What is GST ? Rates, Pros and Cons!
GST & GST rates
Hailed as one of the biggest tax reforms of the country, the Goods and Services Tax (GST) subsumes many indirect taxes that are imposed by Central and State. The GST act was passed in the parliament on 29th March 2017 and it came into effect on July 1st, 2017. In this blog, we’ll take a closer look at what GST is and the detail on it.
What is GST?
“Goods and Services Tax (GST) is an indirect tax levied in India on the sale of Goods and Services”
GST was divided into five slabs of taxes like 0%, 5%, 12%, 18% and 28%. In India, the law on goods and services tax is a comprehensive, multi-stage, and destination based which is levied on every additional values.
“The ultimate purpose of introducing GST is to cut off the excessive taxation...!”
After rolled out, GST has replaced all “Central taxes” such as Central Excise Duty, Service Tax, Additional Duties of Excise & Customs, and “State taxes” such as VAT, Central Sales Tax, Purchase Tax, Entry Tax, Entertainment Tax, taxes on advertisements and surcharges.
What changes has GST brought in?
GST, as a destination based indirect tax, has replaced several other indirect taxes by creating a coalition between state and central levels with reformed taxation regimes. In the pre-GST regime, tax-on-tax was calculated and paid by every purchaser including the final consumer. This tax on tax strategy is called as the “Cascading Effect” of Tax.
“GST eliminates cascading effect as the tax is calculated only on value-add at each stage of transfer”
Implementation of GST will definitely upgrade the taxation and its collection procedures. Simultaneously, it will boost up the Indian economy by reducing the barriers on indirect taxes between states and centrals with a uniform tax rate.
Still confused about GST rates? Here is a quick guide...!
The Goods and Services Tax (GST) council recommended the widespread changes in the Goods and Services Tax on its 23rd meeting which was held on November 2017. At the time, the GST council has decided and announced that highest rate of 28% tax has been taxed on luxury and sinful items. This decision was ended up in shifting the tax to 18% bracket for about 177 items and for many other items, it has been reduced.
Revised rates on goods and service products after GST implementation
After the 23rd meeting of the GST council, the GST rates have been lowered for more than 200 products right from chewing gum, chocolates, to beauty products and wrist watches. Nearly, 178 items have been shifted from taxing rate of 28% to 18% with a uniform tax of 5% applicable for both A/c and non a/c restaurants.
Pros and Cons of GST
The GST as a comprehensive indirect tax is considered to be a historical tax reform in India. Though it was considered to be historical, it also has some pros and cons as listed below.
Pros of GST
- GST is a transparent tax reducing the indirect taxes
- No hidden taxes as it’ll not be a cost to registered retailers
- Highest threshold for registration
- Benefits people as prices drop sown thereby increasing the consumption
- Simple procedure & lesser compliance
- Improved logistic efficiencies
Cons of GST
- 100% online taxation system
- Few economists reveals that it would bring negative impact on the real estate markets
- Increased operational costs owing to software purchase
- The aviation industry might be affected
- Came into effect in the middle of the financial year