Goods and Services Tax

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Goods and Services Tax, abbreviated as GST, is an indirect tax system introduced by the Government. In the recent past, GST has been one of the most debated topics that have literally shaken the Indian financial market. It includes present indirect taxes such as Service Tax, VAT etc. The Goods and Services Tax Bill (GST Bill) was introduced in the Lok Sabha on Mar 27 and was passed by the house on March 29, 2017.

Indian government has classified GST in 4 distinct tax slabs of 5%, 12%, 18% and 28%.

Types of GST:

There are three major categories of GST:

Types of gst

Now let’s delve a little deeper and understand the three categories of GST in greater details:

Central Goods and Services Tax:

CGST is governed by the CGST Act and is imposed by the Central Government on Intra State supplies of commodities and services. It has replaced service taxes, excise duty, Additional Duties of Excise (ADE), Countervailing Duty (CVD), Special Additional Duty (SAD) and other indirect taxes imposed by the Central Government. It is applicable on intra-state supplies of commodities or services, and the tax revenue accumulated goes directly to the central government. 

State Goods and Services Tax:

State Goods and Services Tax (SGST) is a destination based tax imposed by the State Governments. It has replaced Purchase Taxes, Octroi, Luxury Taxes, Taxes on Lottery, Entertainment Taxes, and Entry Taxes. It is applicable on intrastate supplies and the tax revenue goes directly to the state government. Here it is important to know that SGST is attributed to the state where the commodities are consumed and not where they are manufactured.

Both, CGST and SGST, are charged only if the annual turnover for someone dealing in non-exempt category of items exceeds Rs. 20 lakhs. Taxpayers are required to register for CGST and SGST only if their annual turnover exceeds Rs. 20 lakhs. For taxpayers with annual turnover not exceeding Rs. 1 crore, GST bill provides the provision of Composition Scheme. This scheme allows taxpayers to pay GST at a fixed rate of turnover.

Here it is important to know that the limit to avail the benefits of composition scheme in North-Eastern states and Himachal Pradesh is Rs 75 lakhs.

Integrated Goods and Services Tax:

The central and the state government together levy Integrated Goods and Services Tax (IGST). However, the Central government of India collects the IGST. The state and the central government share the overall revenue generated through this tax. IGST has replaced the Central Sales Tax (CST). It is applicable on imports and supplies from the states. The government has not defined any exemption for this category of GST. In order to make supplies in different states, dealers need to register for IGST. The provision of IGST is extended even to free supplies. The composition scheme is unavailable for this category of GST.

Here’s a table that reveals how GST is categorized in four different tax slabs (the first slab is nil so we aren’t discussing about it here):

Categories of gst

 

No Tax (0%):

Goods: - GST has not been impose on goods like charkha, cotton seed oil cake, brooms, clay idols, khadi bought from village and khadi industries stores, human hair, colouring or drawing books, children’s pictures, kajal, all types of salt, Palmyra jiggery, Cereal grains hulled, horn meal, hoof meal, bone meal, bone grist, bones and horn cores, handloom, bangles, newspapers, printed books, judicial papers, stamps, Sindoor, bindi, Prasad, bread, besan, flour, fresh vegetables and fruits, natural honey, curd, butter milk, milk, eggs, fish chicken, fresh meat, and jute.

Services:- Lodges and hotels with tariff less than Rs. 1000. Government has exempted Grandfathering clause under the GST. Rough semi-precious and precious stones would be levied with a GST of 0.25%.

5% GST Bracket:

Goods:- Products like biomass briquettes, e-waste, cullet or other scrap or waste of glass, real zari, paper scrap or waste, hard rubber scrap or waste, scrap or parings, rubber waste, scrap or parings, plastic waste, homeopathy medicines, siddha, Unani, ayurvedic, branded namkeens, khakra and plain roti/chapatti, mangoes sliced dried, fibre and leaf and reed items including wallets, pouches and mats, prayer beads, grass, hawan samagri, cotton quilts (not more than Rs. 1000 per piece), duty credit scrips, oil cakes, paper mache products, saree fall, corduroy fabric, dhoop batti, roasted gram, dried tamarind, walnuts, branded food, first-day covers, stamp-post marks, revenue or postage stamps, kites, agarbatti, insulin, biogas, ice and snow, raisins, cashew nuts, cashew nuts in shell, lifeboats, stent, medicines, kerosene, coal, sabudana, rusk, pizza bread, spices, tea, coffee, frozen vegetables, branded paneer, skimmed milk powder, cream, footwear under Rs. 500, packaged food items, apparel under Rs. 1000 and fish fillets will all attract 5% GST.

