and services, from the manufacturer to the consumer across India. Goods and Services Tax in India will be a game-changing improvement for the economy by creating a common Indian market and reducing the cascading effect of the tax on the cost of goods and services. GST in India will impact the tax structure, tax computation, tax incidence, tax payment, credit utilization and reporting, compliance, leading to a complete remodel of the current indirect tax system. The Rajya Sabha has cleared a constitutional amendment to bring about a system of GST (Goods and Services Tax) in India. GST has been a hot topic of discussion everywhere in these days. So, you need to be familiar with different aspects of GST in India. Let’s check out What is gst and its impact on common Man in India.
What is GST?
GST is by far one of the most awaited tax reforms in India. The present structure of Indirect Taxes in India is a bit complex Different kinds of taxes that are levied by the Central and State Governments on Goods and Services. For example, we have to pay Entertainment Tax for watching a movie. While Purchasing a product we have to pay VAT (Value Added Tax). And there is the long list of taxes like Excise duties, Import Duties, Central Sales Tax, Luxury Tax, Service Tax which are levied some by the Central Government, and some are by the State governments. How nice will it be if there is only one unified tax rate instead of all these taxes? Let us understand what GST is and its importance in this article.
All the necessary steps are being taken for the effective implementation of GST or Goods and Services Tax from April 2017 in India.
August 3rd, 2016 will be recorded as a red-letter day in the history of Indian taxation due to the nearly unanimous passage of 122nd Constitutional Bill in Rajya Sabha, paving the way for the roll-out of GST in India from 1st of April 2017. GST Bill has significantly evolved over the past decade and is touted as the single largest tax reform in India since independence. Goods and Services Tax is estimated to boost GDP by 1.5 – 2%. ‘One India, One Tax’ will be the new reality with Goods and Services Tax including over ten indirect taxes to make India a common market. Apart from the the benefits of simplified compliance, elimination of cascading effect, technological backing and uniform process across India will contribute naturally to ‘Ease of doing Business.’ However, the success of the firm will significantly depend on the ability to understand and adapt to this new reality as certain existing business practices will have to undergo changes.
|GST Salient Features and Benefits||Difference Between GST and VAT|
|GST Registration||GST Registration procedure for existing Dealers|
|GST Forms||GST in India|
What are the Benefits of GST?
Goods and Services Tax is a tax on goods and services with the comprehensive and continuous chain of set-off benefits from the service provider’s and manufacture’s point upto the retailer’s level. Credits of input taxes paid at each stage will be available in the succeeding stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final customer will bear only the GST charged by the last dealer in the supply chain, with a set-off benefits at all the previous stages.
The Benefits of Goods and Services Tax can be summarized as types.
- Business and Industry
- Central Governments and State Governments
Let us take a look at the each topic for better understanding.
Read More: GST Salient Features and Benefits
GST Benefits for Business and Industry
- Easy compliance: A robust and comprehensive Incomer Tax system would be the foundation of the GST in India. Therefore, all assessee services such as IT returns, registrations, Tax payments, etc. would be available to the taxpayers online, which would make compliance transparent and accessible.
- Uniformity of Tax structures and rates: Goods and Services Tax will ensure that indirect tax slab rates and structures are uniforms across the country which makes doing business in the country tax neutral, irrespective of the choice of location of doing business.
- Elimination of cascading: A system of seamless tax credits all over the value-chain, and across boundaries of States, to ensure that there is a minimal cascading of taxes. Which ultimately reduce the hidden costs of doing business.
- Improved competitiveness: Demotion in transaction costs of doing business would eventually lead to an improved competitiveness for the Business and industry.
- Gain to Manufacturers and Exporters: Including all major Central and State government taxes in GST, complete and comprehensive set-off of input goods & services and phasing out of Central Sales Tax would eventually lessen the cost of local manufactured goods and services. It will enlarge the competitiveness of Indian goods, services in the international market and give an uplift to Indian exports. The uniformity in tax rates and tax procedures across the country will also go a long way in reducing the compliance cost.
GST Benefits for Central and State Governments
- Easy and straightforward to administer: Goods and Services Tax is replacing the various indirect taxes at the Central and State levels. Backed with a robust end-to-end Income Tax system, GST would be easier and simpler to administer than all other indirect taxes of the State and center government levied so far.
