Index Tax RegimeTariffs Components of GST Impact of GST on Indian Economy Goods and Services Tax (GST) impacts key sectors of Indian Economy Real Estate E-commerce Travel & Tourism Ride Hailing Apps Smartphones Goods and Services Tax (GST) is an indirect tax levied in India on the sale of goods and services. Goods and services are divided into five tax brackets for tax collection: 0%, 5%, 12%, 18% and 28%. Petroleum products and alcoholic beverages are taxed separately by individual state governments. There is a special rate of 0.25% on raw precious and semi-precious stones and 3% on gold.[1] Additionally, a rate of 22% or other rates in addition to the 28% GST apply on some items such as carbonated drinks, luxury cars and tobacco products. The tax came into effect from July 1, 2017, through the implementation of the Hundred and First Amendments of the Government of India. The tax replaced the existing multiple cascading taxes imposed by the central and state governments. Tax rates, rules and regulations are governed by the Goods and Services Tax Council comprising the finance ministers of the center and all states. The GST has simplified a number of indirect taxes into one unified tax and is therefore expected to fundamentally reshape the country's $2 trillion economy. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get Original EssayThe Goods and Services Tax was launched at midnight on July 1, 2017 by former President of India, Pranab Mukherjee, and Prime Minister of India, Narendra Modi. The launch was marked by a historic midnight session (30 June – 1 July) of both Houses of Parliament convened in the Central Hall of Parliament. Although the session was attended by high-profile guests from the business and entertainment industry, including Ratan Tata, it was boycotted by the opposition due to the anticipated problems it was expected to cause for middle- and lower-class Indians. It is one of the few midnight sessions held by Parliament - the others being India's declaration of independence on 15 August 1947 and the silver and golden jubilees of that occasion. Since its launch, the GST rates have been changed several times, most recently on January 18, 2018, when a group of federal and state finance ministers decided to review the GST rates on 29 goods and 53 services. In simple words, goods and services tax is an indirect tax levied on the supply of goods and services. The GST law has replaced many previously existing indirect tax laws in India. Now let us understand the definition of Goods and Services Tax: “GST is a comprehensive, multi-stage, destination-based tax which will be levied on every value added.” “Input Tax Credit”:- First of all, “input tax” means the tax paid to the government. for the goods you purchase. “Output tax” means the tax you pay to the government. for the goods you sell. This “output tax” will be added to the price of the product and will therefore be paid by consumers. And now let's see what “input tax credit” means… Fathima, for example, produces clothes. He has to pay a fee of Rs.50 to He bought some fabric from Anusha. Anusha paid Rs 40 taxes to the government on the fabric she sold. So, now Fathima pays only 10 rupees tax to the government and informs the government. around Rs.40 which Anusha paid on the fabric. The government checks the receipts. And then, on the paper, the total amount of taxes paid by Fathima is written as Rs.50/-. This is the concept of “Input Tax Credit”. That means you canclaim the "credit" of the "purchase tax" paid by your raw material supplier. GST is an indirect tax for the entire country. Therefore, before the Goods and Services Tax, the tax collection pattern was as follows: Under the GST regime, the tax will be collected at every point of sale. In case of interstate sales, Central GST and State GST will be charged. Intrastate sales will be chargeable to Integrated GST Objectives: To ensure that the cascading effect of tax on tax is eliminated. Improve the competitiveness of original goods and services, thus also improving the GDP rate. Ensure the availability of input credit throughout the value chain. Reduce complications in tax administration and compliance. Make a unified law that involves all tax bases, laws and administrative procedures across the country. Reduce unhealthy competition between states due to taxes and revenues. Reduce tax rates to avoid further clarifications. Tax Regime Single GST (Goods and Services Tax) replaced several earlier taxes and levies which included: Central Excise Duty, Service Tax, Additional Customs Duties, Surcharges, State Level Value Added Tax and Octroi. [Other levies applicable on inter-state routes transportation of goods has also been eliminated in the GST regime. GST is levied on all transactions such as sale, transfer, purchase, barter, rental or import of goods and/or services. India has adopted a dual GST model, which means that taxation is administered by both the Union and state governments. Transactions made within a single state are collected with Central GST (CGST) by the Central Government and State GST (SGST) by State Governments. For interstate transactions and imported goods or services, the central government imposes an integrated GST (IGST). GST is a consumption based tax/destination tax, therefore taxes are paid to the state where the goods or services are consumed and not to the state where they were produced. The IGST complicates tax collection for state governments by preventing them from collecting taxes owed to them directly from the central government. Under the previous system, a state would only have to deal with a single government to collect tax revenue. Rates GST is imposed at variable rates on variable items. The rate