The Goods and Services Tax is an important tax reform which is expected to lead business transformation for all major industries with its implementation from July 1, 2017. The key purpose of GST is to merge most of the existing taxes into a single tax.
GST will replace Central taxes and duties such as Excise Duty, Service Tax, Special Additional Duty of Customs, Value Added tax, Central Sales Tax, Entry Tax, Purchase Tax, Luxury tax, etc.
GST is divided into 4 tax slabs:
- Slab 1: 0% to 5% for commodities such as food grains, rice, wheat
- Slab 2: 5% to 12% on only processed food items
- Slab 3: 12% to 18% on items including oil, soaps, toothpaste, smartphones
- Slab 4: 18% + on products including luxury cars, tobacco products, aerated drinks
Impact of GST
- Simplify and rationalize current indirect tax regime
- Harmonize administration of Centre and State tax, reducing duplication of costs
- Reduce errors and increase efficiency by automating compliance procedures
- Eliminate tax cascading so the consumer need no longer bear the load of tax on tax and the resulting inflationary prices.
GST’s impact on you
GST will make it cheaper to eat out and have chocolates for dessert, though driving there in a luxury car or dressing up for the occasion will strain on your finances.