On the 1st of July 2017 at midnight the Modi Government switched India to GST with the press of a button, the single biggest tax reform that has been undertaken by the country in 70 years of its Independence. The GST is set to be a game changer for the Indian economy against corruption, as well as the outcome of a thought process over several years of the Modi Government.
The one national GST unifies the country’s USD 2 trillion economy and 1.3 billion people into a common market. GST is said to end tax terrorism and inspector raj, two of the biggest hurdles to a nation.
Why GST?
The thought of having one joint indirect tax to subsume numerous existing roundabout expenses is to profit the Indian economy in various ways:
- It will enable the nation’s organizations to pick up a level playing field.
- It will put us comparable to remote countries who have a more organized assessment framework.
- It will likewise convert into picks up for the end shopper who not needs to pay falling assessments any longer.
- There will now be a solitary expense on merchandise and ventures.
GST in Brief
Goods Service Tax is a thorough, multi-arranged, Destination-based tax that would be collected at each stage of value addition.
To understand the concept of GST let us begin with the terms lined up above:
Multi-Stage
Before a product reaches the customers there are multiple steps it goes through right from the manufacturer to the final sale.
- The entire process begins with buying raw materials.
- The second step is the manufacturer.
- Then there is warehousing or storage.
- Next, comes the sales of the product to the retailer.
- And the final stage involves “us” the buyers.
The Goods Service Tax will be implemented on each of these stages, which would make it a multi-stage tax system.
How will it be implemented?
We would shortly tell you about that first let’s get educated about:
Value Addition
Let us assume a manufacturer wants to make a table. He needs to follow a simple process
- He would need to buy the wood.
- That wood would be carved into a table, so this makes the value of the wood increase as it is being used for making the table.
- Then, the manufacturer sells it to the warehouse agents who attach the brand labels, this makes it another addition to the value after which the warehousing sells it to them,
- A retailer who packages the tables and invests in the marketing of the furniture thus increasing its value.
How does the Valuation Addition Takes place in GST?
GST will be exacted on these value additions – the financial worth added at each phase to accomplish the last deal to the end client.
Destination-based selling is another term that we have explained in our article on GST. Merchandise and Ventures Tax will be demanded on all exchanges occurring amid the whole assembling chain. Previously, when an item was produced, the center would require an Excise Duty on the fabric, and after that, the state will include a VAT charge when the thing is sold to the following stage in the cycle. At that point, there would be a VAT at the following purpose of the offer.
Earlier Tax Pattern
The GST will be imposed at every point of sale. Let us Assume if the product is being manufactured in Delhi and the final point of sale is in Chandigarh, since the GST is levied at the point of consumption, so Delhi will get revenue in the manufacturing and warehousing stages, but lose out on the revenue when the product moves out of Delhi and reaches the end consumer in Chandigarh. Which means that Chandigarh will earn that revenue on the final sale because it is a destination-based tax system and this revenue will be collected at the final point of sale/destination which is Chandigarh.
Why is GST considered so important?
To make all the goods under one tax across the country. Read more as below:
Importance of Tax Pattern
Presently, the Indian expense structure is isolated into two-Direct and Indirect Taxes.
- Coordinate assessments are required where the obligation can’t be passed on to another person.
- A case of this is Income impose where you acquire the Income and only you are obligated to pay the expense on it.
- Roundabout charges are the obligation of the assessment that can be passed on to another person. Which implies that when the retailer must pay VAT on his deal, he can pass on the obligation to the client.
- In this way, in actuality, the client pays the cost of the thing and in addition the VAT on it so the business person can store the VAT to the administration.
- This happens in light of the fact that the business person has paid a duty when he purchased the thing from the distributor.
Implementation of GST
When the Goods and Service Tax is Implemented, there will be three kinds of applicable taxes:
- The revenue that is to be collected by the central government is called CGST
- The revenue that is to be collected by the state governments for intra-state sales in called SGST
- The revenue that is to be collected by the central government for inter-state sales is called IGST
| Transaction | New Regime | Old Regime | Comments |
| Sale made in the state | CGST + SGST | VAT + Central Excise/Service tax | Revenue will now be shared between the Centre and the State |
| Sale to another State | IGST | Central Sales Tax + Excise/Service Tax | There will only be one type of tax (central) now in the case of inter-state sales. |
What does it mean for India?
It means the uniform tax across the Country. You can know complete details by reading the Benefits of GST.
Benefits of GST Across India
- It gives the country one uniform tax and no frequent rate changes.
- A lower tax burden. One market to help businesses. No truck queues at state borders
- GDP could rise by 2%
- Less scope for evasion, which means higher revenues
- Lower taxes to boost exports
- Inspector Raj will ease its grip
The concerns
- Multiple tax slabs mean lesser gains and disputes over classification.
- Multiple registrations in different states.
- Confusion over how the tax will work out, as well as filing.
- Apprehension over existing stocks.
- Fears of anti-profiteering unleashing inspector Raj.
What does it mean for businesses?
- No dread that a state will arbitrarily raise charges
- Transparency in charges
- Easy in light of the fact that just a single expense to represent
- The automated process implies less babu-dom
- Goods and administrations suppliers will get the advantage of information to assess credit for the products utilized, adequately making the genuine frequency of tax collection lower than the feature tax assessment rate.
