-Goods and Service Tax is one single tax which is going to replace all the existing indirect taxes of excise, VAT and service tax. It will be applicable on all goods and services.
Currently many taxes are applicable from the time the raw material is purchased till the time the product reaches the consumer. This makes the product/service expensive. In every state, there are different VAT rates and therefore during inter-state sale/purchase, the product gets priced differently. In the end, it is the consumer who bears the tax in the form of high prices. Also, currently there are three taxes that the business owners must comply with- VAT (State level), Excise (Central level), and Service Tax. Since GST is one tax rate, all these hurdles will be simplified and the prices in some sectors might come down.
All the existing businesses (manufacturers, sellers and service providers) must migrate to or get registered under GST.
GST will be paid by manufacturers, sellers and service providers. However, since GST is an indirect tax it is the consumer who must bear the final tax burden.
A Dual GST will be implemented. This kind of system is also in place in Canada. This means that both the Centre and State (where the service is provided or good is delivered) will collect GST.
It’s a destination based tax, which in simple terms means that the State in which the service is provided or the good is delivered, will be the State which gets to collect the tax.
The tax which is collected will be divided two ways-50% will go the Centre and 50% to the State.
CGST: will be collected by the centre. -SGST: will be collected by the state. -IGST: Applicable on Inter-state sales. -UTGST: same as SGST but will be collected by Union Territories.
The final rates have not been passed yet. The proposed rates are 5%, 12%, 18%, 28% (+Luxury Cess). Necessities will be taxed at 0% to avoid inflation
Different rates are necessary because taxing luxury goods and spices at the same rate would not be appropriate. Care is being taken to put goods and services in the slab rates that are the closest to their current tax rates
Expect reduction in prices of: · FMCG goods such as shampoos, chocolates · Eating out · Small cars · DTH
Increase in prices of: · Luxury cars · Tobacco · Aerated beverages · Textiles
A well planned and implemented tax policy can bring about qualitative change in tax system of a nation. GST- India is expected to bring about this qualitative changes leading to business reforms in India. GST has both positive and negative impact at micro level on the average Indian. GST, being a simplified tax policy, removes cascading effect of taxes leading to cheaper cost of various products (eg. FMCG), more job opportunities, more transparency, reduction of tax burden on end consumers, improvement in Indian economy in long run, etc. On the contrary it may have few drawbacks such as initial inflation leading to higher prices of products, rescheduling budgets, higher compliance cost, etc. At a macro level, GST will greatly influence Indian economy, leading to increased FDI, increased in overall government revenue, seamless flow of credits, transparency in tax system, increased exports, etc. All in all, GST is expected to be a boon for nation like India.
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