Namo mantra: Goods and Services Tax

THE HANS INDIA |   Jun 06,2017 , 11:35 AM IST
   


Goods and Services Tax
Goods and Services Tax
Goods and Services Tax

Namo mantra is the secret of Prime Minister Narendra Modi's success. In three years of Modi rule in India, the Modi government has been successful in ensuring political stability and providing decisive leadership with bold decisions, which were both acclaimed as well as bitterly criticized.

Many welfare schemes were launched for the upbringing of the nation (poop people, farmers, women and scheduled castes).

The top among the launched schemes are: Making in India, Digital India, Skill India, Smart cities, Swachh Bharat Abhiyan, Pradhan Mantri Jan Dhan Yojana, Beti Bechao Beti Padhao Yojana, Atal Pension Scheme. And with the slogan ‘One nation, One tax’ the Goods and Services Tax bill stands outstanding, as it is all set to bring huge economic reforms in the nation.

The GST Bill has been an impending topic of discussion for a while now, mainly due to its power to revolutionize the entire tax system and also its ability to make life a lot simpler for taxpayers. Finally, Lok Sabha and all the state governments have passed the GST Bill.

Now, the nation is getting ready for the implementation of this wide-ranging tax development by the 1st of July, 2017. The GST Bill is believed to change the entire landscape of tax payment and charges in the country.

From past few days, they are many misconceptions being raised in the public about the GST Bill, whether it makes goods cheaper for the common man like us, nobody can tell. But this is going to impact everyone's lives - be it jobs, businesses and the overall economic environment in the country.

These reasons are enough for us to understand the basics of GST which is set to reform how the business works and also the taxes put on the goods and services in India.

What is GST? How does it work?

Goods and Services Tax or GST is a consumption tax placed on the import of goods plus all the supplies of goods and services. GST is also known as the Value-Added Tax or VAT in several countries.

Let’s get into depth on the importance of the Goods and Services Tax.

The main prospect from this system is to abolish all indirect, that are imposed by the Central and State Governments on Goods & Services. During the 2007-08 budget session, GST was first introduced and the current Union Cabinet ministry approved the proposal for introduction GST Constitutional Amendment Bill on December 17th 2014.

Later on, the Bill was presented in Lok Sabha on December 19th 2014.

Beginning from the manufacturer to the consumer, GST is the single tax on the supply of goods and services while the credits of the taxes paid at each stage will be available in the succeeding stage of value addition. Hence GST is essentially only the tax on value addition at each stage.

The final consumer bears the advantage of having the GST charged by the dealer in the supply chain, with set off benefits at all the previous stages

In the current tax structure, a business person is not allowed to take tax credits as there are possibilities that double taxation takes place at every step of supply chain which might result in the change with the implementation of GST.

Indian Government is opting for Dual System GST which has two components:

  • Central Goods and Service Tax [CGST]
  • State Goods and Service Tax [SGST]
How is GST imposed?

On the place of consumption of Goods and services, GST will be imposed.

  • Intra-state supply and consumption of goods & services
  • Inter-state movement of goods
  • Import of Goods & Services
Indirect Taxes

GST

Goods/ Services produced & consumed in same state

Goods/ services produced & consumed in different states(Inter-States)

Goods & Services Exported

Goods & Services Imported

Excise Duty

 

 

CGST

 

 

 

 

CGST rate +SGST rates Imposed

 

 

 

 

Integrated GST

 

 

 

 

GST Not Applicable

 

 

 

 

CGST rate + SGST rate imposed

Service Tax

Custom Duties

Central Sales Tax

State Sales Tax

 

 

SGST

Entertainment Tax

State VAT

Professinal Tax

Finance Minister Arun Jaitley headed GST Council has finalized a four-slab service tax structure at the rates of 5, 12, 18 and 28 percent as against the single rate of 15% levied on all taxable services.

Since GST replaces many surging taxes, the common man may benefit after its implementation which is scheduled to be from July 1.