Services: - Small restaurants, transport services (air transport or railways) fall under 5 per cent category as their key input is petroleum, which does not fall under the regime of GST. Textile jobs will attract GST at 5%.

18% GST Bracket:

Goods:- A host of items that were not taxed earlier have come under the purview of 18% GST. These items include staples in strips, base metal, indexing tags and other office items, paper clips, letter corners, letter clips, fittings for files or loose-leaf binders, modelling paste for kids’ amusement, poster colour, kitchen gas lighters, rubber balls, custard powder, computer monitors (up to 20”), medical disposal gloves, raincoats, tractor parts, mixed seasonings, mixed condiments, salad dressings, mayonnaise, curry paste, padding pools, swimming pools, bamboo furniture, optical fibre, CCTV, electrical transformer, printers (except the multi-function printers), weighing machinery (except electronic or electric weighing machine), aluminium foil, headgear, kajal pencil stick, speakers, camera, printed circuits, steel products, note-books, tampons, envelopes, tissues, mineral water, instant food mixes, ice cream, soups, sauces, jams, preserved vegetables, cakes and pastries, cornflakes, pasta, flavoured refined sugar, biscuits, cookies, bidi patta, software, goodwill, trademarks, and footwear above Rs. 500.

Services: - AC hotels serving liquor, financial services, branded garments, IT services, telecom services will attract 18% GST. Room tariffs between Rs. 2500 and Rs. 7500 and restaurants in five-star hotels too will attract 18% GST.

28% GST Bracket:

Goods:- Aircraft for personal use, motorcycles, automobiles, hair clippers, shavers, vacuum cleaner, vending machines, ATMs, washing machines, weighing machines, dishwasher, water heater, ceramic tiles, wallpapers, sunscreen, dyes, hair shampoo, after shave, shaving creams, deodorants, paint, aerated water, pan masala, wafers and waffles coated with chocolate, chocolate without cocoa, molasses, chewing gum and bidis will be taxed at 28%.

Services: - Hotels with a room tariff above Rs. 7500, race club betting, cinema, five-star hotels, and private-run lotteries accredited by the states attracts taxes 28% tax slab under the GST.

Cess on Cars:

Small Cars

No cess

Mid-Range Cars

45%

Large Cars

48%

13-seater Cars

No cess

SUV vehicles

50%

Hybrid vehicles

No cess

Luxury vehicles

5%

 

Goods and Services Tax Rates (GST Rates) in India 2017:

In its earlier meetings, the GST Council suggested a four-tier, simple tax system where the tax rates were either nil or too low for crucial food products and items. The major objective behind the suggestion was the fact that such food products constitute around 50% of consumer’s requirement basket.

The revenue generated through the sales of such food items contributes towards the efforts made by the state and central governments to curb the inflation rate, which has constantly been on a rise even after several revisions made to the tax slabs under GST.

However, significantly higher taxes were expected to be levied on luxury goods and products such as Tobacco and Alcohol. This idea was conceived to ensure revenue neutrality for the Central and the State Government following the practice of the new GST rates.

Other precious metals were probably to witness the implementation of an additional concessional GST tax bracket. For example, metals were likely to be taxed at only 1% under VAT.

Table presented below illustrates the quantum of GST on different consumer products and goods:

Products and Services

GST Rates

Products that were not listed in any other category, like soaps, oil, electrical appliances etc.

18%

All the services such as insurance, telecom, banking, fees, professional charges, restaurants etc.

18%

Necessary far generated mass consumption products like food grains, rice, wheat, etc.

NIL

Common use food products and mass consumption like spices, tea, mustard oil, etc excluding processed food

5%

Processed Food

12%

White goods and Cars

28%

Luxury goods and negative items falling under the sin category, like pan masala, tobacco, luxury cars, aerated drinks, etc.

28%+CESS