What is Goods and Services Tax (GST)?
The goods and services tax (GST) is a single rate of indirect tax applied in India. It subsumes all the central and state indirect taxes presently levied – including state VAT, local sales tax, octroi, entry tax, purchase tax, luxury tax, tax on lottery, betting and gambling, central sales tax, central excise duties, customs duty, service tax, central surcharges/cess, and entertainment tax – into
one single tax rate for the whole country. We have a detailed guide to understand GST benefits, and its important features.
- GST is a transparent tax and also reduce number of indirect taxes.
- GST will not be a cost to registered retailers therefore there will be no hidden taxes and and the cost of doing business will be lower.
- Benefit people as prices will come down which in turn will help companies as consumption will increase.
- There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa.
- Separate taxes for goods and services, which is the present taxation system, requires division of transaction values into value of goods and services for taxation, leading to greater complications, administration, including compliances costs.
- In the GST system, when all the taxes are integrated, it would make possible the taxation burden to be split equitably between manufacturing and services.
- GST will be levied only at the final destination of consumption based on VAT principle and not at various points (from manufacturing to retail outlets). This will help in removing economic distortions and bring about development of a common national market.
- GST will also help to build a transparent and corruption free tax administration.
- Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.
- GST is backed by the GSTN, which is a fully integrated tax platform to deal with all aspects of GST.
Important features of GST:
• Transaction fees in financial services are expected to be more expensive after the
government has put these under the 18 per cent tax bracket in the new OST regime. These services were so far taxed at 15 per cent.
• The government has categorised 1,211 items under various tax slabs in the new OST
regime. The four bands of tax rates have been fixed at 5 percent, 12 percent, 18 percent and 28 percent.
• As much as 81 per cent of the taxed items under OST will fall in/below 18 per cent slab.
• Only 19 per cent of goods will attract OST above 18 per cent
• Financial services are bracketed with A/C hotels that serve liquor, telecom and IT services, branded garments, flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral
water, tissues, envelopes and notebooks, among others,.
• Exempted items include unpacked food grains, prasad, gur, milk, eggs, curd, lassi, unpacked paneer, unbranded natural honey, fresh vegetables, unbranded atta, unbranded maida, unbranded besan, common salt, contraceptives, raw jute and raw silk.
GST came into effect from July 1, 2017 through the implementation of One Hundred and First Amendment of the Constitution of India by the Modi government.
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