What are the must know facts of the GST?
These were the words of PM Narendra Modi when the Constitutional Amendment Bill was passed by the Parliament paving the way for the introduction of a whole new and progressive indirect taxation regime which we commonly call as GST. GST, now let’s take a pause and see what is GST, how will it work, how the Indian economy will be benefitted from this, and the challenges of implementing a uniform system in a diverse country. We will analyse each and every point in detail in the following paragraphs.
What is GST?
GST is an indirect tax that will be levied on goods as well as services. All the existing state and central indirect taxes will be subsumed under these apart from Customs Duties. It will be applicable in throughout the country (except JAMMU and KASHMIR). Under this system, a single product will be taxed at the same rate in every corner of the country meaning that an air conditioner will be taxed the same in Himachal Pradesh as well as Tamil Nadu thus we also refer GST as ONE NATION ONE TAX. However, it does not mean that every item will be charged at the same rate as we cannot charge the same price for AC and salt, food powder. Apparently, the necessities will be levied at a lower rate than the luxuries, but a single luxury product or an individual necessity good will be charged the same rate throughout the country. This was the basic introduction about GST now we will go into a bit of technicality about it.
There will be four slabs of GST:
- 5% that will cover various necessities like pickles, food powder, essential agricultural products,
- 12% this will include various processed food items and some daily products.
- 18% this will include AC, refrigerators, laptops and other semi-luxury goods.
4.28% this will include tobacco products, alcohol, aerated drinks, luxury cars and some ‘white goods’.
How will GST work?
GST will be divided into three components the Central Goods and Services Tax(CGST), State Goods and Services Tax(SGST), Inter State GST. The CSGT will subsume the Central indirect taxes like the service tax, excise duty, additional customs duty, additional special excise duty whereas SGST will subsume the State indirect taxes like VAT, entertainment tax, octroi and others. The CGST will be levied by the Central Govt whereas the SGST will be charged by the state government. In the case of an interstate sales transactions, IGST will be collected by the Central Government. GST will allow the Input tax credit for the taxes paid on the purchase of goods and services during a commercial activity and input tax credit of CGST and SGST will be provided by the respective governments.
It has been a common notion that with the implementation of GST the state’s proceeds from the indirect taxes will drastically reduce and for this the central govt will compensate every state for their loss for four years, and the amount will be finalised by the GST council headed by the Union Finance Minister.
What are the benefits of GST? What are the challenges that lay ahead?
GST aims to overhaul the indirect taxation of the world’s 7th largest economy regarding GDP. A significant advantage of GST will be that it will help in mitigating the cascading effect of taxation as should be for any indirect tax system. Moreover, it will reduce fraud and improve administrative efficiency of the tax authorities. GST will also help in the creation of a unified national market that will help in ease of doing business as the firm houses do not have to make different tax-related cost proposal for every state.
The primary concern about GST will be as India is a very vast and diverse land, so it will not be easy in the implementation of a uniform tax for the entire country. A tax that suits Kerala might not be appropriate for Bihar or for that matter Arunachal Pradesh. The linguistic and cultural differences might come in way of creating a unified national market.
So is it good or bad?
All said about GST I believe that GST is an excellent step forward and it will help in the growth of our economy as has been predicted by various agencies. This tax system will not only benefit the consumers but the business houses at the same time and will also improve administrative efficiency of tax authorities. The Govt believes and is confident of rolling out the new system by 1st July 2017 and any delay in doing this will adversely affect the economy’s growth prospects.
Know Every Aspect Of GST Return In India.