GST: A Business-Friendly Tax Regime

The goods and services tax (GST) is an extensive value-added tax (VAT) on goods and services.

In 1954, France became the first country to introduce the GST system.

At present, GST has spread to over 140 countries worldwide. Through a tax credit mechanism, GST is received on value-added goods and services at each stage of exchange or bargain in the supply line.

Many countries adopted a system of unified GST. Brazil and Canada like countries follow a dual system wherein GST is imposed by both nationwide and state government or regional regimes.

In India, GST is being formulated on central goods and services tax (CGST) and a state goods and services tax (SGST) will be charged on the taxable value of marketing.

What is GST?

The goods and services tax (GST) is a tax on goods and services sold domestically for consumption. The tax is included in the final price, paid by consumers at the point of sale and passed to the government by the seller. The GST is generally used by countries globally.

GST is known as indirect tax, and it is one tax that is applicable all over India.

The journey of GST started in the year 2000 when a council was set up to formulate the law.

The Goods and Service Tax Act was enacted in Parliament on 29th March 2017 and came into effect on 1st July 2017.

GST replaced several types of taxes at both central and state levels. Some of them are mentioned below:

On the central level, GST replaced:

• Central excise duty
• Central sales tax
• Service tax
• Additional duties of customs
• Additional duties of excise
• Excise duty levied under the textiles and textile production

At the state level, GST replaced:

• Purchase tax
• Central sales tax
• VAT
• Surcharge and CESS
• Entry tax
• Taxes on lottery, gambling and betting
• Taxes on advertisements

Benefits of GST

• GST aims to reduce corruption which is related to sales without receipts.

• GST has reduced the taxes on some goods like cars, smartphones, etc.

Business Friendly New Tax Regime

The choice of the tax regimes depends upon the various factors of taxpayers, such as current income level, income composition that is the source of income, investment appetite, and saving habits, among other factors. 

In India, the GST rate for various goods and services is divided into four slabs: 5% GST, 12% GST, 18% GST, and 28% GST. 

5% GST 

The 5% GST slab consists of 14% of goods and services. Some of them are mentioned below:

• Cashew nuts
• Domestic LPG
• Skimmed milk powder
• Milk food for babies etc.

12% GST 

The 12% GST slab consists of 17% of goods and services. Some of them mention below:

• Butter
• Cheese
• Ayurvedic medicines
• Cell phone
• Frozen meat
• Work contract etc.

18% GST 

The 18% GST slab consists of 43% of goods and services. Some of them mention below:

• Hair oil
• Toothpaste
• Soaps
• Cakes
• Pastries etc.

28% GST 

The 28% GST slab consists of 19% of goods and services. Some of them mention below:

• AC
• Refrigerator 
• Premium cars
• Cigarettes etc.

If the lowest slab increases 1%, which includes primarily packaged food items, it will result in Rs 50,000 crore yearly revenue profit.

Some more pieces of information

• Milk does not come under any GST slab. 
• The items like sugar and coffee come under 5% GST.
• Sweets also come under 5%GST.
• To relieve the pressure on power industries, the GST of coal is also reduced from 11.5 % to 5%.
• GST is not imposed on liquor for human consumption.
• In 2021, Our union finance minister Smt. Nirmal Sitharamam announced that GST does not include petroleum and petroleum products.

GST exempted category

The GST exempted category has been classified into two categories. List of exempted goods under GST: 

Food 

Cereals, edible fruits and vegetables, edible roots and tubers, fish and meat, ginger, turmeric, curd, lassi, buttermilk and supplements.

Raw materials

Raw silk, silk waste, charcoal, raw jute fibre, and handloom fabrics.

Miscellaneous

Books, maps, newspapers, journals, postal items, bangles, chalk sticks, kites, organic manure, and vaccines. List of exempted services under GST.

Agriculture services

This includes all services related to agriculture except the rearing of horses, warehouse activities, and supply of farm labour.

Miscellaneous services

Services provided by recognised sports bodies. 

Educational services

Transportation for students and faculty, midday meal service, examination service.

Coaching is provided to the students by institutions under the central scheme.

Medical services

Services are provided by the ambulance, organisations facilitating religious orthodoxy and charity.

Services are provided by health care clinics and veterinary clinics.

Transportation services

Transportation of goods inland waterways, by road or bridges on toll payment.

New exemptions that have been added:

• Services are provided by the GSTN to the central government, state government, and union territories. 

• Export of goods from India by vessel and air.

Types of the tax system present in GST 

There are mainly four types of tax systems present in the GST

Integrated goods and services tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST). The tax collection rate under every one of them is unique.

• IGST is a duty under the GST system that is applied on the highway (between 2 states) supply of products and additional benefits as well as on imports and commodities. The IGST Act represents the IGST.

• SGST is an expense exacted on Intra State supplies of the two labour and products by the State Government and will be administered by the SGST Act.
• CGST is a duty exacted on Intra State supplies of the two labour and products by the Central Government and will be represented by the CGST Act.
• Union territories charge UGST. They will be charged on the transaction undertaken by the union territories of India.

Conclusion

The Government has inducted the GST system to smoothen tax procedures and bring industries into the formal economy. Living GST-compliant, corporations can encounter the excellence of having a centralised tax policy and simple input credits. The preceding machine without a GST means that tax is paid at the price of products and margin at each level of the manufacturing system.