Complete analysis of GST
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India bids adieu to the complex and obsolete taxation system and moves forward in the direction of economic freedom or The Independent India’s biggest reform initiative i.e. Goods and Services Tax, commonly known as GST.
We are here with a detailed analysis of what GST is, the way it managed through its ultimate terminus, what changes is it going to introduce in the existing taxation system and its payoffs.
India joined a long list of more than 100 countries to introduce a nation-wide Goods and Services Tax (GST) or national Value Added Tax (VAT).
The common questions which struck everyone’s mind after GST’s declaration are answered here:-
1) What is GST?
GST stands for the Goods and Services Tax, India’s most ambitious Indirect Tax Reform Plan which will stitch together a common market by dis mantling fiscal barriers between states. It is a well developed taxation system where the tax is implemented at every step of value creation. The Goods and Services Tax is considered as a game changer for Indian Economy as it promises to palliate this problem among many others. GST is being marked as the biggest change in the Constitution since India’s independence. This new taxation system willprovide for a single and sleak process. It will represent India as a unified market to business owners and aims at bringing back the black money back into the economy.
2) What are the final GST rate slabs?
The Goods and Services Tax (GST) will be levied at multiple rates ranging from 0 per cent to 28 per cent. GST Council finalised a four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess.
3) What are CGST, SGST and IGST?
The Central GST or CGST is the area 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.
4) What are the differences between the UPA’s GST and the NDA’s GST?
The primary differences between them are :
- Petroleum sector has been kept out of the ambit of GST
- Liquor for human consumption is exempt however tobacco and tobacco products will fall under GST.
- There is a 1% tax on top of the GST for inter-state movement of goods and services.
5) What are the taxes that GST replaces?
The GST replaces numerous different indirect taxes such as:
- Central Excise Duty
- Service Tax
- Countervailing Duty
- Special Countervailing Duty
- Value Added Tax (VAT)
- Central Sales Tax (CST)
- Entertainment Tax
- Entry Tax
- Purchase Tax
- Luxury Tax
- Advertisement taxes
- Taxes applicable on lotteries.
Three Finance Ministers
2006 – FM P Chidambaram moots GST in the Budget Speech for 2006-07.
2008 – Empowered Committee of State Finance Ministers (EC) engaged.
2009 – EC releases its First Discussion Paper
2011 – FM Pranab Mukherjee introduces Constitution Amendment Bill on GST in Lok Sabha
2013, August- Parliamentary Standing Committee submits report on GST; recommendations incorporated in the Bill
2013, September – Revised Bill sent to EC for consideration
2014, March – Another revised Bill drafted incorporating recommendations of EC.
2014, Dec – FM Arun Jaitley introduces Constitution Amendment Bill for GST in Lok Sabha.
2015, May – LS Passes Constitution Amendment Bill for GST.
2015, Aug – Congress insists on capping GST rate at 18 percent; opposes 1 percent “entry” tax to protect manufacturing states as it distorts the system.
2016, July – Centre and states agree against capping GST rate in the Constitution amendment Bill.
2016, Aug – Parliament passes 122nd Constitution Amendment Bill for GST; clause on entry tax dropped; states assured of full compensation for potential revenue loss upto five years.
2016, October 18 – GST Council decides on a compensation formula for states for revenue loss.
2016, October 26 – FM Arun Jaitley writes blog favouring four-tiered GST tax structure.
2016, November 03 – GST Council agrees on a four-slab structure –5, 12, 18 and 28 percent—along with a cess on luxury and `sin’ goods such as tobacco.
2016, November 04 – GST Council meeting inconclusive as Centre, states fail to agree on GST administrative issue on “dual control”
2016, November 12 – GST Council fails to agree on CGST and SGST laws
2016, Dec 23 – Agreement on two laws in GST Council meeting, but “dual control” remains a thorny issue.
2017, Jan 03 – States want compensation corpus raised from Rs 55,000 crore to Rs 90,000 crore to soothe demonetisation pain; new roadblocks surface on taxation rights of goods transported through territorial waters.
2017, Jan 04 – No breakthrough in GST Council meeting, hopes hinge on Jan 16 meeting to break impasse; roll-out date pushed till July 1.
2017, Jan 16 – Centre and states agree on two thorny issues of “dual control” and taxing rights of goods moved through high seas.
2017, Feb 18 – GST Council finalizes draft Compensation Bill.
2017, Mar 4 – GST Council approves CGST and IGST) Bills.
2017, Mar 16 – GST Council State GST Bill and the UT GST Bills.
2017, Mar 20 – Union Cabinet approves CGST, IGST, UT GST and Compensation Bills.