France was the first country to introduce this system in 1954 and now around 140 countries are following this tax system. GST could be the next biggest tax reform in India but it could be a continuing process until it is fully evolved.

GST Council Meeting Members:

The Constitution of India is the authority under which the GST Council is created.

The present Finance Minister Arun Jaitley is the head and chairman of the GST Council meeting. He will be deciding on the tax rate, exempted goods and the threshold limit. Individual State Finance Ministers are the next highest authorities and will be the GST Council Members.

Senior IAS officer Arun Goyal has been appointed as Additional Secretary in the Goods and Services Tax (GST) Council. A 1985 batch IAS officer of Union Territory cadre, he is currently working as Additional Secretary at the Project Monitoring Group in the Cabinet Secretariat.

GST council secretariat will have all IRS officers who are training all the states Value Added Tax officers all over the country.

All important policy decisions related to rate of tax under GST, exemptions etc will be taken in a GST Council meeting.

Types of Invoices in GST:

In GST Act the details to be mentioned in invoice, type of invoice has been specified and depending on the nature of transaction the invoice is required to be prepared. In GST, every tax payer will be preparing different types of invoices like, Tax invoice, Bill of supply, Debit/Credit note, and Receipt voucher.

Information required filling in the invoices:

  • Name, address and GSTIN of the supplier
  • A consecutive serial number, containing alphabets or numerals or special characters
  • Date of its issue
  • Name, address and GSTIN or UIN of the recipient
  • Address of delivery
  • HSN Code of goods and service accounting code for service
  • Description of goods or service
  • Quantity of goods
  • Value of supply of goods or service taking into account discount. If any
  • Rate of GST
  • Amount of GST on taxable goods or services
  • Place of supply in case of interstate transaction
  • Whether reverse charge applicable
  • Signature or digital signature of the supplier
Who will pay GST?

  1. Whose turnover exceeds Rs 20 lakhs
  2. Person liable to pay GST under Reverse charge ( When Buyer Charges himself GST)
  3. Person supplying goods & services subject to inter-State taxes
  4. Input service distributor
  5. Service aggregators like, Ola, UBER. ETC.
  6. E-COMMERCE operators like Fkipkart, Sanpdeal etc.
GST Countries

In the present time, there are around 160 countries that have implemented GST/VAT. In some countries, VAT is the substitute for GST, but conceptually it is a destination based tax levied on consumption of goods and services.

France was the first country to introduce GST in 1954, because very high sales taxes and tariffs encourage cheating and smuggling.

Here is the list of GST rates in different countries. We should compare ourselves with the country which is mostly on our radar in the sphere of economic competition, i.e. China.

GST Rates in Different Countries

Singapore

7%

Switzerland

8%

Australia

10%

Indonesia

10%

South Korea

10%

Japan

8%

Canada

5% to 15% 

Scandinavian

25%

Sweden

12%

Netherlands

21%

United Kingdom

20%

Greece

24%

Argentina

27%

China

17%

 

Final GST Tax Rate by GST Council

GST rates are finalized on 1211 items. According to the official sources, it is revealed that 81% percent of the items are under the category of 5, 12, 18 or 28 percent brackets. Below is the list of GST Slab Rate and Items mentioned below:-

Zero Percent or Nil Rate:
No tax rates will be levied on basic food items including fresh chicken, meat, milk, eggs, butter, curd, natural honey, besan, flour, wheat, bread, stamps, sindoor, judicial papers, newspapers, bangles, handloom, salt, bindi, fresh fruits, vegetables.

5% Slab Rate:
Cream, Skimmed Milk Powder, Fish Fillet, frozen vegetables, coffee, tea, branded paneer, pizza bread, sabudana, spices, kerosene, medicines, coal, rusk are some of the items which will fall under the category of 5% slab rate.

