Many of you will surely agree on the fact that India is notorious for its much complicated tax system. Well, especially in case of new businesses and startups, it would not be wrong to say that it becomes almost impossible to navigate through various direct as well as indirect taxes.
Moreover, the constant changes in tax system such as service tax are making the things even more worse. But, need not to worry as now the things are set to change for better with none other than Goods and Service Tax, commonly known as GST.
I am sure in the recent days, you must have heard this word many times, in the news. It has been one of the key essentials that has grabbed the attention of the market given its implications on earning of companies.
But before we proceed ahead, let’s just have a better understanding of GST, what actually it is all about and how it is different from other taxes?
What is Goods and Service Tax?
It is nothing but an upcoming system of taxation in India which will merge plenty of individual applied taxes into a single tax, commonly known as Value Added Tax (VAT)
It is a type of comprehensive indirect tax on sales and manufacture of goods as well as services throughout India in order to replace taxes levied by both Central as well as State Government.
How it is Applied?
Well, it is consumption based tax/levy on the destination principle and is basically applied on the goods and services at the place where actual consumption occurs. This tax is collected on value-added goods as well as services at each stage such as sales and purchase in the supply chain.
What is the Final Rate Slab of GST?
GST council has finalized a four-tier tax structure, followed by multiple rate slabs of 5%, 12%,18% and 28%. In this tax structure, the rates are lower for necessary items and highest for luxury and de-merits goods that would further attract an additional cess.
- If experts are to be believed, to control the inflation the essential food items will be taxed at zero rate.
- On common use items, the lowest rate of 5% will be taxed.
- Two standard tax slabs of 12% and 18 % would fall on the bulk of goods and services, including fast moving consumer goods.
- However, the highest tax slab will be applicable on the items, which are currently taxed at 30%-31%(excise duty plus VAT).
- Demerits & sin goods(tobacco/aerated goods) and ultra luxuries will attract a cess over 28%.
Which Indirect Taxes GST will Replace?
- Central Excise Duty
- Value Added Tax
- Service Tax
- Countervailing Duty
- Special Countervailing Duty
- Central Sales Tax
- Entry Tax
- Purchase Tax
- Luxury Tax
- Entertainment Tax
- Tax Applicable on Lotteries
- Advertisement Tax
When It is Implemented?
As the Government may not be able to meet the initial deadline of the GST implementation, i.e. 1st April 2017. So, now experts are assuming that it will rollout after 1st July,2017.
What Will Become Cheaper and Costlier?
Goods: fresh meat, fish, chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, prasad, salt, bindi. Sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, etc.
Services: Hotels and lodges with tariff below ₹1,000, Grandfathering service has been exempted under GST.
Goods: fish fillet, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, kerosene, coal, medicines, stent, lifeboats,etc.
Services: Transport services (Railways, air transport), small restaurants, etc.
Goods: Frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, namkeen, Ayurvedic medicines, tooth powder, agarbatti, colouring books, picture books, umbrella, sewing machine, cellphones,etc.
Services: AC hotels, business class air ticket, fertilisers, Work Contracts, etc.
Goods: Flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, tampons, note books, steel products, printed circuits, camera, speakers and monitors.
Services: AC hotels that serve liquor, telecom services, IT services, branded garments and financial services
Goods: Chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with chocolate, pan masala, aerated water, paint, deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles, water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles, aircraft for personal use
Services: 5-star hotels, race club betting, cinema, etc.