Here is all that you need to know about GST (Goods and Service Tax)
The previous indirect tax regime was a hindrance in the growth of the domestic manufacturing sector as well as flow of foreign investment to the sector. Introduction of GST was important as it would help alleviate the situation. There would be reduction in cost of manufacturing both from a tax view as well as compliance front. Inspite of being one country, India has more than 30 markets which would be transformed into a single market with GST. Since it will also be applicable on imports, the tax factor working against ‘making in India’ will disappear, further boosting the production and in turn the exports as well.
Introduced on July 1, 2017 and set to revolutionise the way India does its taxes, GST will be levied on value additions at each stage of the production cycle - buying raw materials, processing, manufacturing, warehousing and sale to customers - the monetary worth added at each stage to achieve the final sale to the end customer will be taxed.
What are these taxes included in the GST?
It comprises of two components as you might’ve seen in the bills- a central GST (C-GST) and a state GST (S-GST).
The central government levies taxes such as the Central Excise Duty, Duties of Excise for various departments including medicinal and toilet preparations, goods of special importance, textiles and textile products, Customs Duty-CVD and SAD and service charges.
The state or union territory government meanwhile has its own set of taxes including the Value Added Tax (VAT), Luxury Tax, Entry Tax, Taxes on Entertainment and Amusement, Advertisements, lotteries and gambling, purchase taxes, etc.
GST is the sum of C-GST and S-GST (UT-GST). The value of GST is based at 5%, 12%, 18% and 28% of the billing total- meaning the purchaser pays that much percentage extra as tax, which is divided among the components of the GST.
The amount of tax depends mainly on the essentiality of the purchased good or service- to determine if it is a luxury or not-basic necessities being taxed the least and indulgences the most.
There is an additional component added to the end total of the GST known as the IGST- Integrated GST for imports and transactions occurring between states, added by the centre.