What is the Purpose of Bringing GST in India?
GST which is the biggest tax reform brought into INDIA post-independence has paved its way to resolving major inherent flaws in the Indian indirect taxation system. Given below are the basic objectives of GST for beginners -
Deficiencies in the VAT system:
The VAT system was the biggest victim of the cascading effect, i.e., double tax or tax on taxes already paid. The same has been resolved with the implementation of GST. Earlier, a manufacturer was paying excise on the production of goods which formed part of goods for the dealer to sell at a later stage. While making the sales, he was either paying VAT or CENVAT on price inclusive of excise, which led to double taxation and ultimately increased the burden on the consumer. GST has addressed this flaw efficiently. Under GST, the tax is levied only on the net value added at each stage of the supply chain.
Removing the confusion of the existing tax regime:
The major talked about the issue of Classification of a product as a good or service has been redressed by the newly introduced Goods and Service Tax. There was a lot of confusion and litigation over the subject matter, whether to classify a product as a good or service. Also it leads to disputes in deciding the rate of taxes. With the concept of supply introduced by GST, all such paradoxes have settled down.
Integration of all existing taxes:
Under the old taxation policies, there were a lot of ambiguities like
- CENVAT and VAT both were Value-added taxes still imposed separately
- Service tax and VAT was charged separately
- Luxury tax and VAT were imposed simultaneously
All these led to a lot of inconvenience in complying with different procedural requirements under different laws and statutes. Also, Central taxes like CENVAT were not allowed to be set off against State taxes. The introduction of GST subsumed all the other indirect taxes except a few, making the entire taxation system simpler and less confusing.
Easy compliances:
With so many tax laws, there were a multitude of compliance requirements before the introduction of GST law. However, the GST was introduced with the objective of simplifying the compliance requirements and increasing tax compliance, especially in small and unorganized businesses.
Increased Transparency:
Easy compliances have led to better monitoring. The synergies arising out of GST can now be used to take much-needed actions timely. Which will help to build a sound structure of indirect taxes into India.
What are the GST Tax Rates in India?
Though GST was out looked as One Nation, One Tax, and One Rate but the latter part could not be successfully implemented. Numerous reason contributed to the same such as economic disparities in India, people’s attitude to accept change, the feasibility of merging existing varied tax rates into one etc. As a result Goods and Service Tax was introduced in India with different tax rates. The GST Tax Rates for Composition Taxpayers are-
Under 5% Slab
Goods - Goods under this slab include apparel upto Rs.1000, braille items, agarbatti, cashew nuts, domestic LPG, coir mat, floor covering, frozen vegetables, hearing aids, insulin, medicines, matting, milk food for babies, packaged food items, packed paneer, postage stamps, roasted coffee beans, pizza bread, revenue stamps, sugar, stent, sabudana, rusk, skimmed milk, tea, stamp post marks.
Services - Services include road transport by motor cabs and radio taxis, restaurants with a turnover of upto Rs.50 lakhs, supply of tour operators services, sale of advertisement space, air travel by economy class, transport services such as railways and airways.
Under 12% Slab
Goods - Goods include ayurvedic medicines, apparel above Rs.1000, almonds, butter, bhujia, animal fat sausage, chutney, chess board, carrom board, reagents, fruits, frozen meat products, exercise books, fish knives, forks, juice, ghee, jam, jelly, mobile phone, namkeen, notebooks, non-AC restaurants, pickle, packed coconut water, sewing machine, tongs, tooth powder, work contracts, glasses for corrective spectacles.
Services - It includes hotels, guest houses, inns, with a tariff of Rs.1000 to Rs. 2500 each night. It also includes air tickets purchased for business class too.
Under 18% Slab
Goods - Goods under this slab include aluminium foil, biscuits, bamboo, branded clothing, furniture, CCTV, cameras, cakes, corn, curry, paste envelopes, and footwear priced above Rs.500, hair oil, icecream, mineral water, mayonnaise, monitors, padding pools, pasta, printers, preserved vegetables, soups, soaps, salad dressing, steel products, tissues, tampons, toothpaste, weighing machines, and footwear priced above Rs.500.
Services - It includes telecom services, AC hotels serving alcohol to patrons, IT services, and rooms with tariffs between Rs.2500 and Rs.5000 each night.
Under 28% Slab
Goods - Aerated water, personal use aircraft, automobile motorcycles, aftershave, ceramic tiles, chocolates without cocoa, dishwasher, deodorants, hair shampoo, dye, pan masala, shaving cream, shavers, paint, vacuum cleaners, washing machine, water heaters.
Services - Includes 5-star hotels, gambling, and betting in race clubs, hotels with a nightly room tariff of Rs.5000 and more, cinema, and entertainment.