Prime Minister Narendra Modi at Friday, 30th June midnight put in motion the Goods and Services Tax (GST), the biggest tax regime in India. GST rollout is eventually expected to bring maturity and wisdom to the Indian democracy.
Admitted to be the biggest and most ambitious tax reform, GST is being termed as an act of collective thinking and of the broader purpose by the leaders of our country.
The ‘reform of the century’ was rolled out in the Central Hall of the Parliament. The unveiling of the GST had been planned for months and it is a reform with consequences never before seen in India. This surely is a cause to celebrate!
What is GST or Goods and Services Tax?
GST is the tax on goods and services. GST is an indirect tax which mostly superses many other indirect taxes in India, such as services tax, VAT and excise duty. The Goods and Service Tax Act was passed on March 29, 2017 by the Parliaent and was implemented for everyone on July 1, 2017.
To put it in simpler words, GST is tax that is levied on the provision of goods and services. In India, the Goods and Services Tax (GST) is a multi-stage, destination-based tax that is being charged on every value addition. Goods and Services Tax or GST is indirect tax law on single domestic that applies to the entire country.
What is the Impact of GST or Goods and Services Tax in India?
The impact, both short term and long term depend on how well the changeover is planned, and how swiftly the economic agents will fine-tune to the new normal. With the States, giving up much of their most important power of imposing taxes, the question is that will the people get the real advantage?
GST has received enormous publicity and the great benefits spoken about the ‘one nation, one tax’ by both the government and the industry leaders have already raised high expectations. In this article we bring to you a simplified GST format to give you more clarity on what has changed.
Suggested Read: Best Free GST Billing Software – Free Download
The History of GST Law in India
2000: A committee was set-up by PM Atal Bihari Vajpayee to draft GST Law
- 2004: According to a task force, headed by Vijay L. Kelkar the advisor to the finance ministry, concluded GST must be imposed to improve the current tax structure.
2005: Discussion of uniform GST structure by finance minister, P. Chidambaram in the budget session for financial year 2005-06.
2006: Finance Minister proposed a date to introduce GST, from 1 April, 2010
2007: Central Sales Tax (CST) to be phased out. Rated reduced form 4% to 3%
2008: The European Commission has finalised a dual GST framework with a distinct charge and regulations.
2010: Although a project to computerise business taxes has been initiated, the implementation of the GST has been postponed.
2011: Introduction of the Constitution Amendement Bill to enable the GST Law
2012: Discussion begins on GST by Standining committee but stalled it over clause 279B
2013: Report on GST were tabled by Standing Committee
2014: Re-introduction of GST Bill in Parliament by Finance Minister
2015: Lok Sabha passed the bill but not Rajya Sabha
2016: GST goes live, bill passed in both the houses. President gives assent.
2017: Four supplementary GST Bill passed in Rajya Sabha and Lok Sabha & approved by Cabinet. Finally, GST was Launched on 1 July, 2017. Announced by PM Modi at the night of 30 June, 2017
What is the Objective of GST?
The primary goal of GST is to create a unifrom tax rate in Indian market. One nation, One tax, and One market.
GST permits set-off of past taxes for the same transactions as input tax credit to eliminate the cascading effect of taxes.
To help increase the Indian exports, GST collected on inputs would be reimbursed, and all of the exports will be tax-free.
Increase tax income by expanding the tax base by attracting additional taxpayers.
To make tax return procedures easier by using common forms and avoiding the need to visit tax departments.
To provide online services for tax payment and form submission. The GST has been implemented using the Goods and Services Network (GSTN), a comprehensive information technology system.
What are the Components of GST?
There are four major GST components:
Central GST (CGST): The Central Products and Services Tax, or CGST, is a tax levied on the whole value of a transaction when you buy goods or services. The transaction amount is the amount you pay when you buy something. The Central Goods and Services Tax (CGST) is governed by the Central Goods and Services Act of 2017.
State GST (SGST): The State Goods and Services Tax, or SGST, is a tax charged on the transaction value of goods and services and is governed by Section 15 of the SGST Act. Intra-state shipments of goods and services are subject to this tax.
Integrated GST (IGST): The Integrated Products and Services Tax, or IGST, is an indirect tax levied by the federal government on goods and services supplied between states. In the case of imports or exports from India, the IGST is solely applicable on commodities or services.
Union Territory GST (UTGST): It is an indirect tax imposed and collected by the Union Territory on the supply of goods and services in Union Territories. The Union Territory Goods and Services Act (UTGST) of 2017 governs this tax, which is charged on intra-state supplies of goods and services.
How GST helped in Price Reduction?
Businesses are able to deduct the taxes payed by them while purchasing any raw material, commodity, or any service which falls under the GST. All stakeholders in the supply chain, in this case, will pay a 15% GST on value addition they make. In addition, the consumer only pays a 15% tax on the product’s price.
Different GST Slab Rates and Implementation in India
- Exempted GST Rate Slab or 0%
- 5% GST Rate Slab
- 12% GST Rate Slab
- 18% GST Rate Slab
- 28% GST Rate Slab
There are five slab rates under GST structure
Exempted GST Rate Slab or 0%: This tax bracket includes semi-polished and cut stone which covers 14% of goods and services.
5% GST Rate Slab: This also covers 14% of goods and services like basic household items like edible oil, sugar, spices, tea, and coffee (excluding instant) are covered. This GST slab also includes coal, Mishti/Mithai (Indian sweets), and life-saving medications.
12% GST Rate Slab: This slab covers 17% of good and services which includes computers, diagnostic kits, frozen and processed food.
18% GST Rate Slab: 43% of good and services falls under this category. The slab includes hair oil, toothpaste, and soaps, as well as capital goods and industrial intermediaries.
28% GST Rate Slab: This category cover 19% of services and goods. Small automobiles, consumer commodities such as refrigerator, air conditioners, cigarettes, aerated drinks, premium cars, and high-end motorcycle are also covered.
Reasons that make GST rollout a decisive event:
It puts in place the rules-bound tax system of one-product-one-tax.
- It can potentially slash India’s high logistics costs by speeding up the movement of goods across state borders and even within states. This will make the country’s goods and services more competitive.
- GST is discouraging tax dodging and thus expanding the revenue base for the government, without hurting the businesses or the consumers.
- GST is common-man friendly and will level the playing field for small traders in the country.
How to do GST Filing?
GST will help both the common man and the economy. To support the move and make the journey of businesses as well as tax payers seamless and effective, we at Techjockey have latest GST software and registration available.
Suggested Read: How to File GSTR 1 Using Tally.ERP 9 – A Step By Step Guide
We understand that the potential benefits of this historic reform will bring rationalized taxation and benefit the consumers and as well as businesses.
With our hassle free process and uncompromised service quality, we promise to help you at every step of the journey. So, get GST ready through the simplified GST Registration Process.