Understanding the basic concepts of GST (Goods and Services Tax).

Introduction to GST (Goods and Services Tax)

GST stands for “Goods and Services Tax”. In India, GST got implemented w.e.f. 1st July 2017.

The main objective behind the introduction of GST is to put together multiple tax levies into one single tax to beat the constraints of the present tax structure and making efficiencies in tax administration

Who does GST apply to?

  • Every person who supplies goods and services, with a value of more than Rs 20 lakh in a financial year. (Limit is Rs 10 lakh for some special category states).
  • To any supplier making an inter-state supply of goods and services
  • Every e-commerce operator
  • Every person who supplies goods and services, apart from branded services, via an e-commerce operator
  • Aggregators who offer services under their own brand name
  • Casual Taxable Person
  • Non-Resident Taxable Person
  • A Person required to deduct/collect tax (TDS/TCS)
  • Input Service Distributor
  • A Person who supplies online information and database access from a place outside India to a person in India, other than a registered taxable person.
  • The Person required to pay tax under Reverse Charge
  • A person who supplies the goods on behalf of another taxable person (e.g. Agent)

To whom doesn’t GST apply?

  • Agriculturists
  • And to any person who is exclusively engaged in the business of supplying goods and services that are not liable to tax according to GST law.

Here are the number of key changes which GST has brought to the old taxes system :

  • Eliminating Cascading effect i.e. tax over tax.
  • Removing the difference between goods and services, Currently the single concept is supply
  • Bringing harmony to the general economy by concepts like E waybill
  • TDS and TCS introduced within the indirect taxes
  • Single window clearance
  • Freedom from multiple taxation
  • Increase in transparency

What is the GST framework as per the new law?

The government has taken GST in its Dual or concurrent model. As a result of which, both Center and State government will now levy GST simultaneously. The implemented GST structure is divided into four categories, namely –

  • IGST – Integrated Goods and Service Tax
  • CGST – Central Goods and Service Tax
  • SGST – State Goods and Service Tax
  • UGST – Union Territory Goods and Service Tax

What are the GST Tax Rates in India?

Goods and Service Tax was introduced in India with different tax rates.

For Composition Taxpayers the GST tax rates are –
  • 1% For Manufacturers and Traders
  • 5% For Suppliers of Food and Beverages (Restaurant etc.)
The GST Tax Rates for Goods are –
  • 5% For Coal, Household necessities, Cashew, Ice, Atta, Medicines etc
  • 12% For Books, Notebooks, Lens, Processed food, Ketchup, Playing Cards and Computer etc
  • 18% For Aluminum foil, CCTV, Set-Top Box, Kajal stick, Printer (without multi functions), Toothpaste, soap, hair oil and industrial goods etc
  • 28% – The highest tax rates applies on products like Luxury bikes, cars, cigarette, drinks, air conditioner, refrigerator etc.
For Services the GST Tax Rates are –
  • 5% Applicable on services like rented cabs, railways, goods transport services, advertisements in print media, specified job work, etc
  • 12% For business class air travel, accommodation with tariff ranging between Rs 1,000 to Rs 2,500 or non-air-conditioned restaurants
  • 18% – This is the most widely applicable rate for services. It is applicable to outdoor catering and specified construction services for which a rate has not been set specifically. I.e. it is a general rate for taxation of services under GST
  • 28% – The highest tax rate applies to luxuries like luxurious hotels, go-karting, race clubs, amusement parks, gambling etc.

These rates have kept changing since the introduction of GST and are supposed to change more over the time.

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About the Author: Ahraaz Makhdoomi