GST Explained in the most Simplest Way.

What Is  GST ?

For all those who don’t know about GST let me clear about it first, GST means Goods and Services Tax. This will be levied on manufacture sale and consumption of goods and services.The primary function of the GST is to transform India into a uniform market by breaking the current fiscal barrier between states. Which means a uniform tax rate across India no matter what is the current rate. Currently, the indirect tax system in India is complicated. Taxes levied by Centre and the State separately.  Taxes (Currently Prevailing)  such as excise duty, service, central sales tax, VAT ( Value Added Tax), entry tax or octroi will all be all under one roof (GST). This tax covers all stages from manufacture to sale. Since, the target of passing this particular bill is already been missed. Government is hopeful that it will be passed in the current winter session. Almost 140 countries have already applied GST. France was the first country to introduce GST system in 1954.

GST EXPLAINED IN THE MOST SIMPLE MANNER EVER


Is it Important?

Since, the multiple tax is very much pinching the pocket  and making everyone confuse, GST will be a single Tax which will give clear cut opinion to a common men. Since it is a single tax which will be charged, it will come as positive sign for all the business people as their Accounting complexities will be reduced. And it will also help in increase in competition in business especially for the manufacturer’s and it will save more valuable time and money. Also as per the experts and various economists, GDP of India can also increase by 2% if brought into effect. Right now, the effective tax rate on manufactured goods works out to be approx 20%, while services are taxed at 10.3%. Although the GST rate is not yet decided but many experts forecast it to be 15%. “The strength of the GST lies in avoiding the continuous levying of taxes from producer to consumer,” says West Bengal Finance Minister Asim Dasgupta, who heads the panel of state finance ministers set up to give final shape to the GST. While it benefits to corporates but it is also viewed as a consumer friendly, although it has not been discussed on that way. It is expected that due to positive implication on manufacturer’s prices of good’s are also expected to fall, even though not sharply. Since the picture from the consumer point of view is still not clear. Still due to its uniformity and transparency its a win-lose situation.

The appositeness of GST Bill.

According to Finance Minister Arun Jaitlety, GST bill is important in every stage for boosting the economy and simplifying the indirect tax system in India. Investment also seems to get an upward trend due to uniformity but if thought from consumer point of view still its unclear, therefore their is a lot ridding on the current government to pass the bill. There are still many points which are unclear such as the goods which are to be exempted, commodities to be added, petroleum price issue etc. With the issue being raised in parliament its still wait and watch from economic perspective. The Lok Sabha on Tuesday passed the Constitution amendment bill to roll out the Goods and Services Tax (GST), a day after it was tabled in the house. But still its left to be passed in Rajya Sabha. It the bill is passed in the other house it will be applied from the upcoming Financial Year (1st April,2016).

What are the Final GST rates?

This is the basic question that is under a limelight currently. People are not able to clarify themselves from the rates of GST.

Firstly, there is no minimum GST rates and Maximum GST rates on each goods. That means there are distribution of products falling in one of the following rates.

0%, 5%, 12%, 18% and 28%

Above are the rates of GST or what I prefer to say “Bracket”. What seems to be an all of a different scenario and the most common problem that people are unable to distinguish is 28% + Cess goods which are termed as ‘Sin Goods’, It will mainly attract goods such as tobacco and aerated drinks.

Now let’s see some examples falling in each category:

  • 0% (NO GST)

That means on the goods falling under this category are exempted from any tax.

No tax will be imposed on items like fresh meat, fish chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, prasad, salt, Sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, etc. And Service such as, Hotels and Lodges with tariffs below ₹ 1,000/- are been exempted from any tax.

  • 5%

Items such as fish fillet, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, kerosene, coal, medicines, stent, and lifeboats will attract tax of 5 %. And falling in this category are Services such as Transport [Railways and Air transport (Economy Class tickets)], small restaurants (not defined) whose main input is petroleum.

  • 12%

Frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, namkeen, Ayurveda medicines, tooth powder, agarbatti, colouring books, picture books, umbrella, sewing machine, cellphones etc., And Services such as Non-AC hotels, fertilizers, Work Contracts will be under this category. Air transport mainly First Class tickets.

  • 18%

Most items are under this tax slab which include flavored 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. And Services such as AC hotels that serve liquor, telecom services, IT services, branded garments and financial services will attract 18 per cent tax under GST.

  • 28%

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, will attract 28 % tax – the highest under GST system. And Services such as 5-star hotels, race club betting, cinema will attract tax 28 per cent tax slab under GST.

 

What are CGST, SGST and IGST?

Central GST (CGST) which be levied by Central Government, State GST (SGST) which will be levied by State Government and Integrated GST (IGST) which will be levied by Central Government on inter-State supply of goods and services.

Many taxes has been subsumed under GST which are as follows:

  • Central Excise duty
  • Additional Duties of Customs (commonly known as CVD)
  • Special Additional Duty of Customs (SAD)
  • Service Tax
  • State VAT
  • Central Sales Tax
  • Entertainment and Amusement Tax (except when levied by the local bodies)
  • Taxes on lotteries, betting and gambling.

 There are still some goods and services which are yet to be decided. In the upcoming meeting which is slated to be on 2nd June, 2017, will have all the remaining goods and services rates decided.

 

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