The Goods and Services Tax, India’s biggest tax reform since Independence, was formally introduced at a special midnight Parliament session on Friday 30th June 2017 in New Delhi. The new single nationwide tax aims at replacing a complicated mix of state and central taxes and will bring the country to a common market. Now check more details for “GST – One Nation One Tax, GST Highlights, Impact of GST in India” from below….
GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
GST – One Nation One Tax
GST Highlights
- All the information about GST is available at www.cbec.gov.in
- If the aggregate turnover of any person is more than Rs. 20 Lakh then it is compulsory to take the registration for him.
- On Interstate transactions IGST will be levied. CGST and SGST will be levied on intrastate transactions. Similarly, UTGST will be levied on Union territory transactions.
- There are 0%, 3%, 5%, 12%, 18% and 28% tax rates in GST
- In GST, petroleum products like petroleum crude, motor spirit, natural gas, Aviation turbine Fuel, are temporarily out of the ambit of GST.
- In GST, tax is payable on advances also. It means if we gave any amount in advance the GST will be levied on it.
- If goods or services purchased from unregistered dealer then GST is to be paid by Reverse charge Mechanism.
- If the bill amount of one day from unregistered dealer is less than Rs. 5000 then there is no need to pay tax in RCM.
- In GST Monthly Return will have to be filed.
- GST is based on supply. At the time of supply, GST will be levied.
- Small taxpayers whose aggregate turnover in a financial year is less than Rs. 75 Lakh can opt for composition scheme.
- As per the provisions of composition scheme, manufacturer will have to pay 2% CGST and SGST. Retailer will have to pay 1% CGST and SGST and hoteliers will have to pay 5% CGST and SGST.
- Registered taxable person will get ITC of tax paid on Input goods, input services and capital goods.
- In GST, Input Tax Credit of food and beverages, immovable property, passenger vehicle, goods of personal use, works contract etc. is not available.
- For goods HSN Codes and for services SAC Codes are used in GST. Tax rates of goods and services are decided using these codes.
- Every taxpayer should check tax rates of goods and services according to the schedule and notifications otherwise taxpayer will have to face consequences.
- At the time of supply of goods or services the supplier has to give tax invoice to the recipient. The tax invoice shall contain all the information which is necessary as per law.
- If the aggregate turnover of taxpayer is less than Rs. 1.5 Crore then there is no need to mention HSN code of goods on invoice. If the turnover is more than Rs. 1.5 Crore but less than Rs. 5 Crore then it is necessary to mention two digits HSN code on the Invoice. If the turnover is Rs. 5 Crore or more then mention four digits HSN code on the invoice. If the goods are exported then mention eight digits HSN code on thoseInvoices
Impact of GST
The GST has subsumed central and state taxes inevitably changing the indirect tax landscape of India from July 1, 2017. While the actual impact and effect of the massive reform can be gaugedsometime after its implementation, the immediate effect will be: cheaper, costlier and same priced products. While a few products may weigh heavily on your pockets, there will be some which may calm down your nerves and there will be no change in others
The GST Council has made four primary tax rate slabs for various items – low rate of 5 percent, standard rates of 12 percent and 18 percent, and high rate of 28 percent. Some of these products had higher effective tax rates before GST implementation but the new tax policy will lessen the burden on consumers. Meanwhile there will be some products which will now be taxed at a higher rate, thereby increasing their prices. However, it must be noted that the government has kept essential items of daily use tax free, that is, either at zero tax rate or completely out of the ambit of tax under GST. There is a huge number (1,211 items and 600 services) put under the tax brackets, and it may be a burden to keep a track of all of them, here are a few things whose price will increase or decrease or stay the same after the GST.
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Cheaper under GST Food: Unpacked food grains, unbranded Atta, Maida, besan, fresh vegetables and fruits, salt, food at small restaurants, cutlery, ketchup, sauces and pickle. Personal Care: Soaps, hair oil and toothpaste. Travel and Auto: Airfares for economy class travel, bikes or scooters with engine capacity below 350 cc and SUVs. Household: Pressure cookers and pans. Entertainment: Movie tickets that cost less than Rs 100. Hotels: Rooms at non-luxury hotels and hotels with tariffs of less than Rs 7,500. Others: Footwear and Apparels, Weighing machinery, UPS, revenue stamps.
Costlier under GST: Food: Tea and coffee, food at fine dining restaurants or those inside five-star hotels. Personal Care: shampoos and deodorants. Travel and Auto: Airfare for business class and train tickets, bikes which have an engine capacity of over 350 cc. Household: TVs, refrigerators, ACs, washing machine. Entertainment: Movie tickets above Rs 100. Hotels: Hotels which have room tariffs over Rs 7,500. Courier services, mobile phone tariffs, insurance premiums, banking charges, broadband services. Sin: Aerated drinks, tobacco and luxury goods. Others: Mobile bills, tuition fees, salon visits and buying a flat or shop.
