Goods and Service Tax

Goods and Service tax (GST) is an indirect tax applicable throughout India and replacing different taxes levied by the state and central government. It enables goods to move from one state to another without any stoppage at state borders for the payment of state tax. The government announced the GST in four taxes rates which are – 5%, 12%, 18%, 28%. Nearly 81% of the items are kept under 18% tax rate and remaining are taxed above 18%.

BENEFITS:

  • The tax structure will become simple.
  • The entire Indian market will be under single umbrella about taxation.
  • Tax departments will reduce which in turn reduces corruption.
  • Transparency and compliance increases.
  • More business entitles will come under the tax system which would lead to more revenue tax collections.

EFFECTS ON COMMON MAN:

          The current rate of service tax is 15% and applicable to most services, excluding the essential services such as ambulance services, cultural activities, certain pilgrimages, and sports events. For goods such as edible oil, textiles, etc. while the excise duty is nil, the VAT, on the other hand, in several states is 5%. With the GST kicking in, the price of those goods may increase, burdening a common man’s budget. The GST may make consumer goods like tobacco products, cigarettes, aerated drinks costlier. Some of the changes in tax rates are as follows:

  • Food items- Earlier 12.5%- After New Tax under GST- 5%- Positive news.
  • Entertainment- Earlier 30%- After New Tax under GST- 28%- Positive news.
  • Transportation- Earlier 15%- After New Tax under GST- 18%- Negative news.
  • Personal care- Earlier 28%- After New Tax under GST- 18%- Positive news.
  • Communication (mobile and internet services)- Earlier 15%- After New Tax under GST- 18%- Negative news.

Hence with the implementation of GST, India would eliminate all taxes levied by different states and come under the category of “One Nation One Tax” although there is lot of confusion in its application.

By,

Yamini

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