All you need to know about GST

GST (Goods and Service tax) is a huge step taken by the Modi Government. It is a completely new tax system introduced with effect from 1^st July 2017. Since such a huge step was never taken earlier by any government, GST has been the talk of the hour.
India has adopted a dual tax model of GST. It means that tax is paid once to the State Government and once to the Central Government. GST has replaced the old taxes with the new ones viz. CGST (Central Goods and Service Tax), SGST (State Goods and Service Tax), IGST (Integrated Goods and Service Tax) and UTGST (Union Territory Goods and Service Tax). Here, CGST is levied by the Central Government and SGST is levied by the State Government for intrastate transactions. IGST is levied when goods are imported and when there is a transaction between two states (here, the tax is paid by the State which is consuming the good.).  In Union Territories, UTGST is levied instead of SGST by the government along with CGST.
GST is a consumption-based tax. It simply means that tax is only paid by the one who consumes the goods or services. Here, in the initial stage, the retailer has to pay the tax but he is later given a tax credit. Here the Input Tax Credit comes into the picture (a new blog will be up explaining the same). The following Illustration will help to understand the same:

OLD TAX SYSTEM	GST SYSTEM
Goods sold from Mumbai to Nagpur Rs.1000	Goods sold from Mumbai to Nagpur Rs.1000
VAT @10% Rs.100	CGST @ 5% = Rs.50 SGST @ 5% = Rs.50 TOTAL tax = Rs.100
The same good sold from Nagpur to Chennai COST = Rs.1100 PROFIT = Rs.1000 SELLING PRICE = Rs.2100	The same good sold from Nagpur to Chennai COST = Rs.1100 PROFIT = Rs.1000 SELLING PRICE = Rs.2100
CST @10% = Rs.210	IGST @ 10% = Rs.110
FINAL PRICE = Rs.2310	FINAL PRICE = Rs.2210

In the above illustration, we observe that VAT is subsumed by CGST and SGST whereas CST is subsumed by IGST. Thus we come to a conclusion that some of the taxed that are subsumed by GST are:-

• Central Excise Duty
• Additional Excise Duties
• The Excise Duty levied under the Medicinal and Toiletries Preparation Act
• Service Tax

The idea of GST – a ‘single tax system’ was put forth way back in 1999 in a meeting between the then Prime Minister – Mr. Atal Bihari Vajpayee and his economic advisory panel which included three former RBI governors Mr. IG Patel, Mr. Bimal Jalan and Mr. C Rangarajan. Mr, Atal Bihari Vajpayee set up a committee headed by the then finance minister of West Bengal, Asim Dasgupta to design a GST model.
In 2003, the Vajpayee government formed a task force under Mr. Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee recommended rolling out GST as suggested by the 12th Finance Commission.
However, in 2010, the Trinamool Congress routed CPI(M) out of power. Hence, Mr. Asim Dasgupta resigned as the head of GST committee. Till that time 80% of the work was completed.
In 2014, the NDA government was re-elected into power this time under the leadership of Prime Minister Narendra Modi.  Seven months after the formation of the Modi government, the new Finance Minister Mr. Arun Jaitley introduced the GST Bill in the Lok Sabha, where the BJP had a majority. In May 2016, the Lok Sabha passed the Constitution Amendment Bill paving way for GST. However, the Opposition, led by the Congress demanded that the GST Bill be again sent back to the Select Committee of the Rajya Sabha due to disagreements on several statements in the Bill relating to taxation. Finally, in August 2016, the Amendment Bill was passed. Over the next 15 to 20 days, 18 states ratified the GST Bill and the then President Pranab Mukherjee gave his assent to the bill.
A 21-members select committee was formed to look into the proposed GST laws. State and Union Territory GST laws were passed by all the States and Union Territories of India except Jammu & Kashmir paving the way for a smooth rollout of the tax from 1^st July 2017. The Goods and Services Tax was launched at midnight on 30^thJune 2017 by the then President of India – Mr. Pranab Mukharjee and the Prime Minister of India – Mr. Narendra Modi.
The GST Council has laid down 4 tax slabs – 5%, 12%, 18% and 28%. They have put a majority of the commodities in the 18% slab.  Following are the GST rates for the various commodities:-

• NO TAX (0%)

Goods such as Jute, 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, Bones and horn cores, bone grist, bone meal; hoof meal, corn meal, Cereal grains hulled, Palmyra jaggery, Salt – all types, Kajal, Children’s’ picture, drawing or coloring books, Human hair. Hotels and lodges with tariff below Rs.1,000. Rough precious and semi-precious stones will attract a GST rate of 0.25 percent.

• 5%

Items such as fish fillet, Apparel below Rs.1000, 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, Cashew nut, Cashew nut in shell, Raisin, Ice and snow, Biogas, Insulin, Agarbatti, Kites, Postage or revenue stamps, stamp-post marks, first-day covers, etc and
Services such as transport services (Railways, air transport) will be under the 5% category because their main input is petroleum, which is outside GST ambit. Textile job work will be taxed at 5%.

• 12%

Goods such as apparel above Rs.1000, frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, Bhutia, namkeen, Ayurvedic medicines, tooth powder, agarbatti, colouring books, picture books, umbrella, sewing machine, cellphones, Ketchup & Sauces, All diagnostic kits and reagents, Exercise books and notebooks, Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs, Spectacles, corrective, Playing cards, chess board, carom board and other board games and
Services such as state-run lotteries, Non-AC hotels, business class air ticket, fertilizers, Work Contracts will fall under 12 percent GST tax slab

• 18%

Most items are under this tax slab which includes footwear costing more than Rs 500, Trademarks, goodwill, software, Bidi Patta, Biscuits (All categories), flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, tampons, notebooks, steel products, printed circuits, camera, speakers and monitors, Kajal pencil sticks, Headgear and parts thereof, Aluminium foil, Weighing Machinery [other than electric or electronic weighing machinery], Printers [other than multifunction printers], Electrical Transformer, CCTV, Optical Fibre, Bamboo furniture, Swimming pools and paddling pools, Curry paste; mayonnaise and salad dressings; mixed condiments and mixed seasonings, and Tractor parts and
Services such as AC hotels that serve liquor, telecom services, IT services, branded garments and financial services will attract 18 percent tax under GST, Room tariffs between Rs.2,500 and Rs.7,500, Restaurants inside five-star hotels.

• 28%

Goods such as bidis, chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with chocolate, pan masala, aerated water, paint, deodorants, shaving creams, aftershave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles, water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles, aircraft for personal use, will attract 28 % tax – the highest under GST system and
Services such as private-run lotteries authorized by the states, hotels with room tariffs above Rs.7,500, 5-star hotels, race club betting, the cinema will attract tax 28 percent tax slab under GST.
 
However, there are certain goods that are exempted from GST while some are put on hold. They are as follows:-

• Alcoholic Products
• Petroleum Products
• Electricity

To conclude, so far GST has proved to be a great positive step towards the overall growth and development of the country. However, it is essential that it has a positive long-term effect on our economy.
By Ria Vaghela (Market Analyst intern at Qrius and FYBMS student at Narsee Monjee College of Commerce and Economics)