GST or Goods and Services Tax was introduced in India by the government as One Nation, One Tax on July 1, 2017. Considered as one of the significant transformations in the economic structure, GST is a unified taxation system that has replaced the previous taxes such as central duty, excise duty, VAT, etc. It has impacted the multiple sectors and industries in an unprecedented way.
History about GST
Looking at the past trend in our country. There was a discussion held in the panel. The old tax system needs to be revised, and a new system needs to be implemented. The first amendment was passed in the year 2000 by Atal Bihari Vajpayee Government in 2000. The other act was passed by P. Chidambaram. GST as a whole centered towards covering the production-distribution system.
The entire bill had to go for a detailed examination before going for the final close-up. Before the closure of any system, the finance minister reviews and revises the undertaking. In the year 2014, the new prime minister Mr. Arun Jaitley is appointed. After all the proceedings set and done. Mr. Arunn Jaitley made an announcement. The bill is then passed by the Lok Sabha constitution. The ministry of finance thereby declares the new act of GST in public. The honorable president of India finally announces the act, and GST is launched. GST is thereby divided into 4 gametes. They are as follows:
- Central GST Bill
- Integrated GST Bill
- Union Territory GST Bill
- GST Bill
There are three different GST types in India:
1. CGST: CGST means Central Goods and Services Tax and is levied by the Central Government of India on intrastate sale of goods and services.
2. SGST: The state government collects State goods and Services Tax on intra-state sale of goods and services.
3. IGST: The tax levied by the Central Govt on interstate sale of goods and services is known as IGST or Interstate goods and services tax.
Having a Clarification about the three GST types in India is very important.
GST Slab rates: There are 4 GST slab rates for goods and services
5%- Frozen vegetables, Fertilizers, Spices, Plastic waste, Newspaper printing, Takeaway Food, Restaurants.
12%- Ghee, Nuts, Fruits, Pouches, Purses and Handbags, Temporary basis IP rights, Building construction for sale.
18%– Washing Machine, Camera, Shampoo, Outdoor Catering, IT services, Telecom services.
28%- Sunscreen, Motorcycles, Pan Masala, Cinema, Food/Drinks/Stay at AC Five Star Hotels
Impact of GST on manufacturing sectors:
The government has specified the tax slab of 5%, 12%, 18%, and 28% on various goods. Under the GST, the businessman must register for GST to avoid penalties. It has curbed corruption and tax evasion by taxpayers. Also, it is expected that the unified taxation system will reduce the administrative costs for the manufacturers in the long run.
Impact of GST on service sectors:
The service sector contributed 50% of the taxes to the government revenue. Earlier, there was ambiguity for taxation of services such as restaurants and double taxation of VAT, and service tax was implemented on these services. However, under the GST regime, the uniform CGST( Central Goods and Service Tax), SGST( State Goods and Service Tax), and IGST ( Inter-State Goods and Services Tax) are implemented on goods and services.
Is GST a good taxation system?
Advantages of Goods and Services Tax:
1. Eliminated the cascading effect on taxes:
Before the implementation of GST, tax on tax was charged on various goods and services. For instance, if a manufacturer makes boxes, then tax is charged on raw materials and the final product. It increased the price of the product to the final consumers. However, with the coming of GST, the tax was levied on the multi-stage of the destination of the product based.
2. Higher threshold for GST registration:
It is mandatory for a person in business whose turnover exceeds Rs. 20 lakhs to register for GST. The turnover limit for GST registration for North Eastern and hill states is Rs. 10 lakhs. Earlier, a businessman with a turnover of Rs. 5 Lakhs was liable to pay VAT.
3. Less complicated:
With the coming of GST, the process of filing GST returns, registering for GST has been simplified. Also, with the elimination of multiple taxes, the number of compliances is lesser.
With the implementation of GST, the small businessman has a high burden of paying taxes and has also increased the costs of various goods and services. However, it is expected that the prices of products and services will get reduced in the long run.