March 18, 2017
With the Goods and Services Tax (GST) council approving the remaining two of the five bills concerning the tax regime on Thursday, India's most ambitious indirect-tax reform is likely to roll out from July 1. The GST Council capped the proposed cess on aerated drinks and luxury automobiles at 15% and on cigarettes at 290%. It also approved the State GST and Union Territory GST laws.
Nod to these laws along with changes in the Central GST and Integrated-GST laws paves way for the introduction of the legislations in Parliament and state assemblies as early as next week.
So, how well do you know your GST? Here's a brief explanation of its various aspects:
What is GST?
The Goods and Services Tax (GST) will replace nearly a dozen central and state levies into a single national sales tax. It will make the movement of goods cheaper and seamless across the country. It would be far simpler than the current system, where a good is taxed multiple times and at different rates.
What will be the rates?
There would be four tax slabs of 5, 12, 18 and 28 per cent, plus a levy on taxes on luxury items like cars, aerated drinks and tobacco products to compensate states for any revenue losses in the first five years. The GST council is yet to decide which goods fall in which slab. The GST rates will remain broadly in line with the existing rates. To keep inflation under check, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.
How will consumer benefit from the GST?
With the implementation of GST, consumers will not be subjected to double taxation. All taxes that are levied while purchasing good will include both the central government’s taxes as well as the state government’s taxes. The move would deter state governments from indiscriminately increasing taxes fearing public backlash.
What economic impact will it have?
GST can boost economic growth by as much as 2 percentage points, according to Finance Minister Arun Jaitley. Greater tax compliance has the potential to boost revenues for the government, helping narrow Asia's widest budget deficit and allowing more funds to be allocated to schools and highways.
How will the GST affect businesses?
Companies will have to overhaul their accounting systems, which may involve one-time investment costs. There may also be chaos in the short term as the government gets the computer software up and running. The government has trained 49,000 officers of the states and the Centre till last week. GST Network (GSTN)—GST's IT infrastructure arm—and CBEC together will now conduct trainings so that businesses know how to file their returns
Which sectors stand to gain the most?
Logistics companies stand to gain as it becomes easier to ferry goods across India. Other sectors largely depend on the fine print of the GST, including exemptions.
[The Economic Times]