Goods & Services Tax (GST)

Hello everyone, today's post is about the top trending topic in India "The GST" i.e Goods & Services Tax...

At the stroke of midnight on July 1, 2017, 70 years after gaining independence from British colonisers, India will have another "Tryst with Destiny" as the country will go under a complete tax overhaul. The new tax regime, the Goods and Services Tax (GST), will bring massive changes in one of the largest economies of the world. The GST will change the way people conduct businesses in India as the country will become a single market with a single tax rate, irrespective of the state you conduct your business in. Barring a few exemptions, from the smallest entity on the economic food chain to multi-billion conglomerates, no one will stay untouched by the GST. The effect of the new tax regime will be proportional to the size of the entity but ultimately it will be the end user who will bear the brunt of higher tax rate or get the benefits of lower taxes.

But what is GST and how will it reform the current tax structure? And most importantly, why does the country need such a huge overhaul in its taxation policies? We answer these pressing questions in this in-depth article.

• What is GST?

Goods & Services Tax is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition.

To understand this, we need to understand the concepts under this definition. Let us start with the term ‘Multi-stage’. Now, there are multiple steps an item goes through from manufacture or production to the final sale. Buying of raw materials is the first stage. The second stage is production or manufacture. Then, there is the warehousing of materials. Next, comes the sale of the product to the retailer. And in the final stage, the retailer sells you – the end consumer – the product, completing its life cycle.
Let us assume that a manufacturer wants to make a shirt. For this he must buy yarn. This gets turned into a shirt after manufacture. So, the value of the yarn is increased when it gets woven into a shirt. Then, the manufacturer sells it to the warehousing agent who attaches labels and tags to each shirt. That is another addition of value after which the warehouse sells it to the retailer who packages each shirt separately and invests in marketing of the shirt thus increasing its value.GST will be levied on these value additions – the monetary worth added at each stage to achieve the final sale to the end customer.

There is one more term we need to talk about in the definition – Destination-Based.
Goods and Services Tax will be levied on all transactions happening during the entire manufacturing chain. Earlier, when a product was manufactured, the center would levy an Excise Duty on the manufacture, and then the state will add a VAT tax when the item is sold to the next stage in the cycle. Then there would be a VAT at the next point of sale.

Now, Goods and Services Tax will be levied at every point of sale. Assume that the entire manufacture process is happening in Rajasthan and the final point of sale is in Karnataka. Since Goods & Services Tax is levied at the point of consumption, so the state of Rajasthan will get revenue in the manufacturing and warehousing stages, but lose out on the revenue when the product moves out Rajasthan and reaches the end consumer in Karnataka. This means that Karnataka will earn that revenue on the final sale, because it is a destination-based tax and this revenue will be collected at the final point of sale/destination which is Karnataka.

• 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

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.

• Example

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.

Here Are The Slabs Set By The Govt. For Different Taxes On Different Products...

Items	GST
	0% GST	< 5% GST	12% GST	18% GST	28% GST
Food items	Unpacked foodgrains, fresh vegetables and fruits, unbranded atta, maida, besan, gur, milk, eggs, curd, lassi unpacked paneer, unbranded natural honey, palmyra jaggery, salt, fresh meat, fish, chicken, butter milk, cereal grains hulled	Sugar, tea, roasted coffee beans, edible oils, cream, skimmed milk powder, milk food for babies packed paneer, fertilisers, frozen vegetables, cashew nuts, spices pizza bread, rusk, sabudana, Raisin, fish fillet, packaged food items	Butter, ghee, almonds fruit juice, packed coconut water preparations of vegetables, fruits, nuts or other parts of plants including pickle, murabba, chutney, jam, jelly bhujia, namkeen, fruit juices, frozen meat products, dry fruits in packaged form animal fat and sausage	Biscuits (all categories) flavoured refined sugar, pastries and cakes preserved vegetables, soups, ice cream, instant food mixes pasta, corn flakes, curry paste, mayonnaise and salad dressings mixed condiments and mixed seasonings	Chewing gum, molasses chocolate not containing cocoa waffles and wafers coated with chocolate
Apparels & Footwear	Handloom	Footwear (upto Rs 500), apparels (upto Rs 1,000)	Apparel above Rs 1000	Footwear costing more than Rs 500, branded garments, headgear and parts thereof	Nothing
Services	Education services, health services, hotels and lodges with tariff below Rs 1,000, grandfathering service. Rough precious and semi-precious stones (0.25 per cent)	Transport services (Railways, air transport) , small restaurants	State-run lotteries, Non-AC hotels, business class air ticket, work contracts	AC hotels that serve liquor, telecom services, IT services, financial services, room tariffs between Rs 2,500 and Rs 7,500, restaurants inside five-star hotels, movie tickets below Rs 100	Private-run lotteries authorised by the states, hotels with room tariffs above Rs 7,500, 5-star hotels, race club betting, movie tickets above Rs 100
Personal care	Kajal, sindoor, bindi, bangles,	Nothing	Tooth powder	Toothpaste, soap, toiletries, tampons, kajal pencil sticks, hair oil, tissues	Deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen, shavers, hair clippers
Daily home use products	Prasad, phool bhari jhadoo ,	Agarbatti, domestic LPG, bio gas, coir mats, matting and floor covering	Umbrella, sewing machine, spoons, forks, ladles, skimmers, cake servers, fish knives, tongs	Nothing	Paint, wallpaper, ceramic tiles, water heater, dishwasher, washing machine, vacuum cleaner
Health/aids	Medicines, stent, insulin, Braille paper, Braille typewriters, Braille watches, hearing aids and other appliances to compensate for a defect or disability ,	Ayurvedic medicines, all diagnostic kits and reagents, glasses for corrective spectacles and flint buttons	Nothing	Nothing	Nothing
Electronic devices	Nothing	Mobile	Computers, printers, printed circuits, camera, speakers and monitors, Electrical Transformer, CCTV, Optical Fiber	Nothing	Nothing
Stationary	Children’s drawing and colouring books, printed books, newspapers, stamps, judicial papers	Postage or revenue stamps, stamp-post marks, first-day covers	Exercise books and note books	Nothing	Nothing
Others	Jute, bones and horn cores, bone grist, bone meal, hoof meal, horn meal, Human hair	PDS Kerosene, coal, lifeboats, ice and snow, kites	Playing cards, chess board, carom board, ludo and other board games	Bidi Patta, mineral water, tissues, envelopes, steel products, Aluminium foil, weighing Machinery (non-electrical or electronic), bamboo furniture, swimming pools and padding pools	Automobiles, motorcycles & aircraft for personal use, bidis, pan masala, aerated water, weighing machine, ATM, vending machines

Source :- Cleartax.com & Internet
Watch Live Telecast Direct From Lok Sabha Only On http://loksabhatv.nic.in/