Loan Singh Explains Goods & Service Tax aka GST

Goods-and-services-tax

Introduction

Now that all the speculation and hullabaloo about the Goods & Service Tax (aka GST) is finished; Government of India has planned to roll it out from 1st of July. A lot has been written about GST already but despite that there is still a lot of confusion. Some people are confused if GST would be beneficial for them or not, & some are worried as to what could be its impact on inflation. Its implementation matters to millennials because although GST is not expected to impact prices on essential commodities, it could probably lower it further down. GST has been fixed for both goods and services with the idea to unify different tax rates. It will a huge development in India’s tax reforms. It can impact our standard of living, choices involving purchase of assets and our financial planning.

 

What is GST?

GST is an indirect tax that will be implemented throughout India from 1st July 2017. Following the passage of the Constitution’s 122nd Amendment Bill, GST is set to replace the current taxes levied by the Central and State governments. GST will be applicable to close to 1211 items in all. These items will be taxed under a 4 tier tax structure (5, 12, 18 & 28%). The following currently levied taxes would be unified under GST:

  • Entertainment Tax
  • Entry Tax
  • Advertisement Tax
  • Tax on lottery
  • Central Excise Duty
  • Service Tax
  • Countervailing Duty
  • Special Countervailing Duty
  • Value Added Tax (VAT)
  • Central Sales Tax (CST)
  • Luxury Tax
  • Purchase Tax
  • Octroi

GST is essentially a tax only on value addition at each stage from manufacturer to the consumer. The consumer will hence bear only the GST charged by the last dealer in the supply chain. Lowest rates are assigned for essential items with highest for luxury items. Demerit goods such as cigarettes for example would be levied with additional cess (tax over another tax). The collection of this cess would go into the creation of a revenue pool which would compensate states for any loss of revenue during the first 5 years of the implementation of GST.

GST is levied on all transactions related to purchase, lease, sale, barter, import of goods or services etc. The GST implemented in India would be dual in nature i.e. Both Union & State Government. Transactions made within the state would be levied with Central GST (CGST) and State GST (SGST). For transactions between two states or between countries, Integrated GST would be levied, only by the Centre.

goods-and-services-tax

 

Benefits of GST

For the consumer

  • A single tax proportional to the value of goods and services means only one tax to be paid by the final member of the supply chain i.e. Consumer.
  • Reduction in the overall tax burden will be led by efficiency in gains and prevention of leakages in between the supply chain.

 

For industry and businesses

  • A robust system creation; as various services such as payments, returns, registrations etc. can be done online.
  • Abolition of hidden costs is possible thanks to seamless tax-credits all along the supply chain. This would also create a uniform structure to carry out business activities as the tax would be neutral.
  • Reduction in transaction costs will lead to players competing more than just costs, for various segments of products & services.
  • Costs of locally manufactured goods will reduce. Uniform procedures and tax rates will reduce compliance cost, as well.

 

For the government

  • With one tax replacing multiple ones, GST would be simpler to administer for central and state governments.
  • Higher revenue is estimated with GST decreasing the cost of collection of tax revenues.
  • Automating compliance procedures will reduce errors and increase efficiency

goods-and-services-tax

 

GST Structure (Item wise breakup)

GST is divided into 4 tax slabs

 

0% GST on commodities such as food grains, rice, wheat, fresh meat, chicken, eggs, milk, buttermilk, curd, natural honey, fresh fruits, vegetables, flour, bread, salt, stamps, printed books, newspapers, bangles, jute, handloom, hotels and lodges with tariff below Rs.1000.

Also, 0.25% GST would be levied on rough cut diamonds and 3% on gold.

 

Slab 1 (5%)

5% GST on packaged food items, kerosene, coal, medicines, small restaurants, railway, air fare, spices, tea, coffee, frozen vegetables, fish fillet, milk powder, cream, apparel below Rs.1000 and footwear below Rs.500

 

Slab 2 (12%)

12% GST on frozen meat products, sausages, animal fat, fruit juices, ayurvedic medicines, packaged dry fruits, butter, cheese, tooth powder, ghee, incense, coloring books, umbrella, sewing machine, cell phones, non AC hotels, business class air ticket fertilizers, and apparel above Rs.1000

 

Slab 3 (18%)

18% GST on footwear above Rs.500, instant food mix, mineral water, steel products, tampons, notebooks, preserved jams, sauces, soups, ice-cream, preserved vegetables, refined sugar, pastries, cakes, cornflakes, tissues envelopes, camera, speakers, monitors, branded garments, financial services, telecom services and air conditioned hotels that serve liquor.

