Goods and Services Tax(GST) is the most significant reform in the history of indirect taxation in the country. Earlier a plethora of taxes were charged throughout the states in the entire country. GST is an improvement over the previous tax system since it centralizes the taxation system to a large extent. It is now easy for the common man to understand the percentage of indirect taxes that they are charged on any service. GST as a taxation system is aligned with the government's idea of a common national market.
The GST system was rolled out in July 2017. In total, the GST Council fixed a percentage of taxation on 1,211 items. GST Council has put 1300 goods and 500 services under five GST slabs, 0%,5%, 12%, 18% and 28% where most of the items are covered under the 18% slab since the government decided to put only luxury items under the high-end 28% tax slab, so about 177 items in the 28% slab were moved to 18% tax slab.
Implementation of GST has resulted in a decrease in the tax burden for the consumers. Since the government plans on developing a synchronized national market, GST could help in boosting the position of Indian market globally.
One of the significant benefits of Goods and Services Tax is the transparency that it offers to the taxpayers. The earlier indirect tax system was so complicated that only a handful number of people understood the system.
New features of GST
Before the implementation of GST, the taxes levied on goods and services were separated. The Central Government had control over the taxation on goods manufacture and the State Government had complete autonomy in the taxation on the sales of goods.
Post implementation of GST, both Centre and state have the power to levy and collect taxes.
The tax rules under GST regime are listed below:
- The earlier system of taxation focused on the sale/manufacture of goods and services, but GST concentrates on the supply of goods and services.
- GST is destination-based, unlike the origin-based tax system which was earlier applicable on all the goods and services.
- GST levied by Centre is called Central Goods and Services Tax or CGST
- GST collected by the State is called State Goods and Service Tax or SGST
- Taxes levied by Union Territories is known as UTGST or Union Territory Goods and Service Taxes
- On the Inter-State supply of goods and services, IGST or Integrated Goods and Services Tax is collected by the Centre.
- CGST replaces the following Taxes earlier collected by the Centre:
Excise Duty on Medicine and Toiletries
Central Excise Duty
Additional Duties of Excise on goods of special importance
Additional duties of excise on textiles
Additional duties of customs
Special Additional Duty of Customs
Surcharges and cesses
SGST has taken the place of the following taxes which were levied by the state before the GST regime:
Central Sales Tax
Tax on luxury items
Tax on Gambling and Lotteries
State cess and surcharges
- Apart from alcohol and other narcotics consumed by the consumers, GST applies to all goods and services.GST and Central Excise Duty are levied on tobacco products. There are five tax slabs under the GST regime, namely, 0%,5%,18%,28%, where the 0% tax slab is meant for the goods and services that are exempted from taxation.
- Input Tax credit is the amount of taxes paid on the inputs which are reduced from the total taxes paid on the output. Input credit that corresponds to CGST/SGST/UTGST is used for paying the CGST/SGST/UTGST on the output. This means that the channels of input credit are distinct and they would never cross-over, except for the Integrated Goods and Services Tax payments.
- E-filing of the taxes is made available to the taxpayers.
- One of the special features of GST is the anti-profiteering clause which ensures that the business owners pass on the benefits accrued from the tax cuts to the consumers.
- The government has introduced GST Network. The GST network is a private company and will be mainly providing services to the taxpayers-registration, payment, and return. As of now, 25 states have approved to avail the GSTN services. One of the functions of the GST Network is to develop a robust IT system that could help in smoothening the transition from the old taxation system to the GST regime.
- There are 34 financial technology and IT companies that could act as GST Suvidha Providers (GSPs). These companies will be developing software to be used in applications that could make the implementation of GST easier.
Which goods and services become cheaper under GST?
- Dairy spreads
- Unbranded natural honey
- Milk powder
- Fruits and vegetables
- Groundnut oil
- Palm oil
- Sunflower oil
- Coconut oil
- Mustard oil
- Sugar Confectionery
- Cashew nuts
- Baking powder
- Toppings and spreads
- Raisins and gum
- Instant food mixes
- Mineral water
Commodities for daily use
- Plastic tarpaulin
- Bathing soap
- LPG stove
- Hair oil
- Detergent powder
- Tooth powder
- Tissue papers
- Fish knives
- Cake servers
- LPG domestic
- Carbon paper
- Parchment paper
- All types of paper
- Picture, drawing, and coloring books
- Graph paper
- Exercise books
- School bag
- Medicines for cancer and diabetes
- Glasses for corrective spectacles
- X-ray films for use in medicine
- Diagnostic Kits
- Apparel up to Rs.1,000
- Footwear below Rs.500
- Woolen fabrics
- Gandhi Topi
- Khadi yarn
- Fly ash bricks and blocks
- Diesel engines of power below 15HP
- Tractor rear tires and tubes
- Hotels with tariff below Rs.7,500
- Weighing machinery
- Economy-class air tickets
- Static converters (UPS)
- Electric transformers
- Winding wires
- Luxury cars
- Crackers and explosives
- Movie tickets less than Rs.100