What is GST in India: New Tax Reform GST Meaning, Full Form, and Rates
GST or the Goods and Services Tax aims to remove the cascading effect of various taxes. The scary part that is most visible now is the shooting up of services tax - from 14-15% depending upon the sector to flat 18%, but the negative effect is only short term. Due to the elimination of cascading of taxes, the potential benefits of GST to Indian economy are many and would lead to a number of goods being available at a much cheaper rate.
When GST or goods or services tax rolls out on July 1, it will be the biggest tax reform since Independence. GST will lead to a single tax nationwide subsuming a large number of central and state taxes into a single tax. It is estimated that GST could raise GDP growth by 1.5-2 per cent in the long term.
What is GST and Its Meaning: GST, in a simplified term, is a destination-based tax, as against the present principle of origin based taxation.
GST will bring down overall tax. This is how
The unified tax will have a multi-stage collection rule as against the present method of collecting tax at every stage of production or value add. The best part is that the credit of tax paid (input tax credit) at the previous stage will be set-off at the next stage of transaction. This will eliminate the cascading impact of tax.
What is Input tax credit
At the time of paying tax on output manufacturers or service providers, can reduce the tax by the amount they have already paid on inputs. Invoice is required at each level to show tax paid which is then deducted at the next stage.
Rates on goods and services have been classified into four tax rates: 5 per cent, 12 per cent, 18 per cent and 28 per cent. Some goods and services have been exempt.
Precious metals like gold will attract a separate tax rate of 3 per cent. A cess will be levied over the peak rate of 28 per cent on specified luxury and sin goods. Under GST, businesses are required to file returns each month. But the government has let companies file late returns for the first two months so that they can adapt to a new online filing system.
What is CGST, SGST, IGST
The GST to be levied by the Centre would be called Central GST (CGST) and that to be levied by the States (including Union territories with legislature) would be called State GST (SGST). An Integrated GST (IGST) would be levied on inter-State supply (including stock transfers) of goods or services. This would be collected by the Centre. Import of goods would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties. Exports will be treated as zero-rated supplies which means no tax will be payable on exports of goods or services. However, exporters can claim input tax credit.
Who will not pay GST
This is important - Businesses with an annual turnover of Rs. 20 lakh (Rs. 10 lakh for special category states) would be exempt from GST. Moreover, Petroleum products such as petrol, diesel and aviation turbine fuel have been kept out of GST as of now. The GST Council will take a decision on it at a later date.
What will be cheaper
The auto sector will benefit from the new tax as the cost of entry-level cars, SUVs and two-wheelers is likely to fall. Not only this, car battery prices may also fall.
Electronic household appliances like fans, lighting, water heaters, air coolers may also cost you less.
What will be more expensive after GST
After GST, cigarette will cost more as tax on tobacco will be higher than present.
With the increase in service tax, call charges would also rise.
Textile and branded jewellery may cost more.
Meanwhile, reports say that the Centre's GST launch on the night of June 30 will be a sober, one-hour function. A late night session was held in Parliament in 1992 to commemorate 50 years of the Quit India movement and one to celebrate India's 50 years of Independence. A GST call center will go live soon.