General Knowledge / GST Important PointsGoods and Services Tax (GST) is an indirect / consumption tax imposed in India on the supply of goods and services. It is a comprehensive multistage, destination based tax: comprehensive because it has subsumed almost all the indirect taxes except few; multi-staged as it is imposed at every step in the production process, but is meant to be refunded to all parties in the various stages of production other than the final consumer. As a destination based tax, as it is collected from point of consumption and not point of origin like previous taxes.
Goods and services are divided into five different tax slabs for collection of tax - 0%, 5%, 12%, 18% and 28%.
For some products like petroleum products, alcoholic drinks, and electricity are not taxed under GST and instead are taxed separately by the individual state governments, as per the previous tax regime. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-GST; most goods are expected to be in the 18% tax range.
The tax came into effect from July 1, 2017 through the implementation of One Hundred and First Amendment of the Constitution of India by the Indian government. The tax replaced existing multiple flowing taxes levied by the central and state governments.
The tax rates, rules and regulations are governed by the GST Council which consists of the finance ministers of centre and all the states. GST is meant to replace a slew of indirect taxes with a federated tax and is therefore expected to reshape the country's 2.4 trillion dollar economy, but not without criticism. Trucks' travel time in interstate movement dropped by 20%, because of no interstate check posts.
Types of GST in India (3 types)
1. Central Goods & Service Tax (CGST)
2. State Goods & Services Tax (SGST)
3. Integrated Goods & Services Tax (IGST) and Union Territory Goods & Services Tax (UTGST)
GST types support major economic development programs.
It is considered as the biggest taxation reform in the history of Indian economy. It will subsume multiple taxes like VAT, Service Tax, CST, excise and additional excise duty, entertainment and luxury tax, etc. It is a single uniform taxation system which will help in eliminating time, cost and effort.
GST is introduced in the parliament as The Constitution Amendment Act 2016 and it is regulated by the Union Finance Ministry of India. It is a consumption based tax levied on the supply of goods and services which mean that it will be imposed at each stage of sale / purchase of goods / services based on the input tax credit method.
GST will transform Indian economy turning it into one common market based on a uniform taxation system. It will enhance the ease of doing business in India. Industries will make substantial savings in terms of logistics and supply chain due to GST. Some companies will benefit more as the GST rate will be lower than the current taxation. On the other hand, few sectors will have to pay more tax as GST will replace the old taxes uniformly, which may increase the rate respectively.
Government joined hands with the National Securities Depository Limited (NSDL) and together they have created Goods and Services Tax Network (GSTN). It’s a non-government firm which will provide IT infrastructure services to the central and state governments, stakeholders and taxpayers for proper implementation and regulation of GST.
Central Goods & Service Tax (CGST)
It is applicable on the supply of goods and services of standard services and commodities which can be amended periodically by a specialized body under the central government.
The revenue collected under CGST belongs to the central government. The input tax is given to the state governments which they can utilize only against the payment of CGST.
It is as per the 2016 GST bill. CGST is the centralized part of GST that subsumes the present central taxations and levies- Central Sales Tax, Central Excise Duty, Services Tax, Excise Duty under Medical & Toiletries Preparation Act, Additional Excise Duties Countervailing Duty (CVD), Additional Custom Duty and other centralized taxations.
State Goods & Services Tax (SGST)
It is as per the 2016 GST bill. Various taxations and levies under the state authority are subsumed by SGST as one uniform taxation. It includes the amalgamation of State Sales Tax, Luxury Tax, Entertainment Tax, Levies on Lottery, Entry Tax, Octroi and other taxations related to the movement of commodities and services under state authority through one uniform taxation- SGST.
Each state will be having their own SGST and revenue collected from that state belongs to the State Government is supervised by the central government.
Integrated Goods & Services Tax (IGST)
It which is charged on the supply of commodities and services from one state to another state.
Under Article 269A of the Indian Constitution, the inter-state trade and commerce activities that involve the movement of commodities and services shall be levied with an integrated tax (IGST) under the GST regime. The Government of India will collect the revenue under IGST.
It is applicable if you supply of goods and services occur between Andhra Pradesh to telangana.
Union Territory Goods & Services Tax (UTGST)
Union territories in India are accounted under a specialized taxation called Union Territory Goods and Services Tax as per the GST regime 2016. It will subsume the various taxations, levies and duties with one uniform taxation in Union Territories as well.
Delhi (India’s Capital Territory), Chandigarh, Dadra & Nagar Haveli, Andaman & Nicobar Islands, Daman & Diu, Lakshadweep and Puducherry are the union territories in India. UTGST will account for all the taxations under these union territories in India. The parliament is looking forward to implement a separate act to impose and supervise GST in Union Territories under the name of UTGST act.
GST Tax Rates on some common items