- Better controls on leakage: Goods and Services Tax will result in better tax compliance due to a robust Income Tax infrastructure. Because of the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an inbuilt mechanism in the design of GST that would incentivize tax compliance by traders.
- Higher revenue efficiency: GST in India is expected to decrease the cost of collection of tax revenues of the Government, and will, therefore lead to higher revenue efficiency.
GST Benefits for Consumer
- Single and transparent tax proportionate to the value of goods and services: Due to various indirect taxes being levied by the Centre and State governments, with incomplete tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are loaded with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the final consumer, leading to a transparency of taxes paid to the consumer.
- Relief in overall tax load: Because of prevention of leakages and efficiency gains, the overall Income tax burden on most commodities will come down, which will benefit consumers.
Components of Goods and Services Tax in India
Keeping in mind the federal structure of India, there will be two components of Goods and Services Tax – CGST Central GST) and SGST ( State GST). Both Centre Government and State governments will simultaneously levy GST across the value chain. The tax will be levied on every supply of goods and services from manufacturer to the final consumer. Centre Government would levy and collect CGST (Central Goods and Services Tax), and State Governments of India would levy and collect the SGST (State Goods and Services Tax) on all transactions within a States. The input tax credit of Central GST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of State GST paid on inputs would be allowed for paying the State Goods and Services Tax on output. No cross utilization of credit would be permitted in this process.
What are the Taxes Subsumed into GST?
Let us take a look at the Dual System GST taxes at the Centre level, and State level are being subsumed into Goods and Services in India.
Central Level Taxes Subsumed into GST -CGST
The following taxes are being subsumed at the Central level.
- Service Tax
- Central Excise Duty
- Additional Excise Duty
- Countervailing Duty – Additional Customs Duty
- Special Additional Duty of Customs.
State Level Taxes Subsumed into GST- SGST
The following taxes are subsumed at the State Level, let’s check out.
- State VAT or Sales Tax
- Entertainment Tax
- Central Sales Tax
- Purchase Tax
- Octroi and Entry tax
- Taxes on the lottery, gambling, and betting
- Luxury tax
Taxes which will not get subsumed under GST
- Basic Customs duty
- Alcohol for human consumption
- Toll tax
- Petrol / Aviation Fuel / Diesel / Natural Gas
- Stamp duty and Property tax
- Electricity Duty
The CVD of Excise or Additional Duty and the Special Additional Duty presently being levied on imports will be subsumed under Goods and Services Tax. As per Explanation to clause (1) of Article 269A of the Constitution, Integrated GST will be levied on all imports into the territory of India. In the present GST regime, the State governments where imported goods are consumed will now gain their share from this IGST paid on imported goods.
GST Registration in India
The major features of the proposed registration procedures under Goods and Services Tax are as follows.
- For an Existing dealer, the Central Excise/Existing VAT/Service Taxpayers will not have to apply afresh for registration under Goods and Service Tax.
- For New dealers, a single application to be filed for GST registration online.
- Unified application to both tax authorities.
- The PAN based registration number will serve the purpose for Centre and State.
- Each dealer to be given a unique ID GSTIN (Goods and Services Tax Identification Number).
- Deemed approval within three days.
- Post registration verification is only in risk-based cases.
Read More: GST Registration Process in India
GST Slab rate in India
The four rates of Goods and Services Tax are determined by the type and use of goods and services in India. Check the four-tier GST slab rates decided by the Finance Ministry in the following section. There are likely to be three sets of GST rates as below, check out once.
- Standard Rate
- Merit Rate
- De-Merit Rate
There is also a lower rate for precious metals like gold, platinum, Silver and zero-rate for essential goods in India.
Zero Tax Rate: The Zero rate GST will be applicable for the 50% of goods falling under consumer price index basket. Zero Tax Rate goods will also include foods grains.
5% Tax slab: This will be levied on essential foods items of mass consumption used by ordinary people.
12% Tax Slab: It is a standard slab rate.
18% Tax Slab: The goods that are not included in the 12% GST Tax Slab rates will be taxed at 18% slab rate.
28% Tax Slab: This rate will be levied on All items (especially luxurious goods). It will include car, washing machine, air conditioner, etc.
Note: An additional cess would also be levied on luxury cars, tobacco products and aerated drinks beside the highest tax rate (28%).