of GST is 2.5% for soaps and 28% for detergents. The GST on movie tickets is based on slabs, with a GST of 18% for tickets costing less than Rs. 100 and 28% GST on tickets costing more than Rs.100 and 5% on ready-made clothes. The booking rate of properties under construction is 12%. Some industries and products have been exempted by the government and remain untaxed under the GST, such as dairy products, milling products, fresh fruits and vegetables, meat products and other foodstuffs and first necessity. Checkpoints across the country have been abolished ensuring the free and rapid movement of goods. The central government had proposed to insulate states' revenues from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and petroleum products. . The central government had assured the states compensation for any revenue loss incurred from the date of GST for a period of five years. However, no concrete laws have yet been enacted to support this action. The GST Council has adopted a concept paper discouraging tariff interventions. E-invoice needs to be generated for every inter-state movement of goods above the threshold of rs.50000 (US$790) Components of GST There are 3 taxes applicable under theGST: CGST, SGST and IGST.CGST: Collected by the Central Government on an intra-state sale (for example: within Maharashtra) SGST: Collected by the State Government on an intra-state sale (for example: within of Maharashtra) IGST: Collected by the Central Government for inter-state sale (for example: from Maharashtra to Tamil Nadu) In most cases, the tax structure in the new regime will be as follows: Transaction New Regime Old Regime Sale within the State CGST + SGST VAT + Central Excise Duty/Service Tax Revenue will be shared equally between Center and State Sale to another State IGST Central Sales Tax + Excise Duty/Service Tax There will be only one type of tax (Central) in case of interstate sales. The Center will then divide the IGST revenue based on the destination of the goods. Illustration: Suppose a trader in Gujrat sold the goods to a dealer in Punjab worth Rs. 50,000. The GST rate is 18% and includes IGST only. In such case, the retailer has to charge Rs. 9,000 as IGST. This IGST revenue will go to the central government. The same trader sells goods to a consumer in Gujrat worth Rs. 50,000. The GST rate on the good is 12%. This rate includes CGST at 6% and SGST at 6%. The retailer has to collect Rs. 6,000 as goods and services tax. Rs. 3,000 will go to the central government and Rs. 3,000 will go to the Gujarat government as the sale is within the state. Below is the list of indirect taxes in the pre-GST regime: Central Excise Duties Excise Duties Special Additional Duties of Customs Cess State VAT Central Sales Tax All these taxes have been replaced with Central GST, State GST and GST integrated. Impact of GST on Indian Economy The impact of GST on macroeconomic indicators is likely to be very positive in the medium term. Inflation would be reduced as the trickle down (tax upon tax) effect of taxes would be eliminated. Tax revenues for the government are very likely to increase with an expanded tax net, and the fiscal deficit is expected to remain under control. Furthermore, exports would grow, while FDI (foreign direct investment) would also increase. Industry leaders believe the country would make many strides towards ease of doing business with the implementation of the biggest tax reform ever seen in the country's history. After long discussions, our GST Council has finalized the rates for all goods and major service categories under various tax brackets, and the GST is expected to fill the loopholes in the current system and boost the Indian economy. This is done by unifying indirect taxes for all states in India. The tax rates under GST are fixed at 0%, 5%, 12%, 18% and 28% for various goods and services and almost 50% for goods and services. services fall within the 18% tax rate. But how will our life change after GST? Let's see how GST on some everyday goods and services will impact the pocket of the end user. Footwear and Clothing/Garments: Footwear costing more than INR 500 will have a GST rate of 18% compared to an earlier rate of 14.41. fee, but fees for footwear below INR 500 have been reduced to 5%. So, you have to shell out more to buy footwear above INR 500/-. And as far as ready-made garments are concerned, the rates have been reduced to 12% from the current 18.16%, which will make them cheaper. Cab rides: Now, taking an Ola or an Uber will be cheaper as the rate tax has changed to 5% compared to the previous 6% for booking a taxi online. Air Tickets: Under the GST, the tax rate for economy class air tickets is fixed at 5%, but the tax for economy class ticketsbusiness class will have a higher fare tax of 12%. Train fare: There will not be much impact. The effective tax rate has increased from 4.5% to 5% in GST. However, a passenger traveling on business trips can claim an input tax credit on their train ticket which can help them reduce expenses. People traveling on local trains or sleeper class will not be affected, but first class and air-conditioned travelers will have to pay more. Movie tickets: Movie tickets costing less than INR 100 will be charged a fee GST of 18%, but at prices above INR 100 it will have a higher tax rate of 28%. Life Insurance Premium: Premium amounts on policies will increase, with an immediate impact that can be seen on term and endowment policy premiums as rates have been increased under the GST on life, health and general insurance. Mutual Fund Returns: The impact of GST on returns from mutual fund investments will be largely marginal as GST will be charged on the TER, which is the total expense ratio of