The Goods and Services Tax (GST) is all set to roll out on the midnight of 30 June. Amid all the fanfare and the headlines spread across front pages, if you’re itching to ask some basic questions but are too embarrassed, here’s your one-stop shop.
1. What Is GST?
GST or the Goods and Services Tax is a single indirect tax that is expected to replace the existing system of multiple indirect taxes – making way for a pan-India, comprehensive system.
Unlike before, there will now be a single tax on the supply of goods and services, from the manufacturer to the consumer.
2. What Is GST's Impact?
The main aim of GST is to end multiple taxation at different levels of the supply chain. Earlier for instance, if you're a resident of Madhya Pradesh but purchased a car in Tamil Nadu, you would be taxed several times – there'd be the Tamil Nadu state tax, followed by Excise Duty, followed by sales tax. Once GST rolls out, several other indirect taxes will be done away with.
GST will clearly be demarcated into two portions – one for the Centre and one for the state in question.
3. Which Central and State Taxes Are Subsumed Under GST?
The GST would replace the following taxes. Taxes currently levied and collected by the Centre
- Central Excise Duty
- Additional Excise Duties
- Duties of Excise (Medicinal and Toilet Preparations)
- Service Tax
- Additional Duties of Customs (commonly known as CVD)
- Special Additional Duty of Customs (SAD)
- Central Surcharges and Cesses so far as they relate to supply of goods and services
State taxes that would be subsumed under the GST are:
- VAT/Sales tax
- Entertainment tax (unless it is levied by the local bodies)
- Luxury tax
- Taxes on lottery, betting and gambling
- State Cesses and Surcharges in so far as they relate to supply of goods and services
- Entry tax not in lieu of Octroi
Purchase tax: Purchase tax was exempted from this list as several states benefiting from it thought they would be devoid of substantial revenue if it were to be subsumed. It was eventually decided that in case the tax has to be subsumed, adequate compensation would have to be paid to the states. The issue is currently being discussed with the government.
4. Benefits of GST
The GST system is meant to be more efficient in its application and distribution. After 1 July, items will be taxed according to the category they have been put in. This means that the supply of an item will now be unhindered by state boundaries and taxes. Reduced tax burden means the price of many items will reduce for the consumers.
According to research agencies, once GST is ironed out and on track, it could contribute to a GDP growth by 1.5 percent in the long run.
5. What Are the GST Categories?
There are seven GST categories in total:
- 28%
- 18%
- 12%
- 5%
- 3%
- 0.25%
- 0 (Exempt)
6. What Are the Items Not Affected by GST?
Crude oil, diesel, petrol, natural gas and jet fuel are currently not under GST. These items have been put under the ‘0 percent’ category, but will continue to be taxed under the old tax regime.
When and how these items will be included under GST is for the GST Council to decide.
7. How Does the GST Council Function?
No decision can be taken by the council without the agreement of the Centre and the states. To pass any decision, the GST council needs to garner 75 percent votes. While the Central government’s vote will have one-third weightage, the votes of all states put together will be two-third.
The council will also be the arbitrator of disputes between the Centre and the state, or between states, and will have the final say in the matter.
8. Where Do You Register for the GST?
The Goods and Services Tax Network (GSTN) is a non-governmental private organisation which will provide I-T infrastructure and support to the government, taxpayer and other service providers for the implementation of GST. The government has a 24.5% stake in the GSTN.
9. Relaxation in Rules for Two Months
The council has relaxed the tax filing norms for two months – July and August – for those maintaining manual records or still in transition for GST. The government has a simplified form instead of invoice returns, and there will be no penalties for late returns. Regular returns need to filed from September onward.
(With inputs from IndiaSpend)
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