Goods and Services Tax (GST)or 101st Constitutional Amendment Act is the biggest tax reform inIndia since Independence. It was implemented from 1st July, 2017.
France being itsfirst member which implemented the GST in 1954.InIndia the classic taxes involved direct and indirect taxes. GST isan Indirect tax levied on goods and services. GST is a single tax on the supplyof goods and services, right from the manufacturer to the consumer which meansit will replace all major Indirect taxes levied by Central as well as Stategovernment.
GSTdeals with five tax brackets i.e. 0%, 5%, 12%, 18% and 28%. Under GST allnecessities are taxed at a lower rate and luxuries at a higher rate. Theprincipal rationale behind this tax structure is that items which are presentlytaxed at rates closer to the range of each of the slabs will be fitted into theparticular rate of the slab. Let’s see how Mr Sharma and his family will dealwith these taxes. MrSharma daily goes to market to buy fruits, vegetables and milk that mean theseare his family’s daily needs therefore he will not pay any tax on them. MrsSharma often bakes pizza for kids at home as she is well aware about the costof eating in restaurant but on items like pizza base, cheese, herbs and spicesshe will land up paying 5%tax.
Their son often demands a smart phone which MrSharma is denying for a while because he knows that he will have to pay12%tax.The family members are cost effective when it comes to choosing a welldata or talktime plan according to their needs but now they have to pay 18% taxfor such services. 0%-regular items are considered as non-taxable like fresh fruits, vegetables,cereals, milk everything remains untaxed because the object of this is toensure that the GST structure is not burdensome on the common man.5%- Ifwe use the process version of the above, then we have to pay tax on itlike fish fillet, cream, skimmed milk powder, branded paneer and frozenvegetables etc. Services like transport services, a small restaurant.
12%- Frozen meat products, butter, dry fruits in packagedform, animal fat and sausage etc. Services like Non-Ac hotels, business classair ticket, fertilizer.18%-This includesflavoured refined sugar, pasta, cornflakes, pastries, cakes, preservedvegetables, jam, sauces and mineral water etc. Services like AC hotels thatserve liquor, telecom services, IT services, branded garments and financialservices.28%-This includesChewing gum, molasses, chocolate containing cocoa, waffles, and wafer coatedwith chocolate etc.
It also includes Aircraft for personal use are thecostliest services like 5-star hotels, race club betting, cinema.The items exempted fromGST are alcohol, petroleum crude, petrol, diesel, natural gas, aviation turbinefuel.There are three parts ofGST:CentralGST or CGST will replace the previously existing central level taxes.StateGST or SGST will replace all the previously existing taxes to the StateGovernment.
Centrewill levy CGST and IGST while respective states will levy SGST.IGSTThetime when you order something from Jaipur while staying in Delhi then you won’tbe charge just CGST and SGST but IGST too that is Integrated goods and servicetax which is applied when the locationof the supplier and the place of supply are in different states. Advantagesand disadvantages of GST1.
Although GST has replaced all the existing indirect tax and fixedthe tax for different commodities but 18% service tax has posed a big challengefor all.2. GST will facilitate Make inIndia by making India a one market place that will also contribute to ease ofdoing business in different states.
3. GST act will not apply forsmall business whose turnover is below 25 lacs boosting the entrepreneurship inIndia. Inspite of One Nation-One Tax Policy, if someone has business indifferent state, he has to register at all places. 4.
Although the main purpose of GST is to keep taxsame all over the nation but allowing States to levy the additional rates of 1%to 2% on certain commodities will defeat the purpose.5. The provision of IGST dilutes the objective ofcreating a harmonized national market of goods and services.
Inter state tradeof goods would be more expensive than intra trade as the burden will be borneby retail customers. Further evasion of tax will continue.The biggest gainers of this seem to be the exportindustry as the exports will become more competitive internationally, and willshow higher rate of growth. The GST is also expected to raise the national GDPby 1-2% as per some experts, while strengthening long term FDI inflows. Foreign investorsin India can now look forward to a greater ease of doing business in thecountry, as the jumbled indirect tax system is not there. OpinionGST will simplify the tax system andwill curb the corruption to some extent. Besides boosting foreign investment itwill lead to a healthy competition among traders in the country.In thephase of growing economy the multiple tax rates is inevitable for severalreasons because one cannot tax an aeroplane and a needle at a same rate.
Different items used by different segments ofsociety needs to be taxed differently. Otherwise the GST would be regressive.The tax on some products in a narrow slab regime will substantially increase. Thiswould disrupt the market and would be highly inflationary.
Each good would betaxed on the basis of its own demerit. So it depends on us we have to take abenefit of necessity or luxury, according to this we have to pay tax on ourneeds.The so calledshortcomings are temporary in nature and will be cured by the time coming.