GST : One Tax, One Nation

The GST will be a one-tax, one-nation regime where all goods and services will be taxed at 0 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent wherever they are purchased.

There is higher tax called a “sin” tax on goods like aerated drinks.

GST also reduces the tax burden on the final consumer since it ends the tax-on-tax phenomenon, also known as cascading effect. Now, a tax paid at one stage can be deducted from the tax paid at the next stage, reducing the overall tax incidence on the item.

But not all items will be subject to GST.  Alcoholic drinks, electricity and five petroleum products crude, petrol, diesel, natural gas and aviation turbine fuel will not be under GST and will continue to attract Value Added Tax (VAT) and central excise.

Dual GST

India will have a dual GST. This means that the single rate set for a good or service has two components – Central GST (CGST) and a State GST (SGST). So nine per cent of an 18 per cent GST goes to the centre and the other 9 per cent goes to the state.

There is also an Integrated GST (iGST) on the interstate supply of goods and services, which can be set off against CGST and SGST that is to be paid.

GST will replace all central taxes including central excise and additional duties of excise, service tax, countervailing duty in the case of customs duty, central surcharges and cesses.

Also, GST will replace all state taxes including state vat, central sales tax, luxury tax, all forms of entry tax, entertainment and amusement tax, taxes on advertisements, purchase tax, tax on lotteries, betting and gambling, state surcharges and cesses.

Will GST trigger inflation or bring down prices?

Normally, GST would have pushed up inflation and that is what happened in most countries that switched to GST.

The inflation spike lasted from between six months to two years. But in India, the state and central GST acts have a provision which mandates that manufacturers and service providers have to pass on any benefits from a reduction in tax rate or availing of input tax credit to consumers in the form of lower prices.

This provision was introduced at quite a late stage because of fears that companies may not lower prices even if it is warranted and trigger inflation. there are stiff penalties for companies not passing on the benefits, which includes companies losing their central GST registration.

Who will not pay GST

This is important – Businesses with an annual turnover of Rs. 20 lakh (Rs. 10 lakh for special category states) would be exempt from GST. Moreover, Petroleum products such as petrol, diesel and aviation turbine fuel have been kept out of GST as of now. The GST Council will take a decision on it at a later date.

What will be cheaper

The auto sector will benefit from the new tax as the cost of entry-level cars, SUVs and two-wheelers is likely to fall. Not only this, car battery prices may also fall.

Electronic household appliances like fans, lighting, water heaters, air coolers may also cost you less.

What will be more expensive after GST

After GST, cigarette will cost more as tax on tobacco will be higher than present.

With the increase in service tax, call charges would also rise.

Textile and branded jewellery may cost more.

– Awanish P. N. Sharma

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