 

Slab 4 (28%)

28% GST on alcohol, chocolate wafers, pan masala, aerated water, paint, deodorants, shaving creams, after shave, hair shampoo, sunscreen, ceramic tiles, cigarettes, chewing gum, water heater, dishwasher, washing machine, weighing machine, ATM, vending machines, vacuum cleaner, shavers, automobiles, motorcycles, five star hotels and tobacco.

 

GST’s impact on us

We are already in June, when the petrichor signals the onset of rains. With 1st of July approaching, car, AC, washing machine and shoe sellers are seen clearing out their stock with pre-GST sales and discounts. This is a rain of discounts which needs to be enjoyed by everyone.

From 1st July, on road prices for small cars are expected to go down marginally. But car manufactures are seen handing out attractive discounts towards luxury cars.

Prices for car batteries, paint, cement, movie tickets, fans, water heaters, air coolers, entry level cars and 2 wheelers are set to reduce. On the flip side, mobile phone calls, textile, branded jewelry are set to become expensive.

 

In parting

Implementation of GST will almost surely put us on par with nations that have a more structured tax system. It will provide a level playing field for our country’s businesses to perform trade and boost the Indian economy by removing indirect tax barriers between states.

 

30 thoughts on “Loan Singh Explains Goods & Service Tax aka GST

  1. OI Tenho um site no blogger e recebo muito comentário inútil você por acaso sabe como se proteger
    disso ? me perdoe usar este espaço para perguntar isso, mas vejo que seu site é bem bacana
    e você devem ter sofrido com isso em algum momento .
    Obrigado http://richardbraun.nl/gallery2/v/mypics_0/album20/DSC00197.jpg.html?goto=google_news&refurl=http%3A%2F%2Fhttp://richardbraun.nl/gallery2/v/mypics_0/a&rvnl=wpcpground.php%3Fcat%3Dusaia&locale=de

  2. I see your page needs some fresh content. Writing manually takes a lot of
    time, but there is tool for this boring task, type in google; murgrabia’s tools unlimited content

  3. Pingback:My Homepage

  4. Pingback:URL

  5. I was very pleased to search out this web-site.I needed to thanks in your time for this excellent learn!! I positively enjoying each little little bit of it and I’ve you bookmarked to check out new stuff you weblog post.

  6. If you may be booking for the trip in the online
    tour agency Morocco, it’s not necassary to forget about the available
    online coupons that may have you ever get an even better deal.
    The great thing about this experience is that it will not consume a rigid itinerary.
    Scuba Diving (Red Sea, Egypt)If you want to visit an a wholly marketplace,
    try scuba-diving.

  7. E-Sync Security Solutions Provides Good Service with enhanced Supports. cctv camera and biometric Security Systems is very important because it is a very volatile environment and that it contributes a lot to a country’s progress. security device dealers The wide variety of easy to use terminals ensures that biometrics is a smart (and cool) solution when deciding what kind of time and attendance system to purchase for your company.

  8. I don’t have a dishwasher anymore, but I agree it is important to be sure that everything is unclogged otherwise it can make washing less effective. That is important to clean it at least once a 30 days

  9. *I discovered your blog site on google and check a few of your early posts. Continue to keep up the very good operate. I just additional up your RSS feed to my MSN News Reader. Seeking forward to reading more from you later on!?

  10. Pingback:Budget 2018 – Does it play second fiddle to GST or not?

  11. Pingback:GST and its Revisions – Loan Singh looks back on Budget 2018

  12. I used to be very pleased to find this web-site.I wanted to thanks to your time for this wonderful read!! I undoubtedly enjoying each little bit of it and I have you bookmarked to check out new stuff you weblog post.

  13. I have learn a few excellent stuff here. Definitely worth bookmarking for revisiting. I wonder how much attempt you set to create one of these fantastic informative web site.

  14. E-Sync Security Solutions Provides Good Service with enhanced Supports. cctv camera and
    biometric Security Systems is very important because it is a very volatile environment and that it contributes a lot to a country’s progress. Security Cameras The
    wide variety of easy to use terminals ensures that biometrics is a smart (and cool) solution
    when deciding what kind of time and attendance system to purchase for your company.

  15. I’m curious to find out what blog system you’re utilizing? I’m having some small security problems with my latest website and I would like to find something more risk-free. Do you have any recommendations?

  16. This is the right weblog for anybody who needs to find out about this topic. You understand so much its nearly arduous to argue with you (not that I actually would need…HaHa). You positively put a new spin on a topic thats been written about for years. Great stuff, just nice!

  17. E-Sync Security Solutions Provides Good Service with enhanced Supports. cctv camera and biometric Security Systems is very important because it is a very volatile environment and that it contributes a lot to a country’s progress. Security Cameras The wide variety of easy to use terminals ensures that biometrics is a smart (and cool) solution when deciding what kind of time and attendance system to purchase for your company.

Leave a Reply

Your email address will not be published. Required fields are marked *