2017, March 27 – FM Arun Jaitley introduces CGST, IGST, UT GST
2017, March 29 – Lok Sabha passes five GST bills.
2017, March 31 – GST Council approves five sets of rules involving registration, payment, refund, invoices and returns.
2017, May 18 – GST Council meets in Srinagar; approves tax rates for 1211 items; approves another four sets of rules relating to composition, valuation, ITC (input tax credit) and the transition process.
2017, May 19 – GST Council places services under four slabs—5,12,18,28 percent.
2017, June 03 – GST rate of gold fixed at 3 percent; footwear placed in two tax slabs—5 percent for footwear less than Rs 500 and 18 percent for more.
2017, June 11 – GST Council reduces tax rates on 66 items including ketchups, instant food mixes, pickles, tractor components, computer printers and insulin among others; announces a two-part entertainment tax for cinema. Movie tickets costing Rs 100 or below will attract a GST rate of 18 percent, while those priced at above Rs 100 will be taxed atat 28 percent.
2017, June 18 – GST Council extends deadline for the first set of returns; lotteries to be taxed at 28 and 12 percent; relief for hotels as 28 percent rate will apply for room tariffs above Rs 7,500 a night.
2017, June 20 – FM Arun Jaitley announces plans for a midnight event in Parliament’s central hall on June 30 to roll out goods and services tax (GST).
2017, June 30 – A midnight event in Parliament’s central hall will mark the switchover to GST.
Here’s a list of the various items enlisted in the different Tax Slabs.
A number of food items have been exempted from any of the tax slabs. Fresh meat, fish, chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, all kinds of salt, jaggery and hulled cereal grains have been kept out of the taxation system.
Bindi, sindoor, kajal, palmyra, human hair and bangles also do not attract any tax under GST.
Drawing or colouring books alongside stamps, judicial papers, printed books, newspapers also fall under this category.
Other items in the exempted list include jute and handloom, Bones and horn cores, hoof meal, horn meal, bone grist, bone meal, etc.
Grandfathering service has been exempted under GST.
A low budget holiday may get cheaper as hotels and lodges with tariff below Rs 1,000 are in this category.
Rough precious and semi-precious stones will attract GST rate of 0.25 per cent.
An array of food items such as fish fillet, packaged food items, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, cashew nut, cashew nut in shell, raisin, ice and snow will be priced at 5 per cent tax.
Apparel below Rs 1000 and footwear below Rs 500 are also in this category.
Some items in the fuel category like bio gas, kerosene and coal are in this slab.
Items from the health industry in this category include medicine, insulin and stent.
Other items in this slab are agarbatti (incense sticks), kites, postage or revenue stamps, stamp-post marks, fertilizers, first-day covers and lifeboats. Transport services like railways, air and small restaurants travel fall under this category.
Gold has been taxed under a separate slab of 3 per cent.
Yet another category of edibles like frozen meat products, butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, namkeen and ketchup & sauces will attract 12 per cent tax. Cellphones will also be priced in this category.
Cutlery items like Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs fall in this slab.
Ayurvedic medicines and all diagnostic kits and reagents are taxed at 12 per cent.
Utility items like tooth powder, umbrella, sewing machine and spectacles and indoor game items like playing cards, chess board, carom board and other board games like ludo are in this slab.
Apparel above Rs 1000 will attract 12 per cent tax.
Non-AC hotels, business class air ticket, state-run lottery, work contracts will fall under 12 per cent GST tax slab
Another set of consumables are listed under the 18 per cent category- biscuits, flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, curry paste, mayonnaise and salad dressings, mixed condiments and mixed seasonings and mineral water.
Footwear costing more than Rs 500 are in this category.
Items like Printed circuits, camera, speakers and monitors, printers (other than multi function printers), electrical transformer, CCTV, optical fiber.
Other items in this slab include bidi leaves, tissues, envelopes, sanitary napkins, note books, steel products, kajal pencil sticks, headgear and its parts, aluminium foil, weighing machinery (other than electric or electronic weighing machinery), bamboo furniture, swimming pools and padding pools, AC hotels that serve liquor, telecom services, IT services, branded garments and financial services.
The residuary set of edibles which include chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with choclate, pan masala, bidi and aerated water fall in this category.
An array of personal care items like deodorants, shaving creams, after shave, hair shampoo, dye and sunscreen are in the highest tax slab as well. Paint, wallpaper and ceramic tiles, Water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers and hair clippers have been clubbed together in this slab.
Automobiles, motorcycles and aircraft, 5-star hotels, race club betting, private lottery and movie tickets above Rs 100.