What is GST Regime

Meaning of GST Regime

 

This post explains about GST Regime. 

GST Regime:

Goods and Services Tax (GST) is an indirect tax was introduced in India on 1 July 2017 and was applicable throughout the India which replaced multiple cascading taxes levied by the central and state governments. It was introduced as The Constitution (One Hundred and First Amendment) Act 2017, following the passage of Constitution 122nd Amendment Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India. Under GST, goods and services are taxed at the following rates, 0%, 5%, 12% ,18% and 28%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition, a cess of 15% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products.

Touted by the government to be India's biggest tax reform in 70 years of independence, the Goods and Services Tax (GST) was finally launched on the midnight of 30 June 2017, though the process of forming the bill took 17 years (since 2000 when it was first proposed). The launch was marked by a historic midnight (30 June - 1 July 2017) session of both the houses of parliament convened at the Central Hall of the Parliament, but which was immediately boycotted by the opposition by staging a walk out to show their disapproval of the same.

Members of the Congress boycotted the GST launch altogether. They were joined by members of the Trinomial Congress, Communist Parties of India and the DMK, who reportedly found virtually no difference between the existing taxation system, and therefore claimed that the government was trying to merely rebrand the current taxation system but made it worse for common people by increasing existing rates on common items and reducing rates on luxury items. Many critics pointed out that the GST would increase costs of daily goods and affect many Indians adversely, especially the middle, lower middle and poorer classes. GST was initially proposed to replace a slew of indirect taxes with a unified tax and was therefore set to dramatically reshape the country's 2 trillion-dollar economy. The rate of GST in India is between double to four times that levied in other countries like Singapore.

Goods and services tax is an indirect and uniform tax that will be implemented as a dual system due to the federal structure of the country.

In India tax is collected in two ways. One type of tax is collected directly such as income tax and corporate tax and it is called direct tax. The other category is called indirect tax which is collected from the consumers for goods and services. Both central and state have their own various taxes that fall into this category.

GST essentially means is that all the indirect taxes collected by the central government will be merged into CGST and all the indirect taxes of state government will be clubbed into SGST.

But don't think that combining and renaming is the only thing that will happen. Now presently in India there is a variation in the percentage of tax levied by each state government. That is why you will find long queues of lorries at each state borders. That is why you find different petrol prices at different places. In the new tax regime, every state will have a fixed and uniform tax rate.

 

Pros and cons of GST

The pros of GST are:

  1. Decrease production cost.
  2. Increase in country's GDP.
  3. Same price for goods across the country.
  4. A better taxation system.
  5. Whole chain is covered in the tax system (i.e from manufacturer to end retailer)
  6. Reduced tax on manufacturers (reducing the cascading effect of taxes)

Cons of GST are:

  1. Loss of revenue for manufacturing States like Tamilnadu, Maharashtra
  2. States losing autonomy to change Tax rate.
  3. Taxing all the sectors except Agriculture into the tax system.
  4. Payment of tax even in case of goods transfer etc.,
  5. Services will become costlier as the rate is higher in GST

The information provided here is about GST Regime.  If you would you like to add more information about GST Regime, share below your thoughts.

 


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