Furthermore, in particular, what it implies for you?
And most importantly, what it means for you?
Rate classification for services
Only rates of select goods and services have been mentioned here
GST rate on pearls, precious or semi-precious stones, diamonds (other than rough diamonds), precious metals (like gold and silver), imitation jewelery, coins-3% GST rate on rough diamonds-0.25%.
List of things to get cheaper after the GST
Below is a comprehensive list of the goods and services which will become cheaper from July 1 when GST comes into force:
Eatables
Items of daily use
Stationary, Health Care and Apparels
Vehicles and Other Features
How can GST help you save INR 5000 in a year?
The Goods and Service Tax (GST) will not be much different for the common man, when you go out after this to buy groceries you will not find the GST hitting your budget, though the new prices might help you save a few hundred rupees every month.
Therefore, GST means marginal savings for households. Here is a list of the possible monthly expenses from the 1st of July onwards:
| Items | Qty(Kg/Ltr/Pack) | Old price (per unit) | Total (Rs.) | New Price (per unit) | Total (Rs.) |
| Flour | 20 | 25 | 500 | 25 | 500 |
| Rice | 20 | 50 | 1000 | 50 | 1000 |
| Bread | 15 | 20 | 300 | 20 | 300 |
| Pulses | 5 | 110 | 550 | 110 | 550 |
| Milk | 60 | 52 | 3120 | 52 | 3120 |
| Vegetables/Fruits | 30 | 50 | 1500 | 50 | 1500 |
| Tea | 2 | 150 | 300 | 150 | 300 |
| Packaged chicken | 5 | 350 | 1750 | 359 | 1795 |
| Edible oil | 4 | 125 | 500 | 126 | 505 |
| Masala | 1 | 300 | 300 | 289 | 289 |
| Curd | 2 | 100 | 200 | 92 | 184 |
| Packaged cheese | 2 | 250 | 500 | 240 | 480 |
| Butter | 4 | 50 | 200 | 53 | 212 |
| Biscuit | 20 | 10 | 200 | 9 | 180 |
| Sweets | 2 | 350 | 700 | 337 | 674 |
| Corn flakes | 2 | 150 | 300 | 134 | 268 |
| Ice cream | 15 | 45 | 675 | 42 | 630 |
| Cold drinks | 15 | 20 | 300 | 18 | 270 |
| Juices | 15 | 30 | 450 | 29 | 435 |
| Soap | 8 | 25 | 200 | 21 | 168 |
| Toothpaste | 2 | 60 | 120 | 51 | 102 |
| Hair oil | 2 | 150 | 300 | 127 | 254 |
| Shampoo | 2 | 250 | 500 | 230 | 460 |
| Face cream | 2 | 300 | 600 | 280 | 560 |
| Medicine | 5 | 100 | 500 | 90 | 450 |
| Total | 15,565 | 15,186 |
A middle-class household is going to save INR 379 on an average by calculations, therefore, saving in a year INR 4,548.
How disruptive will the implementation of the GST be?
Any change, even a little change in the method of documenting an arrival, is troublesome. An irrelevant interference in this considering the smooth path in which a large number of individuals have recently moved to the GST and some new registrants are joining now. In the medium and long haul more income implies all the more spending by the administration.
There are anxieties among little organisations who frame the gathering’s base. Some are notwithstanding arranging challenges.
Doubts about the GST
It is not going to be difficult for a small business. There will be no obligation on neighbourhood mum and pop shops. Those with a turnover of up to Rs 20 lakh don’t have to pay any cost or select. For those with yearly turnover between Rs 20 and Rs 75 lakh, you can benefit of the merger plot. In the arrangement conspire, merchants need to pay 1% duty and makers need to pay 2%. Those with turnover above Rs 75 lakh are not that little and must be as of now benefiting administrations of an expense expert or a CA (sanctioned bookkeeper) even at this point.
Each change is contradicted by one or other gathering. I am not all that stressed about it. The GST Council is a collection of those people. It is a mindful body. In the event that anybody feels estimations were not right, they can speak to, the chamber can consider. There is a fitment board of trustees and chamber has considered more than 60 cases. You can’t anticipate that the board will act underweight. The contention that I didn’t pay impose under the old framework and there was an extension for me to avoid charges, this grievance can’t be engaged.
Do know the Changes that have been made in the cost?
Read the info in the table below:
With the nation introducing another assessment administration with the presentation of the Goods and Services Tax (GST), customers will now need to pay more to bank administrations, protection premium installments and Mastercard charges starting Saturday. The greater part of the money related administrations will pull in a higher duty of 18 for each penny as against the past 15 for every penny under the new aberrant expense administration.
Conclusion
Among the host of dignitaries who were present during the grand event included President Pranab Mukherjee, Vice-President Hamid Ansari, Speaker Sumitra Mahajan, Union Finance Minister Arun Jaitley, former Prime Minister H D Deve Gowda, ministers, MPs, and other special invitees.
Now this leaves the Indian economy in the hands of the Modi Government and Taxation.