GST for beginners..

Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level under which no distinction would be made between goods and services for levying of tax. It will substitute all indirect taxes (17) levied on goods and services by the Central and State governments in India.

Benefits of GST..

  • There could be 0.9-1.7% increase in GDP growth due to the elimination of tax cascading. The exclusion of cascading effects i.e. tax on tax till the level of final consumers will significantly improve the competitiveness of original goods and services in market.
  • Revenue will get a boost  as tax evasion will drop. Full input tax credit under GST will mean a 12-14% drop in the cost of capital goods. Input tax credit will encourage suppliers to pay taxes – States and Centre will have dual oversight – The number of tax-exempt goods will decline.
  • GST will lead to the formation of a common market. Currently, the market is fragmented along state lines, pushing up costs by 20-30%. The current 2% inter-state levy means production is kept within a state. Under the GST national market, this can be dispersed, creating equal opportunities for all states.
  • Ecommerce to get a boost. State restrictions and levies have complicated ecommerce. Some sellers do not even ship to particular states. All this will end with GST .

    The GST Model in India..

    • The GST shall have two components: one levied by the Centre (referred to as Central GST or CGST), and the other levied by the States (referred to as State GST or SGST).
    • The CGST and the SGST would be applicable to all transactions of goods and services made for a consideration except the exempted goods and services.
    • Cross utilization of input tax credit (ITC) both in case of Inputs and capital goods between the CGST and the SGST will not be permitted except in the case of inter-State supply of goods and services (i.e. IGST).


    Comparison of existing tax regime with GST :


                                – courtesy :

    Currently, central excise is levied on a produce manufactured at a factory. The VAT is applied not on the ex factory office but at the rate arrived at including the cost of manufacture and excise duty. With GST, this cascading effect of tax will go away.

    The final GST slab rates..

    • A 4- tier GST tax structure of 5%, 12%, 18% and 28% has been fixed by the GST council.
    • Essential items including food, which constitutes half the consumer inflation basket will be taxed at zero rate.
    • Mass consumer items such as spices, mustard oil, etc will be taxed at 5%.
    • Most items will be taxed under the 12% and 18% tax slabs. Processed foods, soaps, oil, tooth paste, consumer electronics, etc shall fall under this category.
    • The highest tax slab of 28% shall apply on white goods, luxury cars and sin products such as pan masala, cigarettes, etc.
    • Good news for e tailers, that the Tax Charged at Source (TCS), which was a point of worry for most etailers, have been fixed at only 1%.

    GST has been planned to roll out from April 1, 2017. It is believed that GST will be a game changer for a highly tax non-compliant nation like India. With the inclusion of GST (post demonetisation), the idea is crystal clear – bring  more people under the formal economy, create a wider tax base and eliminate black currency. The creation of an unified market and the reduction of red tape will boost local and foreign investor sentiments. Indian economy can only look forward and become better and greater under GST.

    ( THANKS to Atharva Joshi for his valuable insights.

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