Goods and Services Tax (GST) is the largest fiscal reform in India.GST is an attempt to bring all the indirect taxes under one umbrella and form a single unified tax. GST is, therefore, one major tax that substitutes all other prevailing indirect taxes levied both by the Central and State Governments.
Goods and Services Tax Act was passed in the Indian parliament on the 29th of March 2017. It finally came into effect on the 1st of July of the same year. GST is a Value Added Tax (VAT) that is levied on the sale of goods and services meant for domestic day-to-day consumption.
The Goods and Services Tax (GST) is a large source of revenue for the Government of India.
Given the fact that GST is a ground-breaking fiscal policy in India, there are several FAQs related to the Goods and Services Tax (GST). Some of these questions are addressed below in this article.
What was the pre-GST Tax framework?
Before the implementation of the Goods and Services Tax (GST), the Central and the State Governments had their own tax laws and calculations for charging taxes on commodities and services. The taxation system was a multi-staged one which meant that the tax was collected at every step of the supply chain, beginning from the manufacturer to the final consumer. for More elaborately, all taxes were levied firstly in the manufacturer end, after that selling to a wholesaler, then at the retailer and finally to the consumer end.
The tax rates also varied under the pre-GST tax framework. The tax percentages varied from one state to another. In this scenario Each and every product was subjected to the main variable of taxes depending upon the destination and stages the product has been through. This one led to the “tax-on-tax” effect & the “cascading” effect. As a result of this effect, the tax calculation process became complex and the prices of products were inflationary. The previous tax regime meant a higher amount of taxes paid. will the consumer had to bear this amount in the form of main product prices.
Why was GST implemented in India?
The Goods and Services Tax (GST) was introduced in India to improve the tax collection procedure and bring transparency in the system. It is an imp attempt to introduce a uniform and easy simple tax structure. Previously, there were seventeen indirect taxes, some of which are namely – Central Excise Duty, Entry Tax, Entertainment Tax, Luxury Tax, Value Added Tax (VAT). The entire tax collection procedure was very complex.
The implementation of GST has main aim is simplified the tax framework. There are four bills passed under GST by the Government of India: Goods and Services Tax Bill, Compensation Goods and Services Tax Bill, Integrated Goods and Services Tax Bill and Union Territory Goods and Services Tax Bill.
What are the GST rates in India?
The Goods and Services Tax (GST) Council has different tax rates assigned for different types of goods. Some goods can be bought also without GST, whereas for other products the rates are given below:
- Tax Slab of 5%
Some of the goods attracting 5% taxation under GST are skimmed milk powder, frozen vegetables, coffee, cola, tea, pizza bread, spices, fertilizers, kerosene, ayurvedic medicines, insulin, cashew nuts, handmade carpets, and textiles, etc. They are mostly everyday consumption items. Services such as served liquor, transports- railways, airways, takeaway food, hotel rooms come under the 5% tax slab.
- Tax Slab of 12%
Items in 12% slab such as frozen meat, butter, sausages, cheese, gadgets- cell phones and sewing machines, handbags, mirrors, and etc.their are taxed 12% GST. Services such as business class air tickets, movie tickets come under the 12% GST rate.
- Tax Slab of 18%
in this slab there are Most of the items come under this tax slab. Some items are- cornflakes, safety glass, glassware, mirrors, refined sugar, pasta, cakes, detergents, deodorants, chocolate, etc. IT and Telecom services, Among services, branded garments and financial services are taxed at 18%.
- Tax Slab of 28%
In this slab very Luxury items mean vacuum cleaners, dishwashers, motorcycles, automobiles come under the 28% GST slab. racing, Five-star hotels, betting in casinos also come under this tax slab.
What is the impact of GST?
Evaluation of the GST Indian Economy will reveal that there have been more merits than demerits after the implementation of the Goods and Services Tax (GST). GST has eliminated the tax-on-tax effect which previously led to inflationary prices of goods and services. The Goods and Services Tax (GST) is levied only on the last stage of the supply chain as a result of which, the overall prices of goods have gone down.
there are fewer compliances and The threshold limit is 20 lakhs or above which suggests that tiny service providers or small traders aren’t susceptible to GST. The threshold limit is 20 lakhs or above which suggests that tiny service providers or small traders aren’t susceptible to GST.
The process of registration and tax return filings was much more complex before the implementation of GST. These processes can now be fulfilled online. People do not have to run from pillar to post to file tax returns. It requires minimal technical knowledge and any layman can register for GST and file returns hassle-free online.
The Goods and Services Tax (GST) was introduced with the intention of reducing the prices of goods in the long run and simplifying the tax framework in India. These targets have been fulfilled. However, the GST remains in its nascent stage. it’s increased the convenience of doing business, especially for little and medium enterprises, start-ups and little traders. With the assistance of flexible parameters for taxes, there’s a minimal requirement of interactions with tax officials. A business owner has maximum independence under GST.
GST is additionally much easier for the govt to administer. within the past two years, GST has given a lift to the Indian market by increasing competitiveness. India is now a world and customary market. The industries are far more competitive now and there are more uniform and customary tax structures and rates all across the country.