Goods and Services Tax

GST is a comprehensive form of Indirect tax levied on the manufacture, sale or consumption of goods and services. It is a single tax applicable to the supply of goods that start with the manufacturer and ends with the consumer. It is a tax that is applicable to value addition at each stage. With the implementation of the new regime, India has become one unified market with only one indirect tax.

Goods and Services Tax is known as the largest indirect tax reform of the country since 1947. History of GST in India existing from 2006, when the Finance Minister proposed the idea of introducing this new tax regime. This new tax regime (GST) is implemented from July 01, 2017.

Major Components of the GST

Central GST:  Levied by the Central Government

State GST- Levied by States and Union Territories with legislature

Union Territory GST(UTGST) – GST levied by Union Territories without Legislature

Integrated GST – Levied by Central Government on the inter-state supply of goods and services to ensure that the credit chain is not disrupted.

Apart from the applicable custom duties, import of goods and services would be treated as inter-state supplies and would, therefore, be subject to IGST.

What is the responsibility of the GST Council?

GST Council works on deciding the rates applicable for CGST, IGST,and SGST/UTGST by doing a mutual agreement with the Centre and States. The following taxes currently levied by the Center would be subsumed with the introduction of GST-

• Central Excise Duty
• Duties of Excise (Medicinal and Toilet Preparations)
• Special Additional Duty of Customs (SAD)
• Service Tax
• Cess and surcharges applicable so far related to goods and services.
• Additional Duties of Excise (Textiles and Textile Products)
• Additional Duties of Excise (Goods of Special Importance)
• Additional Duties of Customs (commonly known as CVD

The following taxes currently levied by the state would be subsumed with the introduction of GST-

• Central Sales Tax
• State VAT
• Purchase Tax
• Entry Tax (All forms)
• Luxury Tax
• Taxes on advertisements.
• Entertainment Tax (except those levied by the local bodies).
• State Cess and surcharges applicable so far related to the supply of goods or services.
• Taxes on lotteries, betting and gambling.
• Alcohol for human consumption would be the only product on which GST is not applicable.
• Crude, Diesel, ATF, Petrol and Natural Gas are the five specific petroleum products on which GST would be applicable from a date decided by GSTC.
• The center would levy central excise duty on tobacco and tobacco products, and they would also be subject to GST.

Major Benefits and features of GST

The tax which was initially charged on the manufacture or sale of goods and provision of services would now be levied on the ‘supply’ of goods and services.

Before GST was following the principle of origin-based taxation, Now after GST, it works on the principle of taxation on destination-based consumption.

Vice providers and manufacturers who are having a turnover up to Rs 50 Lakhs have the option to pay tax at a flat rate without credits. It is also known as a compounding option. This compounding scheme and threshold exemption is optional.

The number of exempted goods and services will be kept to a minimum.

All exports will be zero-rated.

It is a must for taxpayers to understand that credits for a certain category of GST can only be used for paying GST of that category. It means that credits given to CGST may not be used for paying SCGST or UTGST. The same is vice-versa. The two types of Input Tax Credit may not be cross utilized, however, there is an exception to this rule for specific circumstances for payment of IGST on inter-state supplies.

The ITC is permitted to be utilized in the following manner.

• ITC of CGST can be used for payment of IGST and CGST
• ITC of SGST can be used for payment of IGST and SGST
• ITC of UTGST can be used for payment of IGST and UTGST
• ITC of IGST can be used for payment of IGST, CGST, SGST and UTGST
• ITC of CGST is not allowed to be used for payment of SGST/UTGST and vice versa

To make sure that credit of SGST which has been used for the payment of IGST is transferred from originating State to the Centre, accounts are to be settled periodically.

Also, the payments will be transferred from the Center to the destination State for IGST used for payment of SGST. 

These transfers will be made based on the information mentioned in the returns filed by the taxpayers, including the transfers made from the center to the destination state for the portions of SGST collected on IGST on B2C supplies.

TAX Slabs of GST Rates

The Government has proposed a 4-tax tier structure under 4 slabs that are 5%, 12%,18% and 28% for all the Goods and Services.

0%( No Tax slab):  Items like Jute, fish, chicken, meat , buttermilk, curd , fresh fruits and vegetables , natural honey, besan , flour , salt , bread , sindoor , prasad, bindi , stamps , printed books , judicial Papers, handloom , Bones and horn cores, bone meal, bangles, bone grist, salt- all types, cereal grains hulled, kajal, Palmyra Jaggery etc. Certain services would be exempted under GST such as grandfathering services, lodges and hotels having tariff below Rs. 1,000. A nominal rate of 0.25% would apply to semi-precious and rough stones.

5% tax slab : It is applicable on goods as apparel costing below Rs 1000 which includes footwear below Rs 500, packaged food items, skimmed milk powder, branded paneer, coffee, tea, frozen vegetables, spices, rusk, pizza bread, coal, sabudana, lifeboats, medicines, stent, cashew nut in shell, raisin, ice and snow, insulin, biogas , kites, postage or revenue stamps, fish day covers agarbatti , stamp-post marks, etc. 

Since petroleum is outside the GST ambit, services using petroleum as their primary input such as transport services (air travel, railways) and small restaurants.

12% tax slab:  Goods such as Apparel above Rs 1,000 which includes items such as cheese, ghee, butter, frozen meat products , packaged dry fruits animal fat, fruit juices, sausage, Ayurvedic medicines, bhujia, namkeen, tooth powder, picture books, coloring books, exercise books and notebooks, sewing machine, umbrella, ketchup & sauces, cellphones, diagnostic kits and reagents, fertilizers, fish knives, spoons, forks, cake servers, ladles, skimmers, tongs, corrective, spectacles, chessboard, playing cards, carom board and other board games would be taxed at the rate of 12%. Also, services such as Non-AC hotels, State-run lotteries, Work Contracts, business class air tickets will fall under 12 percent GST tax slab.

18% tax slab:   There are maximum goods covered under this tax slab which includes footwear costing more than Rs 500, biscuits (All categories), bidi Patta, flavored refined sugar, cornflakes, pasta, preserved vegetables, pastries and cakes, jams, soups, sauces, instant food mixes, ice cream, tissues, mineral water, tampons, envelopes, steel products, printed circuits, notebooks, speakers and monitors, Kajal pencil sticks, camera, Aluminum foil, Weighing Machinery, Headgear and parts thereof, CCTV, Printers Electrical Transformer, Bamboo furniture, Optical Fiber, mayonnaise and salad dressings, swimming pools and paddling pools, mixed condiments and mixed seasonings, Curry paste etc. Apart from that, it also includes services like restaurants inside five-star hotels, AC hotels that serve liquor, room tariffs between Rs 2,500 and Rs 7,500, IT services, telecom services, branded garments, and financial services will attract 18 percent tax under GST.

28% tax slab: It includes list such as bidis, molasses, chewing gum, waffles and wafers coated with chocolate, chocolate not containing cocoa, pan masala, paint, deodorants, aerated water, shaving creams, hair shampoo, aftershave, sunscreen, wallpaper, dye, water heater, ceramic tiles, weighing machine, dishwasher, ATM, washing machine, vacuum cleaner, vending machines, shavers, hair clippers, automobiles, aircraft for personal use, will be charged at the rate of 28 % the highest under GST system. For services such as hotels with room tariffs above Rs 7,500, private-run lotteries authorized by the states, 5-star hotels, cinema, race club betting, will attract 28 percent tax under GST.