From demonetization to the introduction of GST, the Indian economy is going under huge reforms. GST i.e. Goods and Services Tax is a big revolution in the tax regime. It also aims to make paying taxes much simpler for the taxpayers. Let’s dive into the minute details of the GST Bill and see how it is better than the older tax system.
Lok Sabha passed the 4 important GST Bills on 29th of March, 2017 and it was implemented on 1st July, 2017. Since then, it has had a huge impact on the tax payment and service/goods charges in the country. The 4 Bills that were passed are Central Goods and Services Tax Bill (CGST), Union Territory GST Bill, Integrated GST Bill, and Compensation GST Bill.
What is GST?
The main motive behind the GST Bill is to merge all the different taxes that we pay on various goods and services on a daily basis, into a single entity. Each and every type of product is classified as goods. In the earlier tax system, when you purchased a single product/service, you ended up paying more than 1 type of tax. GST aims at simplifying these multiple taxes into a single tax system.
In the older tax system, there were many types of taxes like the Service tax, Central Excise Duty, Additional Duties of Excise and Customs, Special Additional Duty of Customs and other taxes. All these types of taxes have now been replaced with a single Central Tax GST. Similarly, taxes like VAT Entry Tax, Entertainment Tax, State Taxes, Purchase Tax etc have now been replaced by a single State Tax GST.
Why Is The Need For GST
The Finance Minister Of India, Mr. Arun Jaitely, believes that the GST will help to curb the excessive inflation significantly. Different services and products had different types of taxes in different states which caused ambiguity between the masses. Therefore, GST will remove such ambiguity as the taxes would be uniform throughout the country depending on the product or service.
Another important aim of the GST is to eliminate the chances of excessive taxation on the consumers. Earlier, the taxes were levied by the State and the Centre after calculating the layers of taxes which were already levied on that product/service and not on the original cost of it. Therefore, the same product/service had different prices in different states. But now, after the implementation of GST, the prices will be the same throughout the country for that product/service.
The GST Bill is expected to keep a close watch on tax evasion and simplifying business operations. Also, all the essential products like food grains and other agricultural products will not have any tax levied on them. Therefore, food inflation will be a bit controlled.
Updates And Changes in GST Bill 2017
It was thought that the tax rate would be the same for all the products and services across all the categories. However, four different tax rates had been levied on different categories of products and services. These taxes are 5%, 12%, 18%, and 28% respectively. Only one tax can be levied on one product/service. The logical reasoning behind such approach is that the premium goods cannot have the same tax rate as that of daily necessary products. Also, there are a few products that are completely tax exempted. Demerit products like tobacco, luxury cars and aerated drinks have an additional cess levied on them. Petroleum products and alcohol have not been included into GST.
The centre will be able to impose and collect tax for the products/services on intrastate supply through CGST Bill. The Integrated Goods and Services Tax Bill 2017 will be responsible for the collection of tax on supply that is interstate. The Compensation GST Bill has been introduced to compensate for the loses that the states incur due to GST implementation. Finally, the Union Territory Goods and Services Tax will allow the centre to impose and collect tax on products/services that are intrastate by Union Territories. No additional tax will be imposed so that the states can be compensated within the existing framework.
Impact Of GST On General Public Of India
The GST Bill states that services will not be taxed over 18% and the products like packaged spices/salts which are mass consumed are taxed at 5%. Most of the other daily used products/services are taxed at the nearest tax slab possible. General products like oil, toothpaste etc which were taxed at over 20% are now taxed around 12% to 18%. Products like washing machines, AC’s, refrigerators, luxury products, tobacco etc are now taxed at 28%; some of which had earlier tax rates of over 30% have now become cheaper.
GST will be expensive for the working population who receive subsidized products/services etc as now that comes under the tax system and hence will cost more. This includes gym memberships, health insurances, taxi services etc. If the supplier of the small firms isn’t registered, then the purchaser will have to bear the tax of GST on such sale and would be impacted in a bad way.
An authority has also been set up by the government which checks if there is any depreciation of the tax rate to the consumer by companies after GST implementation.
Like any other Bill, The GST comes with its own set of pros and cons. It has been implemented for a while now and the changes it has brought are closely monitored. Therefore, it has helped in simplifying the tax system to an extent but a lot of work has to be done and it is still far from perfect.
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