What preparations do the Government, both at the State and the Central level need?

Whether the Government system today is capable enough of adopting such an enormous change?

Whether the tax-payers are ready?

How will the manufacturers, traders, and ultimate consumers be affected?

Is GST a boon or a bane?

What is GST?

The GST is basically an indirect tax that will replace and simplify the present muddled-up tax system.

GST creates one national tax to replace a slew of complex ones that differ from state to state. It is a consumption tax.

It is said to replace all indirect taxes levied on goods and services. In the present system, taxes are levied on goods and services separately.

The GST is a consolidated tax based on a uniform rate of fixed tax which will be payable at the final point of consumption.

The GST will consolidate all State economies. It will be one of the biggest taxation reforms to take place in India. The basic idea is to create a single, cooperative and undivided Indian market to make the economy stronger and powerful.

The GST is basically an indirect tax that brings most of the taxes imposed on most goods and services, on manufacture, sale, and consumption of goods and services, under a single domain at the national level.

The final consumer will thus bear only the GST charged by the last dealer in the supply chain. Double taxation will be ruled out with the application of GST.

Benefits of GST Bill

The introduction of a GST is essential in the emerging environment of the Indian economy. By implementing the GST, India will gain approx. $15 billion in a year.

For the Government and Businesses

• It will promote more exports.
• Create more employment opportunities.
• Boost growth.
• It will improve competitiveness between businesses.
• The taxation burden will be split equitably between manufacturing and services.
• This will help in removing economic distortions.
• It will bring about the development of a common national market.
• It will help to build a transparent and corruption-free tax administration.

 

For individuals and companies

• GST will be charged on the manufacturing cost, thereby reducing the prices of goods and services.
• Single and transparent taxation.
• Relief in overall tax burden.

Since GST promises to bring down the prices of products and services, lower prices will mean more consumption, and more consumption will result in more production, thereby helping in the growth of the individuals, the companies, and the economy as a whole.

Implementation of GST

Indian Government will apply Dual System GST. This system will have two components which will be known as

• Central Goods and Service Tax (CGST)
• State Goods and Service Tax (SGST).

The current taxes like excise duties, service tax, customs duty, etc. will be merged under CGST. The taxes like sales tax, entertainment tax, VAT, and other state taxes will be included in SGST.

Applicability of GST

The GST will be ultimately borne by the customer. This is true even today but the difference is that with the streamlining of multiple taxes to the final cost which will be lower in case of GST and will eliminate the double charging in the system.

Negative Impact of GST

• Some services will become expensive. E.g. Telecom, banking, airline, etc.
• A total change in the taxation system will lead to some lack of understanding at the beginning. People will take some time to understand its implications.
• It is easier said than done. There are always some complications attached. It is a consumption-based tax, so in the case of services, the place where service is provided needs to be determined.
• If actual benefit will not be passed to consumer and sellers increase their profit margin, the prices of goods could also see a rising trend.
• The introduction of GST in the country would impact the real estate market. This would increase new home buying price by 8% and reduce the buyers’ market by 12%.
• Most developed economies use a single GST instead of a dual GST. Hence, it will still be a very complicated billing and reconciliation IT machinery.

 

Impact of GST on Household Expenses

	FOOD	ENTERTAINMENT	TRANSPORT	HOUSEHOLD & PERSONAL CARE	MOBILE PHONE SERVICE
Before	12.5 %	30 %	15 %	28 %	15 %
After	5 %	28 %	18 %	18 %	18 %

 

We already know that the GST slabs are pegged at 5%, 12%, 18% & 28%. The tax structure for common-use goods are as under:

 

GST Rates Structure

No tax on the following items:

• Fresh meat, fish, chicken, eggs, milk, buttermilk, curd, natural honey, fresh fruits, and vegetables
• Flour, besan, bread, “Prasad”, salt, bindi, sindoor
• Stamps, judicial papers, printed books, newspapers, bangles, handloom, hotels and lodges with tariffs below Rs 1,000.
• Jute

0.25 percent tax

• Rough Diamonds.

3 percent tax

• Gold.

5 percent tax

• Apparel below Rs 1,000.
• Packaged food items.
• Footwear below Rs 500.
• Cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana.
• Kerosene, coal, medicines, stent, lifeboats, transport services (railways, air transport), and small restaurants.
• Fish fillet.

12 percent tax

• Frozen meat products, butter, cheese, ghee, dry fruits in packaged form.
• Animal fat, sausage, fruit juices, namkeen.
• Ayurvedic medicines.
• Tooth powder, agarbatti, coloring books, picture books, and umbrellas.
• Sewing machine.
• Cell phones, non-AC hotels, business class air tickets, fertilizers, work contracts.
• Apparel above Rs 1,000

18 percent tax

• Footwear costs more than Rs 500.
• Bidi patta.
• Biscuits (all categories), flavored refined sugar, pasta, cornflakes, pastries, and cakes.
• Preserved vegetables, jams, sauces, soups, ice cream.
• Instant food mixes and mineral water.
• Tissues, envelopes, tampons, notebooks.
• Steel products, printed circuits, cameras, speakers, and monitors.
• AC hotels that serve liquor, telecom services, IT services, branded garments, and financial services.

28 percent tax

• Alcohol, bidis, cigarettes, cigars, chewing gum.
• Molasses, chocolate not containing cocoa.
• Waffles and wafers coated with chocolate, pan masala, aerated water, and paint.
• Deodorants, shaving creams, after-shave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles.
• Water heater, dishwasher, weighing machine, washing machine.
• ATM, vending machines, vacuum cleaners, shavers, hair clippers, automobiles, motorcycles, aircraft for personal use, five-star hotels, race club betting, cinema.

There are approx. 140 countries where GST has already been implemented. A completely new system of taxation is being introduced with an aim for the country’s economic, social, and financial growth. Some of the popular countries where GST is practiced are Australia, Canada, Germany, Japan, and Pakistan, etc.  Implementation of GST impacts a nation both ways, positively and negatively. Ignoring negative aspects, positive aspects can be taken into consideration, in order to improve the economy of the country.