GST - A Detailed Analysis
Introduction of GST
The GST (Goods and Services Tax) is a unified indirect tax across the country on goods and services.Before GST- Tax is levied at each stage separately by the Central government and the State government at varying rates.
After GST- Single tax levied on the supply of goods and services, right from the manufacturer to the end consumer.
Example
| Manufacturer of Bike to Wholesaler | Without GST | With GST |
| Cost of Production | 90000 | 90000 |
| Profit Margin @10 % | 10000 | 10000 |
| Price of Manufacturing (cost of production + Profit Margin) | 100000 | 100000 |
| Excise Duty @15 % | 15000 | - |
| Total Value | 115000 ((Price of manufacturing + Excise duty) | 100000 |
| Vat @14 % | 16100 | - |
| GST (CGST + SGST) @28 % (These are levied on different- different point but total value is combined to 28 %) | - | 28000 |
| Total Price | 131100 | 128000 |
Taxes that will be subsumed in GST
GST replaced almost all the indirect taxes which are-At Central level-
- Central Excise Duty
- Service Tax
- Additional Customs Duty (Countervailing Duty)
- Special Additional Duty of Customs (SAD) etc
At State level-
- VAT/Sales tax
- Entertainment tax
- Luxury Tax
- Taxes on lottery, betting and gambling etc
History of GST
- First country to introduce GST system was France.
- In year 1999, NDA government constituted a committee headed by then finance minister West Bengal, Asim Dasgupta to design a GST model.
- In year 2003, NDA government formed a task force under Vijay Kelkar to recommend tax reforms and Kelkar committee recommended rolling out GST as suggested by the 12th Finance Commission.
GST Legislation
- The Constitution (122 Amend.) Bill, 2014 seeks to amend the Constitution to introduce the Goods and Services tax (GST).
- The GST Constitutional (122nd Amend.) Bill, 2014 became the GST Constitutional (101st Amendment) Act’ 2016 when the president assented the provisions of bill on 8th Sept 2016.
- Due to Introduction GST act, following major changes took place in Indian constitution-
(a) Changes in 6th and 7th schedules of the constitution
(b) Introduction of Articles 246A and 269A. - Major Components of GST ACT-
(a) Central Goods and Services Tax (CGST)- to be levied by centre
(b) State Goods and Services Tax (SGST)- to be levied by state
(c) Integrated Goods and Services Tax (IGST)- On inter-state supply of goods and services. It is levied and collected by the Centre and will be shared amongst the Centre and the States.
(d) The Union Territories Goods and Services Tax (UTGST)(e) GST (Compensation to States) ACT, 2017. - In GST ACT, Highest tax slab is pegged at 40%.
Implementation of GST-
- The GST is governed by a GST Council, chaired by the Finance Minister of India.
Composition of GST council1. Union minister of Finance
2. Union minister of state in charge of finance
3. Finance ministers of each state governments
- GST council determined different Tax rate slab for different commodities. These rates will be reviewed by the council from time to time.
- These rates are Zero (No tax) %, 5 %, 12 %, 18 %, 28 %.
Zero percent-Mostly food items like curd, milk, Butter Milk flour etc, Newspaper, handloom etc.
Five Percent- Fertilizers, Coffee, Tea, Spices, Coal, Medicines, Transport services etc.
Twelve Percent-Butter, Ghee, Namkeen, Cell phones will be under 12 % tax slab, Non-AC Hotels, Business class air ticket etc.
Eighteen Percent- (Most items will come in this slab) Note books, Mineral water, steel products, Telecom services, IT services etc.
Twenty Eight Percent-Pan Masala, Paints, shaving creams, ATM, Automobiles, Chocolate not containing cocoa, automobiles, motorcycles, Five-star hotels, cinemas etc.
- There is a special rate of 0.25% on precious stones (Diamonds) and 3% on gold.
- A special GST Network (GSTN) was created for GST implementation. The GSTN will provide a shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders for implementation of GST.
The benefits of GST can be summarized as-
(1) Easy compliance
(2) Uniformity of tax rates and structures
(3) Removal of cascading- (Removal of inevitable and sometimes unforeseen chain)
(4) Higher revenue efficiency- (Due to increase in tax base)
(5) Transparency in tax system
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