What is GST?
Goods and services tax means a tax on supply of goods or services, or both, except taxes on supply of alcoholic liquor for human consumption, petroleum Crude, diesel, petrol, ATF and Natural Gas (Article 366 (12A) of Constitution of India). GST is a destination-based tax i.e., GST is levied on consumption of Goods or Services.
GST is a path breaking indirect tax reform which attempts to create a common national market. GST has subsumed multiple indirect taxes like excise duty, service tax, VAT, CST, luxury tax, entertainment tax, entry tax, etc.
France was the first country to implement VAT/GST in 1954. Presently, more than 160 countries have implemented VAT/GST in some form or the other. Most of the countries follow unified GST i.e., a single tax applicable throughout the country. India, too, has adopted a dual GST i.e., GST is levied by both Central and State Government.
Taxes under GST are as follows:
CGST stands for Central Goods or Services Tax. CGST is levied by central government on intra-state supplies.
SGST stands for State Goods or Services Tax. SGST is levied by State government / Union territory with Legislature on intra-state Supplies.
UTGST stands for Union territory Goods or Services Tax. UTGST is levied by Union Territory without territory on intra-state Supplies.
IGST stands for Integrated Goods or Services Tax. IGST is levied by Central government on Inter-state supplies.
GST Compensation Cess at specified rate has been imposed on the specified luxury items or demerit goods, like pan masala, tobacco, aerated waters, motor cars etc.
Taxes Subsumed in GST
- Central Excise Duty & Additional Excise Duties
- Service Tax
- Excise Duty under Medicinal & Toilet Preparation Act
- CVD & Special CVD
- Central Sales Tax
- Central surcharges & Cesses in so far as they relate to supply of goods & services
- State surcharges and cesses in so far as they relate to supply of goods & services
- Entertainment Tax (except those levied by local bodies)
- Tax on lottery, betting and gambling
- Entry Tax (All Forms) & Purchase Tax
- VAT/ Sales tax
- Luxury Tax
- Taxes on advertisements
Need for GST in India:
- Cascading of taxes on account of (i) levy of Non-VATable CST and (ii) inclusion of CENVAT in the value for imposing VAT
- Non-integration of VAT and Service tax
- Double Taxation of a transaction as both goods and services e.g. software was liable to both VAT and Service tax
Basic Features of GST:
- Value Added Tax: GST is a value added tax levied on manufacture, sale and consumption of goods and services.
- Destination based tax: GST is a destination-based consumption tax i.e. revenue of GST ordinarily accrues to the consuming States.
- One Nation One Tax: GST Aims to make India a common market with common tax rates and procedures thus paving the way for an integrated economy at the national level.
- Continuous Chain of Input Tax Credit: GST paid on purchase is available as Input Tax Credit to buyer to set off against output tax liability. Thus, it removes cascading effect of taxes i.e. tax on tax.
- Final Burden on consumer: The final burden of GST is on consumer since tax charged to customer is not available as input tax credit.
Tax rates under GST:
The maximum rate of GST can be 40% ( 20 % CGST and 20 % SGST or 40 % IGST) in India. The tax slabs under GST are as follows:
0% – Fresh fruits, vegetables, Newpapers, Grains etc
0.25% – Diamond, Semi precious stones etc
3% – Silver, Gold or imitation jewellery etc
5% – Polyester fabrics, Apparels below Rs 1000, Footwear below Rs 500 etc
12% – Apparels above Rs 100, cheese, business class air ticket etc
18% – Mobile, Camera etc
28% – 5 Star Hotel Stay, Air Conditioner etc
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