Everything You Need To Know About GST (Goods and Service Tax)

Being the most ambitious indirect tax reform for India and in effect from July 1, 2017, GST (Goods and Services Tax) is a value-added tax that brings together a common market by razing the fiscal barriers between states. It was introduced by the former President of India Shri Pranab Mukherjee. GST seeks to destroy the inefficiencies that exist in our tax regime.
It is a single uniform tax levied on all goods and services, and was brought with a clear objective of making the taxation system more transparent and efficient. Earlier, the central as well as state governments were levying tax multiple times on goods and services, such as Entre Tax, Excise Duty, State Tax, Central State Tax, Value-added Tax, etc. Now with the introduction of GST, all these taxes that were causing confusion, and making the system complex have been replaced with SGST (State Goods and Services Tax), CGST (Central Goods and Services Tax) and IGST (Integrated Goods and Services Tax).

Who is entitled to pay GST?

Any businessman, or trader with a yearly sales/revenue above 20 lakh are supposed to pay GST to the government. However, there is an exemption provided to certain states under special category states, for instance, backward states in North East. This move is designed in such a way as no businessman or trader can ever evade tax, which is illegal.

How different is the new taxation system in contrast to the old taxation regime? Let us understand the difference between the old taxation system and the newly introduced taxation system which is GST with the help of an example:   

Old Taxation System	New Taxation System (GST)
Product Sold from Mumbai to Vishakhapatnam Price= 10,000 VAT@10%= 1000	Product Sold from Mumbai to Vishakhapatnam Price= 10,000 SGST@5%= 500 CGST@5%= 500
Product Sold from Vishakhapatnam to Bangalore COST= Rs.11,000 PROFIT= Rs. 3,000 SELLING PRICE= Rs.14,000	Product Sold from Vishakhapatnam to Bangalore COST= Rs.11,000 PROFIT= Rs.3,000 SELLING PRICE= Rs.14,000
CGST@10%= Rs.1,400	IGST@10%= Rs.400 (1,400-SGST-CGST which has already been paid)
Total Cost of Product= Rs.15,400	Total Cost of Product= Rs.14,400

The GST has replaces numerous different indirect taxes that did not use to be mentioned on the invoices earlier as mentioned in the below list:

• ·         Service Tax
• ·         Countervailing Duty
• ·         Value Added Tax (VAT)
• ·         Central Excise Duty
• ·         Special Countervailing Duty
• ·         Central Sales Tax (CST)
• ·         Advertisement taxes
• ·         Octroi 
• ·         Entertainment Tax
• ·         Purchase Tax
• ·         Luxury Tax
• ·         Entry Tax
• ·         Taxes applicable on lotteries.

The Central GST or CGST is where the central government has power and State GST where the State has tax collection abilities. The IGST or Integrated GST is for the movement of products with the states in India. This will be gathered by the union government, but however it will be split over to the states to ensure their revenues are not affected by this gigantic move.

The intellect behind the introduction of GST was to bring a reform that can bring transparency in the taxation regime, to reduce the gap between the rich and the poor by levying more tax on ‘elite’ goods and services, and less tax on ordinary goods and services so as to make them affordable by the poor. For example, 18% tax for AC restaurants and 28% for five star restaurants, which only the rich can afford, and only 12% tax is levied on non-ac restaurant, where a lower middle-class man can easily afford the food.

As mentioned above the GST levied will be different for different goods and services, the GST on soap, which is the need of every human being is 18% and that on washing detergents is 28%. When it comes to movies, it again is categorized into two parts: 18% tax for a ticket costing less than or equal to Rs. 100 versus 28% GST levied on tickets costing more than Rs. 100. However, government has given relief to the people by exempting GST on certain products and commodities including dairy products such as milk and curd, fresh vegetables and fresh fruits, meat products, and other groceries.

Post the introduction and implementation of GST throughout the country, check posts were scraped across the country to enable faster movement of goods between cities and states. Further, to ensure that states do not incur losses in terms of revenue, the central government has promised the states that compensation would be provided to them in case any revenue loss in incurred as a result of GST introduction. This promise by the central government give them some relief.