What is GST: The GST or Goods and Services Tax is scheduled to be implemented on the 1st of July, 2017 and it is set to revolutionize the Indian tax system. But many people has so many doubts regarding GST like what is GST and how will it reform the current tax structure? what are the GST rates And most importantly, How to register for GST 2017 We answer these pressing questions in this in-depth article.
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What is GST? How does it work?
GST full form is Goods and Services Tax(in Hindi जी.एस.टी. एवं कर की दर). GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with setoff benefits at all the previous stages.
What are the benefits of GST?
The benefits of GST can be summarized as under:
For business and industry
Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.
Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.
Removal of cascading: A system of seamless taxcredits throughout the valuechain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.
Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.
Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive setoff of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.
For Central and State Governments
Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust endtoend IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.
Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an inbuilt mechanism in the design of What is GST that would incentivize tax compliance by traders.
Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.
For the consumer
Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.
Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.
Which taxes at the Centre and State level are being subsumed into GST?
At the Central level, the following taxes are being subsumed:
a. Central Excise Duty,
b. Additional Excise Duty,
c. Service Tax,
d. Additional Customs Duty commonly known as Countervailing Duty, and
e. Special Additional Duty of Customs.
At the State level, the following taxes are being subsumed:
a. Subsuming of State Value Added Tax/Sales Tax,
b. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
c. Octroi and Entry tax,
d. Purchase Tax,
e. Luxury tax, and
f. Taxes on lottery, betting and gambling.
GST Tax Rate Structure : Rates fixed at 5%, 12%, 18%, 28%
GST Tax Rate Structure : GST council has agreed on rate structure as 0%, 5%, 12%, 18% and 28%. Having a slab rate structure in GST is a departure from popular international practice of having one rate of tax for all goods and services.
Council has not announced schedule of goods and services under each slab rate. The FM has mentioned that highest tax slab rate will be applicable to items currently taxed at 30% to 31% (excise duty plus VAT) will be taxed at a demerit rate of 28%.
Some of the goods taxed at 28% will be charged with an additional cess for five years. However, with use of best estimates and some publicly available information, the likely impact on MRP of the products can be summarized below:
The Goods and Services Tax (GST) has been one of the key things that has caught the attention of the market given its implications on earnings of companies. The government has kept a large number of items under 18% tax slab. The government categorised 1211 items under various tax slabs. Here is a low-down on the tax slab these items would attract:
Download GST Rate Chart for Goods & Services PDF
Below we have provided the total list of GST Rate for Services in PDF format and divided into the each tax slab rate.
|Full List of GST Rates Item Wise India PDF 2017||Download|
|GST Rates for Goods India PDF 2017 (As per May 2017)||Download|
|GST Rate for Services in India PDF 2017 (As per May 2017)||Download|
How to Enroll for GST?
- The PAN associated with the registration is not valid
- The PAN is registered with State a Tax authority and Provisional ID has been supplied by the said State Tax authority.
- There are multiple CE/ST registrations on the same PAN in a State. In this case only 1 Provisional ID would be issued for the 1st registration in the alphatebical order provided any of the above 2 conditions are not met.
How does GST work?
When Goods and Services Tax is implemented, there will be 3 kinds of applicable Goods and Services Taxes:
- CGST: where the revenue will be collected by the central government
- SGST: where the revenue will be collected by the state governments for intra-state sales
- IGST: where the revenue will be collected by the central government for inter-state sales
In most cases, the tax structure under the new regime will be as follows:
|Transaction||New Regime||Old Regime||Comments|
|Sale within the state||CGST + SGST||VAT + Central Excise/Service tax||Revenue will now be shared between the Centre and the State|
|Sale to another State||IGST||Central Sales Tax + Excise/Service Tax||There will only be one type of tax (central) now in case of inter-state sales.|
What is GST: A dealer in Maharashtra sold goods to a consumer in Maharashtra worth Rs. 10,000. The Goods and Services Tax rate is 18% comprising CGST rate of 9% and SGST rate of 9%. In such cases the dealer collects Rs. 1800 and of this amount, Rs. 900 will go to the central government and Rs. 900 will go to the Maharashtra government.
Now, let us assume the dealer in Maharashtra had sold goods to a dealer in Gujarat worth Rs. 10,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%. In such case the dealer has to charge Rs. 1800 as IGST. This IGST will go to the Centre. There will no longer be any need to pay CGST and SGST.
The idea behind having one consolidated indirect tax to subsume multiple currently existing indirect taxes is to benefit the Indian economy in a number of ways:
- It will help the country’s businesses gain a level playing field
- It will put us on par with foreign nations who have a more structured tax system
- It will also translate into gains for the end consumer who not have to pay cascading taxes any more
- There will now be a single tax on goods and services
In addition to the above,
- The Goods and Services Tax Law aims at streamlining the indirect taxation regime. As mentioned above, GST will subsume all indirect taxes levied on goods and service, including State and Central level taxes. The GST mechanism is an advancement on the VAT system, the idea being that a unified GST Law will create a seamless nationwide market.
- It is also expected that Goods and Services Tax will improve the collection of taxes as well as boost the development of Indian economy by removing the indirect tax barriers between states and integrating the country through a uniform tax rate.