GST: GOODS AND SERVICES TAX
Goods and Services Tax:
GST is a single tax on the supply of goods and services,right from the manufacturer to the consumer. Credits of input taxes
paid at each stage will be available in the subsequent stage of value
addition, which makes GST essentially a tax only on value addition
at each stage.
The final consumer will thus bear only the GST charged by the last
dealer in the supply chain, with set-off benefits at all the previous stages.
In other words:
GST is one indirect tax for the whole nation, which will make India
one unified common market.
A nationwide tax reform cannot function without strict
guidelines and provisions. The GST Council has devised a fool proof
method of implementing this new tax regime by dividing it into three
categories.
Wondering how they work? Let our experts explain this to you in detail.
Transaction New Regime Old Regime Comments
Sale within the state CGST + SGST VAT + Central Excise Revenue will now be /Service tax shared between the Centre and the State
Sale to another State IGST Central Sales Tax There will only be one + Excise/Service Tax type of tax (central) now in case of
inter-state sales.
GST Law in India – A Detailed History:
GST is not a new phenomenon. It was first implemented in
France in 1954, and since then many countries have implemented this
unified taxation system to become part of a global whole. Now that India
is adopting this new tax regime, let us look back at the how and when of
the Goods and Services Tax and its history in the nation.
What are final GST rate slabs?
The Goods and Services Tax (GST) will be levied at multiple
rates ranging from 0 per cent to 28 per cent. GST Council finalised a
four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates
for essential items and the highest for luxury and de-merits goods that
would also attract an additional cess.
Service Tax will go up from 15% to 18%. The services being taxed at
lower rates, owing to the provision of abatement, such as train tickets,
will fall in the lower slabs.
In order to control inflation, essential items including food, which presently
constitute roughly half of the consumer inflation basket, will be taxed at zero
rates.
The lowest rate of 5% would be for common use items. There would be two
standard rates of 12 per cent and 18 per cent, which would fall on the bulk
of the goods and services. This includes fast-moving consumer goods.
Highest tax slab will be applicable to items which are currently taxed at
30-31% (excise duty plus VAT).
Ultra luxuries, Demerit and Sin Goods (like tobacco and aerated drinks),
will attract a cess for a period of five years on top of the 28 per cent GST.
The collection from this cess, as well as that of the clean energy cess, would
create a revenue pool which would be used for compensating states for any
loss of revenue during the first five years of implementation of GST.
Finance minister said that the cess would be lapsable after five years.
The structure to agree is a compromise to accommodate a demand for the
highest tax rate of 40% by states like Kerala.
While the Centre proposed to levy a 4% GST on gold but the final decision
on this was put off.
During a press conference, finance minister Mr Jaitley said, “GST rate on
gold will be finalised after the fitting to the approved rates structure of all
items are completed and there is some idea of revenue projections”.
The principle for determining the rate on each item will be to levy and collect
the GST at the rate slab closest to the current tax incidence on it.
The GST will subsume the multitude of cesses currently in place, including
the Swachh Bharat Cess, the Krishi Kalyan Cess and the Education Cess.
Only the Clean Environment Cess is being retained, revenues from which
will also fund the compensations.!!!
