Most hyped and influential word right now India uses is GST. From 1ST July 2017, India will come to the momentous change everybody is talking about. It has raised a panel of discussion between everyone, the offices, the producers, the sellers, the marketers, the housewives, the wholesalers, the professionals etc. Everybody is converting the pros and cons, effects and trying to analyze the difference, confusions, anticipations, conclusions and so much more. But what exactly is GST?
The Goods and Service Tax is the new indirect tax replacing the old taxation system levied by the Central and State Government. It is going to replace all major indirect taxes in our country. GST is regarding the taxes or the values added at every stage a product or a service.
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To understand the GST, we first need to know the Present Tax system. Indirect taxes are imposed on goods and services which are paid to the government itself but through a third person, such as service tax, sales tax, customs duty, VAT, etc. all these indirect taxes will be replaced by GST. GST will have no effect on direct tax.
Now GST has its own ways,
CGST: where the revenue will be collected by the central government
SGST: where the revenue will be collected by the state governments for intra-state sales
IGST: where the revenue will be collected by the central government for inter-state sales
For instance, a manufacturer from Gujarat sells to a customer in Gujarat itself, then the tax imposed under GST will be 18% which includes 9% of CGST and 9% of SGST, from which 95 will go to Central Government and the other 9% to State Government.
If the same dealer sells the good to a customer in Rajasthan, then SGST will not be levied but CGST and IGST will be collected by the central government @18%.
Categories under GST
||Food grains, meat etc.
||Mostly used items – sugar, tea, coffee etc.
||Luxury Items, Aerated drinks, etc.
Goods/Services which will get expensive – Packed Food, Jewellery, Mobile phones services, Insurance & Banking services etc.
Good/Services which will get cheaper – Entertainment, restaurants, SUVs, two-wheelers, TVs, Washing machine, etc.
Taxes Exempted under GST – Stamp Duty, toll tax, electricity duty, etc.
So this is how GST is going to work. The total liability on the customer will reduce, it will change the whole economy, GPD is expected to increase, it will remove the system of cascading i.e. imposing tax again on already imposed one i.e. tax on tax and so on. Let’s see if it goes in an expected manner.