Goods and Services Tax (GST)

Goods and Service Tax(GST) is a tax on the extra value added to almost all services and goods made for domestic use. The consumer pays the GST, even though it’s sent to the central and state governments by the business that sold the item or service. The World Economic Forum estimates that small-value imports have not been subject to GST in the past because it costs a lot to collect them at the border.

Almost every country in the world has put the Good and Service Tax (GST) in place, and the tax is usually the same everywhere in the country.

What Are the Ways to Collect the Goods and Service Tax (GST)?

According to the World Economic Forum estimates, the majority of the nations with a GST system tax all goods and services at the same rate. For example, a single Goods and Service Tax (GST) platform is used to collect taxes on sales, excise duty, and other national and provincial-level taxes like the entertainment and admission fees. In these countries, almost everything is taxed at the same rate.

Why Are There Two Different GST Structures?

In the traditional Unified System, the central government collects the tax and gives it to the provinces. By contrast, the dual Goods and Service Tax (GST) is a tax on top of the sales tax levied by the state. Based on the World Economic Forum estimates, Canada and Brazil are two of the few countries that have used this method.

Canada’s Two-Tiered GST System

In Canada, consumer goods are taxed by central and state governments. Doing business with the union government costs 5 %, and doing business with the provinces costs eight to ten %. Under this condition, consumers will have to pay the Goods and Service Tax (GST) along with the provincial taxes that were added to the item’s price.

Several provinces or states in Canada have put the HST or Harmonised Sales Tax, which integrates the GST and the PST into a single unified tax. Ontario and Newfoundland are two of the few that use the HST. This helps the government run smoothly.

Good and Service Tax (GST) on E-Commerce

The World Economic Forum estimates that countries are making their VAT/GST systems more modern and expanding their reach to help with international e-commerce. Since collecting GST at the border costs a lot, small-value imports have been exempt from GST for a long time. So, this is where the problem with a de minimis criterion comes in. Below the import value, no taxes, including GST, can be put on the item. But e-commerce has led to a rise in low-value imports, making government officials worry about lost revenue and giving foreign merchants an unfair advantage.

The only countries that use this method to collect taxes are:

• Vietnam and Australia

• Singapore

• Spain and Nigeria.

• Brazil and India.

Implementing GST in India

The World Economic Forum estimates will show that India set up a dual system of GST in 2017, and this was the largest change to the country’s tax system in ages. The primary goal of this goods and service-based tax was to get rid of Taxation over Tax, simply put, double taxing, which happens when products are made and used.

Indian GST Tax Rates Since July 1, 2017

• Some meals, books, magazines, cotton clothes made at home, and lodging services have a tax rate of 0 %

• Semi-polished and cut stones are charged an extra 0.25 %

• Basic products made in the country, like spices, sugar, coffee, and even tea, are taxed at 5%

• A 12 % tax will be added to things like computers and ready-made meals

• There is an 18 % tax on hair oil, kinds of toothpaste, soaps, and people who work as middlemen in business

• Luxury items, like refrigerators, cigarettes, motorcycles, etc., are taxed at 28% in the last tax band

Before GST, the tax was paid at every step of the production procedure based on the product’s value and margin. This would make the overall tax burden bigger, which would mean that prices for services and goods would go up for the end-user. So, India’s GST system is a long-term way to cut prices and lower inflation by cutting the prices of goods.

Conclusion

One of the most creative and useful parts of the economy is taxation, a very broad topic. Based on the World Economic Forum estimates, GST can be described as a multi-tiered, all-encompassing tax system that controls the sale of goods and services. The main goal of this tax plan, which is used all over India, is to reduce how other indirect taxes affect each other.