Businesses especially startups till date had found out in a hard way how to navigate through various taxes, to make it simple GST is soon going to be introduced. They are furthermore troubled by constant changes rates of various direct and indirect taxes. To mitigate such a difficulty a game changer had appeared. This is commonly known as GST India the Goods and Service Tax.
Tax is calculated in the following manner for goods and services tax computation: If for a particular product GST is set at 20%. Assuming that cost of a Product A is 100 and then its basic price is fixed at 20%. If the product’s MRP is 150 then a 20% tax on that difference amount that 20% of Rs 30 is also charged under goods and services tax. Then a second goods and services tax for the same product is Rs 6.the total amount is Rs. 120.
Since the Goods and Services Tax will be applied at every step of value creation it will be very difficult for black money owners to participate anywhere in the value chain with the goods and services tax without accounting for all other transactions. The GST is estimated to provide an immediate boost of 0.9% – 1.4% of the GDP.
10 FAQ about GST India
1) What are the differences between the UPA’s GST and the NDA’s GST?
Below are the primary differences:
Petroleum products are kept out of the ambit of Goods and Services tax.
Liquor for human consumption is given exemption however tobacco and tobacco products will fall under goods and services tax.
There is a 1% tax on top of the goods and services tax for inter-state movement of goods and services.
2) What are GST,CGST, SGST and IGST?
India is union of states, which has clear demarcation of powers, responsibility and revenue collection between the states and the centre as per constitution. For example law and order falls under the state’s jurisdiction while the nation’s defense is the central government’s responsibility. So GST needs to have clear provisions on what areas the centre and the state are allowed to collect revenue from taxation to prevent an overlapping.
The Central GST or CGST is the areas where the centre has the powers and State GST where the State has taxation capabilities. The IGST or Integrated GST is for movement of goods within the states of the Indian union. This will be collected by the union however will be transferred over to the states. Thus it is essential that if and when the GST comes out it is rolled over in the entire nation simultaneously.
3) What are final GST rate slabs?
The Goods and Services Tax will be levied at multiple rates ranging from 0 per cent to 28 per cent. Goods and services tax Council finalized a four-tier tax structure ranging from 5%, 12%, 18% and 28%. Lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess.
Service Tax will go up from 15% to 18%. The services being taxed at lower rates, owing to the provision of abatement, such as train tickets, will fall in the lower slabs.
In order to control inflation, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.
The lowest rate of 5% would be for common use items. There would be two standard rates of 12 per cent and 18 per cent, which would fall on the bulk of the goods and services. This includes fast-moving consumer goods.
Highest tax slab will be applicable to items which are currently taxed at 30-31% (excise duty plus VAT).
Ultra luxuries, demerit and sin goods (like tobacco and aerated drinks), will attract a cess for a period of five years on top of the 28 per cent goods and services tax.
The collection from this cess as well as that of the clean energy cess would create a revenue pool which would be used for compensating states for any loss of revenue during the first five years of implementation of goods and services tax.
Finance minister said that the cess would be lapsable after five years.
The structure to agreed is a compromise to accommodate demand for highest tax rate of 40% by states like Kerala.
Gold will be levied a goods and services tax of 3%/
The principle for determining the rate on each item will be to levy and collect the goods and services tax at the rate slab closest to the current tax incidence on it.
The goods and services tax will subsume the multitude of cesses currently in place, including the Swachh Bharat Cess, the Krishi Kalyan Cess and the Education Cess. Only the Clean Environment Cess is being retained, revenues from which will also fund the compensations.
4) What are the taxes that goods and services tax replaces?
The GST replaces numerous different indirect taxes such as:
Central Excise Duty
Special Countervailing Duty
Value Added Tax (VAT)
Central Sales Tax (CST)
Taxes applicable on lotteries.
5) What will be the short-term impact of GST India?
The GST will fuel inflation for the short term. The GST rate starts at 5% and 18% taxation services such as restaurants, movies etc. are bound to increase prices. Another problem with the GST that many pundits feel is not including liquor and petroleum under GST’s ambit. These are major revenue sources for the government and experts feel this is being done due to a few crony capitalists who need some time to funnel away their black money as the GST India promises to widen the tax paying population.
6) When will goods and services tax be implemented?
goods and services tax was slated to be implemented on 1st April 2017. It is widely assumed that GST rollout will start only after 1 July 2017.
Keep checking the article for latest updates.
7) What is a constitutional amendment?
To implement goods and services tax, a constitutional amendment, superseding existent law, was necessary, so the goods and services tax is the One Hundred and Twenty Second such proposed amendment and hence is named The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014. This was passed in both Lok Sabha and Rajya Sabha with 2/3 majority.
8) What are the finer points in the implementation of the bill?
Several committees were setup to evaluate the feasibility and implementation of the GST. Some fine points which were considered are:
The problem of separating the taxation powers of the state and the centre which resulted in CGST and SGST.
Exemptions from the GST, which currently includes Petroleum and Liquor for human consumption.
GST India will be applicable on imports too along with the Basic Customs Duty, ie. Customs duty + GST for imports.
The GST will be applicable at the point of sale. In comparison the Value Added Tax is a destination based tax while excise duties are taxed at the origin.
9) What is the Empowered Committee?
The Empowered Committee is a committee of the Finance Ministers of the states. It was set up by the Vajpayee Government to look into the Value Added Tax model. The committee has had an influential hand in shaping and structuring of the GST.
10) What will become costlier and cheaper?
According to experts, these items could become costlier:
Cigarette and tobacco will be higher than current duties
Commercial vehicles such as trucks will become costlier
Mobile phone calls may get costlier as service tax will go up
Textile and branded jewellery may become costlier.
And these could become cheaper:
Auto: Prices of entry-level cars, two-wheelers, SUVs may fall
Car batteries likely to get cheaper
Paint, cement prices likely to go down.
Movie ticket prices likely to fall as entertainment tax will come down
Electronics items like fans, lighting, water heaters, air coolers, etc. will get cheaper
Benefits of GST India
Effective date of GST will be 1st July 2017 once the bill is passed in Rajyasabha. For further reading you can refer to Ministry of Finance. Here is the complete draft of GST.
Is Your Business Ready For GST?
For businesses many goods and services tax mobile apps are available for ready use. goods and services tax mobile apps solve much of the problems of the businesses with ready reckoner, and other calculation facilities readily available on the mobile phone itself. Down load goods and services tax app and concentrate on business matters more, and forget about tax problems. Otherwise add another GST webpage alongside existing website.