12% Slab Rate:
Items such as cheese, frozen meat products, ghee, butter, sausage, dry fruits in packaged form, Bhujia, fruit juices, namkeen, animal fat, tooth powder, Ayurvedic medicines, colouring books, agarbatti, picture books, sewing machine, umbrella, and cellphones will fall under the 12% Slab Rate under GST.

18% Slab Rate:
Most of the items will fall under 18% Slab Rate, and it include corn flakes, notebooks, flavoured refined sugar, pastries and cakes, pasta, jams, sauces, soup, tissues, instant food items or mixes, ice cream, ,mineral water, preserved vegetables, tampons, envelope, printed circuits, steel products, camera, speakers and monitors.

28% Slab Rate:
28% is the highest slab rate under GST. It include several items such as chewing gum, chocolate not containing cocoa, waffles and wafers coated with chocolate, pan masala, molasses, deodorants, aerated drinks, shaving creams, hair shampoo, , after shave, paint, dye, sunscreen, wallpaper, ceramic tiles, water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles, aircraft for personal use, and yachts.

Statewise Last Date for GST Enrollment

GST Tax Rate By GST Council in India

GST Rates in India

Final GST Tax Rate by GST Council in India

List of items that will become Cheaper and Costlier after GST

List of services rates under GST

Timeline of GST in India:

After 13 years worth of efforts, GST is being introduced in India. Let’s take a look at the events that led to the achievement:

  • The Kelkar Task Force on indirect tax had suggested a comprehensive GST based on VAT principle in 2003.
  • During the budget speech for the financial year 2006-07, a proposal was first raised to introduce a National level GST by April1, 2010.
  • The Empowered Committee of State Finance Ministers(EC) were given the responsibility of preparing a design and road map for the implementation of GST as the proposal involved reforms/ restructuring of the indirect taxes imposed by not only the Center but also the States.
  • In November 2009, the EC EC released its first discussion paper on GST in India after receiving inputs from the Central government and the states.
  • In September 2009, a joint working group consisting of officers from Central and State Government was formed to proceed further on the GST related work.
  • The Constitution (115th Amendment) bill was introduced in the Lok Sabha in March 2011 to amend the Constitution to enable introduction of GST. Subsequently, the the bill was referred to the Standing Committee on finance of the Parliament for examination and report.
  • A committee on GST design with officials of the Govt of India, State Govt and the Empowered Committee was formed following the decision taken between the Union Minister and the Empowered Committee of the State Finance Ministers on November 8th, 2012.
  • The committee held a detailed discussion on GST design and submitted its report in January 2013. Later on, the EC recommended certain changes in the Constitution Amendment Bill.
  • The EC further constituted three committee of officers to discuss and report on various aspects as follows:
  1. Committee on place of supply rules and revenue neutral rates,
  2. Committee on dual control, threshold and exemptions,
  3. Committee on IGST and GST on imports.
  • In August 2013, the Parliamentary Standing Committee submitted its report to the Lok Sabha where the recommendations were examined in the Ministry in consultation with the Legislative departments. Most of the recommendations were accepted and the draft Amendment Bill was properly revised.
  • The final draft Constitutional Amendment Bill was sent to the EC for consideration in September 2013.
  • Once again, the EC recommended changes on the Bill in November 2013 and certain recommendations were incorporated in the draft Constitution (115th Amendment) Bill and the revised draft was sent for the consideration of the EC in March 2014.
  • Following the approval of new government in June 2014, the draft Constitution Amendment Bill was sent to the EC.
  • The Cabinet of India approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to introduction of GST in country. The Bill introduced in the Lok Shaba and was passed on May 6th, 2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on July 22, 2015.
  • Rajya Saba unanimously passed the GST Bill on August 3rd, 2016.
  • Lok Sabha passed all four bills: Central GST, Integrated GST Bills, Union Territory GST and the GST (Compensation to the States) Bill on April 5th, 2017.
  • GST regime is scheduled to be implemented from July 1.

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