GST stands for Goods and Services Tax. GST is going to be implemented by 1 july 2017. For an indian citizen it is necessary to know about it and understand how and on whom it will be applicable. That is why i am writing this article so that everyone whether a business person or an individual whoever reads this article gets a glimpse of what GST actually is and how it is applicable on them and why it is necessary.
First of all there are two types of taxes we in india pay to the government.
1. Direct Tax
2. Indirect Tax
Direct Tax, is a tax imposed on a person or a property different from the tax imposed on transactions.
Example: Income Tax, which is directly paid to the government from what we get in our pocket.
Indirect Tax, is a tax collected from the customer by an intermediary, later the intermediary pays it to the government and files return from the government for the tax paid by the intermediary at the time of purchase.
Example: Taxes what we pay when we purchase goods or services, these taxes are included in the MRP or the Value of the product or service whatever you purchase.
For your information there are around 18 types of indirect taxes presently collected in india. For example sales tax, service tax, VAT, CST, entertainment tax, luxury tax, custom duty, excise, octroi etc.
There are many products and services for which you need to pay multiple taxes and sometimes we require to pay taxes on taxes. Thus many goods and services becomes costlier for us. Keeping these things in mind GST bill was presented in the indian parliament and is going to be implemented by 1 july 2017. GST will replace all the indirect taxes which are currently being collected when you purchase any good or service.
One Nation One Tax “GST”.
When GST planning was being made many products were considered and they were classified into four different slabs.
Apart from these four slabs there is a free slab in which there are products on which no GST will be charged.
Slab 1 consists of products on which 5% GST will be charged.
Slab 2 consists of products on which 12% GST will be charged.
Slab 3 consists of products on which 18% GST will be charged.
Slab 4 consists of products on which 28% GST will be charged.
For a common man it will not impact directly but it will definitely impact indirectly, many goods and services which are expensive their price will fall and many goods and services which are inexpensive their price will rise.
For a business person it will impact directly as due to this change in the taxation the prices will fall for some goods and services and for some goods and services it will rise, thus it will result in fall and rise in the demand of a good or service.
Not only this much a business person should understand the slabs very well because it will help them in finding, which category does their product falls? how much GST is to be paid? is he liable to pay tax or not?
to know the answers of these questions a business person should understand GST and classification of products under GST Slabs.
We can say businesses here are divided into three categories.
1. Whose annual turnover is less than 20 lacs per year. Firms falling under this category are exempted from GST. No need to pay GST.
2. Whose annual turnover is more than 20 lacs and upto 75 lacs. SME’s comes in this categories and in india many SME’s do Tax jhol, by selling without bill products. but now you cannot sell products without as the inspections will be strict than earlier because now there will be transparency when there will be only one tax to be paid it will be easy to assess whether the person has paid the tax or not. Businesses falling under this category has two options given by the government.
a. Register for GST and keep paying taxes by showing the purchase and sales bills.
b. Composite Scheme. pay only 0.5% of the annual turnover(NEW SCHEME).
3. Whose annual turnover is more than 75 lacs. For firms falling under this category it is mandatory to register for GST, pay required taxes and file returns on time.
Lets have a look at products and their tax slab. Which will give us an idea whether their price will be increased or decreased after GST implementation.
Some Tax Free Goods and Services
- Any sort of unprocessed and local meat.
- Pasteurized form of milk, separated milk, fresh milk and cream, Buttermilk, unpacked and unbranded paneer and honey.
- Fresh fruits and vegetables which has not been preserved, unroasted coffee beans, unprocessed tea leaves.
- Unprocessed and unbranded fresh turmeric, wheat rye, barley, oats, maize, rice and millet.
- Un-aerated unprocessed water, Common salt, kala namak and rock salt.
- Medical products and medicines.
- Books, newspapers, journals, maps, atlas, globes.
- Tariff hotels priced under Rs. 1000.
- Metro fare, local train tickets, fare of non AC train.
- Education and activities related to it and healthcare services.
Few Goods and Services in the 5% Slab
- Packaged form of honey, paneer, yogurt, fresh cream etc.
- Herbs, dry fruits, frozen fruits and veggies or used in preservative solutions.
- Processed, roasted and packaged coffee, packaged and processed tea.
- Processed and packaged spices like cinnamon cloves, nutmeg, mace, cardamom, thyme, bay leaves etc.
- Mixture for making bread, pastry and other bakery.
- Carriages for disabled persons.
- Fare of AC train.
- Fare of economy air travel.
- Cab fare.
Few Goods and Services in the 12% Slab
- Frozen and packed meat items, butter and cheese.
- Namkeens, bhujia and other such edible item, washing detergents.
- Books for entertainment and education.
- Mathematical and geometry boxes, color boxes, pencil sharpners, other stationary products.
- Utensils, sewing needles, kerosene and LPG stoves.
- Household articles made up of iron, steel, copper and aluminium.
- Tariff of non AC hotels.
- Fare of business class air tavel.
Few Goods and Services in the 18% Slab
- Refined sugar, artificial honey.
- Cooked or uncooked pasta, corn flakes, bulgar wheat, waffles and wafers.
- Soups, ice cream, food mixes, toothe powder, agarbatti, products made up of plastic, kitchenware, other household articles, electronic toys.
- Paper related products like facial tissues, or any type of tissue.
- Helmets and hats.
- Tariff of air conditioned hotels.
- Liquor serving hotels and bars.
- Services relating to telecom and finance.
Few Goods and Services in the 28% Slab
- Molasses, chewing gum, bubble gum, white chocolate, any sort of chocolate and preparations containing cocoa.
- Custard powder, pan masala.
- Perfumes, beauty products, bathing soaps.
- Plywood, veneered panels and similar kind of laminated woods.
- Mirrors or products with mirror or glass, stoves.
- Five star hotels with tariffs above Rs. 5000.
- Race club betting.
- Consuming films.
So, this was GST in simple terms, there might be some points i would have forgotten to mention here. If you have something important to share regarding GST please share with us in the comment section below.
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