A new stepping stone for our economy is going to be implemented soon in our country. From July 1 2017, a new taxation system called GST(Goods and Services Tax) will take over and if you have missed out on the concept, now is the right time to brush up your knowledge and understand what your country is moving forward to. We all know it by it’s name. Let’s get to know the details. Here is a simplified guide to GST.
- GST is the new Goods and Service tax. It will mainly be classified in 3 forms. CGST (Central GST), SGST(State GST) and IGST(Integrated GST).
- On all the goods and services sold two taxes will be levied. CGST and SGST. Interstate transactions will attract IGST instead of SGST and CGST. The rates of IGST will be almost equal to the combined rates of SGST and CGST.
- As a manufacturer produces a good, he will pay a certain amount of CGST and SGST. He will then sell his goods to the next in chain for the product to reach the market. The buyer will pay the amount of CGST and SGST on his selling price to the next in chain. He will also deduct the inputs from the previously levied tax by the manufacturer. In this scenario, every addition in value attracts a tax without any single party being overburdened. From the tax on output, the tax on input will be deducted, thereby creating a simpler system of tax.
- Whoever supplies the goods or services to a different state will levy IGST instead of CGST and SGST together. Input credits of both CGST and SGST will be deductible from IGST.
- The registration process for GST will be simpler as well. It will be PAN based. All the existing VAT, Service tax or Central excise dealers need not re-register for GST. New dealers however will be required to fill an online GST registration form.
- A few of the previous taxes will be merged into CGST namely Central Excise Tax, Service Tax, and Countervailing Tax. On State level VAT, Central sales Tax, Octroi, Purchase Tax, Entertainment tax and a few more will be replaced by GST.
- Differentiated tax rates have been proposed so far. 5%, 12%, 18% and 28% will be levied depending upon the necessity and luxury categories of goods.
To simplify, all the inter-state transactions will levy the same tax i.e IGST. And within the state transactions will observe both CGST and SGST together. The implications of GST are highly debatable as of now. The combined rates of taxes will be higher than the current ones. The businesses however will benefit because of the lower rates. They may decide to pass on the benefits to their customers as well.
Instead of levying a number of taxes at different stages, different rates for different goods and services, Our government has decided upon a much simpler approach. They will go ahead with a frame to levy GST at each and every supply of any good or service till the time it reaches the end customer. The tax will be divided at each stage and the burden will be shared right from the manufacturer to the end consumer. Each value addition will bear a tax, thus avoiding the cascading effect. Hence, A unified tax would suffice.
We hope you got insights into the whole process and being a responsible citizen you got to know what’s happening in your economy.