GST – India’s Revolutionary Tax Overhaul

Here’s all that you need to know about India’s historic and biggest tax reform since Independence – the GST. Find the answers to all your queries about the GST and its implementation right here.

A buzzer that sounded in the Parliament’s central hall at midnight on June 30, 2017, signalled the official switchover to the GST regime. The GST put an end to years of complicated taxes of the Central and State Government and replaced them all with a single uniform tax all over India. “One Nation, One Tax” became a reality.

Here’s all that you need to know about this revolutionary tax in India and its impact on the common man.

First things first, what is GST?

Implemented on July 1st, 2017, GST (Goods and Services Tax) is a single, national tax levied on all goods and services across the country. GST is applied at all points in the supply chain starting from the manufacturer up to the end consumer.

Here are the top features of GST:

  1. Pay Tax only for Each Stage

The taxes a person pays at each stage is available as set off (input credit). To put in simple terms, only the extra value added at every stage is taxed, and the end user needs to only pay the GST that is charged at the last point in the supply chain.

  1. Benefits of Tax Reduction available to the End Consumer

Due to the availability of input tax credit, manufacturers, traders, and service providers can now pass the benefits to the end consumer. Also, the anti-profiteering clause in GST Bill ensures that the benefits of tax reduction reach the end consumer.

  1. Rate Slabs under GST

The GST Council has categorised goods and services across five major slabs – 0%, 5%, 12%, 18% and 28%.

The lower slabs are for essential commodities, while the higher rates are levied on ultra-luxury and sinful items. The bulk of fast-moving consumer goods come under 12% or 18%.

  1. Dual GST

The GST implemented in India is a dual GST with the Centre and States taking parts of the joint tax. The four types of GST include:

  • The Central GST (CGST) levied on the goods/services that transcend state borders.
  • State GST (SGST) is for the goods/services within a particular state.
  • Union GST (UGST) is levied and collected by Union Territories for goods/services within a UT.
  • Integrated GST (IGST) is collected by the centre for all imports and exports and inter-state supply of goods and services.
  1. Taxes that come under GST

GST replaced the following taxes and subsumed it.

Centre taxes that were scrapped include:

  • Central Excise duty, Duties of Excise, Duty of Customs, Service Tax, Central Surcharges, and Cesses.

State taxes that were subsumed under GST include:

  • State VAT, Luxury tax, Central Sales Tax, Entertainment and Amusement tax, Taxes on Advertisements, Purchase Tax, Entry tax, taxes on gambling, betting and lotteries, State Surcharges, and Cesses.
  1. Taxpayers under GST

Under the GST regime, any individual or company who is involved in the supply of goods/services has to pay the tax. The tax has to be paid when the goods/services cross the threshold exemption. The GST threshold is set at 20 lakhs for all the states, except the North-Eastern states where the limit is 10 lakhs.

Any business whose aggregate turnover exceeds the threshold is liable to pay GST.

  1. GST Burden to Lower with Time

According to the RBI, GST will not have any impact on the overall inflation rate. Additionally, economists state that while prices may fluctuate now, the tax burden of GST will disappear with time.

Even though GST may have a negative impact on the service sector, as the rates increase to 18%, experts are confident that due to reduced cost of products and availability of input credit, prices will come down significantly, thereby benefitting the end consumer.

Final Thoughts

While implementation of GST may have had a few hiccups and initial bumps, there’s no denying the fact that a single tax for the entire nation is the way to go. Once businesses get used to the GST norms and rules, handling it will become super-easy and hassle-free.

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