a mutual fund. TER is commonly called the expense ratio of a mutual fund company and the same is set to rise by 3%. The return you get as an investor will be reduced to that extent, unless the respective mutual fund company, for example AMC, absorbs it, but this will still be a marginal difference. Jewellery: Gold investment will become slightly expensive because there will be 3% GST on gold and 5% on manufacturing charges. The previous tax rate on gold was around 2% in most states and the GST has been increased from the existing rate to around 2%-3%. Buying a Property: Under construction, properties will be cheaper of those ready to be inhabited. in properties. The GST rate for a property under construction is 18%, but the effective rate on this type of property will be around 12% due to the tax credits that the builder will be able to avail of. Education and Medical Facilities: Education and medical sectors have been kept out of the ambit of GST and both primary education and healthcare are exempt from GST. It means that a consumer will not pay any tax for the money spent on these services. But due to the increase in the tax rate for certain goods and services purchased by these organizations, they may pass on the additional tax burden to consumers. Hotel Stay: For hotel stay, if the room rate is less than Rs 1,000, in that case there will be no GST, but any amount above Rs 5,000 will be subject to 28% tax. Buying a Car: Most cars in the Indian market will become slightly cheaper except hybrid cars because the GST rate will be 28% on all vehicles irrespective of make, engine capacity or model. However, on top of this 28%, an additional tax will be applied which can be 1%, 3% or 15%, depending on the specific car segment. Mobile bills: People will have to pay more on mobile phone bills as GST on telecom services now stands at 18%, compared to the previous tax rate of 15%. However, telcos may absorb this 3% increase due to stiff competition. Restaurant Bills/EAT OUT: Your restaurant bill will depend on whether you dined at an AC or non-AC establishment that does not serve alcohol. Now dining in five star hotels will be charged 18% GST, non-AC restaurants will be charged 12% and 5% GST will be charged from small hotels, dabs andrestaurants not exceeding an annual turnover of INR 50 Lakh. IPL and other related events: Events like IPL, i.e. sporting events, will have a GST rate of 28%, higher than the previous rate of 20%. This will increase the price of your tickets. And the GST rate for other events such as theater, circus or Indian classical music performance or a folk dance performance or a theater performance will be 18% GST, which is lower than the previous tax rate. DTH and Cable Services: The money you pay for your DTH (Direct-To-Home) connections or your cable operator will reduce slightly as the tariff is set at 18%, which is lower than the previous fees which included taxes on entertainment between 10% and 30%, in addition to the 15% service tax. Amusement Parks: The ticket price for amusement and theme parks will increase as the earlier service tax of 15% will become 28% under the GST. Here is a list of some items that are completely exempt from the GST regime: Unprocessed grains, rice and wheat, etc. Unprocessed milk, (fresh) vegetables, fish, meat, etc. Unbranded Atta, Besan or Maida. Coloring/drawing book for children. Sindoor/Bindis, bangles, etc. Goods and Services Tax (GST) Impacts Key Sectors of Indian Economy As their businesses are vulnerable to any major change in the economy due to a new policy implementation, the founders and employees of these companies are extremely concerned about the impact of the four tax bands of 5%, 12%, 18% and 28% specified in the GST. Many Indian businesses have limited capital and resources at their disposal, meaning any confusion can quickly escalate into panic. Along with these stakeholders, millions of customers are wondering what the impact of this new tax system will be on the amount of money they will need to shell out to enjoy their favorite goods and services. The impact of GST on the most popular sectors of the Indian startup ecosystem, including real estate, e-commerce, hospitality, smartphones and ride-hailing. Real Estate Under the new tax structure, due to the input credit benefits that most builders will get on major raw materials purchased, the base price of real estate projects launched after July 1, 2017 will be comparatively cheaper. The purchase of properties under construction will apply a net effective tax rate of 12% compared to the previous rate of 5.5% (including value added tax and service tax). Real estate operators like Prop Tiger and Quikr want to pass this cost advantage on to real estate buyers. “For new projects with 100% of the input credit passed to the buyer and the land cost equal to 50% of the project cost, we expect property prices to fall by approximately 1% in the Western and Northern markets and around 3% in southern markets,” said an Edelweiss report. However, prices of ready-to-move-in flats with completion certificates, before the implementation of GST on July 1, would remain stable as these properties are out of the ambit of GST. Any price change in the segment will solely depend on supply and demand. to sellers listed on their websites. This could impact prices and make online purchases more expensive. Although the latest notification issued by the government has stated that the provisions of “TDS (Section 51 of the CGST/SGST Act, 2017) and TCS (Section 52 of the CGST/SGST Act, 2017) shall come into force from a date to be notified later.”Travel and tourism Depending on the room rates, there are four rates for hotels and lodges. While hotels and hotels with rates.