Tax free items: There will be no tax imposed on items like: Salt, eggs, milk, buttermilk, unpackaged curd, natural honey, fresh fruits and vegetables, flour, besan, bread, Prasad, lassi, unpacked paneer, fresh meat, fish, chicken, Palmyrajaggery, hulled cereal grains, unbranded and unpackaged tea and coffee, vegetable oil, children’s picture, drawing or coloring books, muddhas made of sarkanda and phoolbaharijhadoo, jute, kajal (other than kajal pencil sticks), bindi, sindoor, bangles, handloom, stamps, judicial papers, printed books, newspapers, unbranded dried leguminous vegetables, silkworm laying, raw silk, silk waste, uncarded or uncombed wool, Gandhi topi, khadi yarn, coconut, coir fibre, unspun jute fibres, Indian national flag, Puja items, prasad, contraceptives, hotels and lodges with tariff below Rs 1,000, education and healthcare services.
Sector-wise Impact Analysis : GST is purported to bring in the ‘one nation one tax’ system, but its effect on various industries will be slightly different. The first level of differentiation will come in depending on whether the industry deals with manufacturing, distributing and retailing or is providing a service.
Logistics : In a vast country like India, the logistics sector forms the backbone of the economy. We can fairly assume that a well organized and mature logistics industry has the potential to leapfrog the “Make In India” initiative of the Government of India to its desired position
E-commerce : The e-com sector in India has been growing by leaps and bounds. In many ways, GST will help the e-com sector’s continued growth but the long-term effects will be particularly interesting because the model GST law specifically proposes a tax collection at source (TCS) mechanism, which e-com companies are not too happy with. The current rate of TCS is at 1% and it’ll remain to be seen if it dilutes the rapid boom in this sector in any way in the future.
Pharma : On the whole, GST is expected to benefit the pharma and healthcare industries. It will create a level playing field for generic drug makers, boost medical tourism and simplify the tax structure. If there is any concern whatsoever, then it relates to the pricing structure (as per latest news). The pharma sector is hoping for a tax respite as it will make affordable healthcare easier to access by all.
Telecommunications : In the telecom sector, prices are expected to come down after GST. Manufacturers will save on costs through efficient management of inventory and by consolidating their warehouses. Handset manufacturers will find it easier to sell their equipment as GST will negate the need to set up state-specific entities, and transfer stocks. The will also save up on logistics costs
Textile : The Indian textile industry provides employment to a large number of skilled and unskilled workers in the country. It contributes about 10% of the total annual export, and this value is likely to increase under GST. GST would affect the cotton value chain of the textile industry which is chosen by most small medium enterprises as it currently attracts zero central excise duty (under optional route).
Real Estate : The real estate sector is one of the most pivotal sectors of the Indian economy, playing an important role in employment generation in India.The probable impact of GST on the real estate sector cannot be fully assessed as it largely depends on the tax rates. However, it is a given that the sector will see substantial benefits from GST implementation, as it will bring to the industry much required transparency and accountability.
Agriculture : Agricultural sector is the largest contributing sector the overall Indian GDP. It covers around 16% of Indian GDP. One of the major issues faced by the agricultural sector, is transportation of agri products across state lines all over India. It is highly probable that GST will resolve the issue of transportation. GST may provide India with its first National Market for the agricultural goods. However, there are a lot of clarifications which need to be provided for rates for agricultural products.
FMCG : The FMCG sector could see significant savings in logistics and distribution costs as the GST will eliminate the need for multiple sales depots. The GST rate for this sector is expected to be around 17% which is way lesser than the 24- 25% tax rate paid currently by FMCG companies. This includes excise duty, VAT and entry tax – all of which will be subsumed by GST.
Freelancers : Freelancing in India is still a nascent industry and the rules and regulations for this chaotic industry are still up in the air. But with GST, it will become much easier for freelancers to file their taxes as they can easily do it online. They will be taxed as service providers, and the new tax structure will bring about coherence and accountability in this sector.
Automobiles : The automobile industry in India is a vast business producing a large number of cars annually, fueled mostly by the huge population of the country. Under the current tax system, there are several taxes applicable on this sector like excise, VAT, sales tax, road tax, motor vehicle tax, registration duty which will be subsumed by GST. Though there is still some ambiguity due to tax rates and incentives/ exemptions provided by different states to the manufacturers/ dealers for manufacturing car/bus/bike, the future of the industry looks rosy
Startups : With increased limits for registration, a DIY compliance model, tax credit on purchases, and a free flow of goods and services, the GST regime truly augurs well for the Indian startup scene. Currently, many Indian states have very different VAT laws which can be confusing for companies that have a pan-India presence, specially the e-com sector. All of this is expected to change under GST with the only sore point being the reduction in the excise limit.
BFSI : Among the services provided by Banks and NBFCs, financial services such as fund based, fee-based and insurance services will see major shifts from the current scenario. Owing to the nature and volume of operations provided by banks and NBFC vis a vis lease transactions, hire purchase, related to actionable claims, fund and non-fund based services etc., GST compliance will be quite difficult to implement in these sectors
Thus, we can conclude that GST is in its initial phases of Implementation. We will face some problems on its way but at the end it would prove to be aboon for the nation enabling fulfillment of our cherished dream of making India a progressively sustainably growing economy
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