Finance

What is GST & How Does it Affect Our Lives?

What is GST?

Goods and Service tax is an indirect tax on the whole Indian market thus making India as an unified market. It is a tax on the supply of goods and services right from the manufacture to the consumption of that good or service. GST is essentially a tax which is levied on the value addition of each stage. The final consumer will bear GST only by the last dealer in supply chain.

How Good is GST?

The benefits of GST will be varied both for the central and  state government, business and industry.

Subsuming of major  central and state government taxes and phasing out of Central Sales Tax would reduce the cost of locally manufactured goods. GST will ensure that indirect taxes and tax structures are common across the boundary, this will certainly increase the easiness of doing business.

Multiple indirect taxes are replaced by one common tax that is GST means this will lead to easier and simpler forms of administration.  GST will lead to a higher revenue efficiency since the cost of collecting revenue would decrease. For consumers this would mean that the overall tax burden on most of the commodities would come down thus benefitting the consumer.

At the central level, various taxes are being subsumed such as Central Excise, Additional Excise, Service Tax etc. while on the state level Octroi and Entry tax, Luxury, Purchase Tax etc.

India’s government has adopted a federal structure and for GST this federal structure has 2 components- Central GST (CGST) and State GST (SGST). Both state and central governments will levy GST across the value chain.

GST Tax Slabs

No tax will be imposed on goods such as fish, meat, chicken, eggs, milk, newspapers, bangles, handloom, bone grist, bone meal, bread, Prasad, salt, jute, horn meal, hoof meal, Palmyra jiggery, children’s picture, drawing or colouring books, human hair.  Hotels and lodges having tariff below Rs.1,000 will not attract GST.

Items such as fish fillet, skimmed milk powder, sabudana, kerosene, coal, medicines, packaged food, rusk, frozen vegetables, stent, lifeboats, small restaurants, transport services will be under the 5% GST.

Apparel above Rs.1,000, frozen meat products, butter, cheese, ghee, dry fruits, animal fat, sausage, fruit juices, skimmers, cake servers, umbrella, sewing machines, spoons, forks, ladles, playing cards, chess board, carom board and ludo, business class air tickets, fertilisers, work contracts will attract GST of 12%.

Footwear costing more than Rs.500, Bidi Patta, biscuits, pasta, cornflakes, pastries and cakes, kajal pencil sticks, jams, sauces, preserved vegetables, jams, sauces, soups, ice-creams, instant food mixers, speakers, monitors, bamboo furniture, optical fibre, mayonnaise and salad dressing, tissues, steel products, mixed condiments and mixed seasoning, AC hotels that serve liquor, telecom services, branded garments and financial services attract GST of 18%.

Bidis, chewing gum, molasses, pan masala, aerated water, waffles and wafers coated with chocolate, weighing machine, washing machine, deodorants, shaving creams, wallpaper, ceramic tiles, automobiles, hair clippers, motorcycles, aircrafts for personal uses, dye, aftershave, water heater, vending machines, vacuum cleaner, 5star hotels, race clubs, betting clubs, cinema halls will attract a staggering 28% of GST.

 

Let’s see how GST affects Indian economy.

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