It is now essential for every business or professional, to provide GST details in their income tax returns. GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India.
Goods and services are divided into five tax slabs for collection of tax – 0%, 5%, 12%, 18% and 28% there is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.
Types:
- SGST – State GST, collected by the State Govt.
- CGST – Central GST, collected by the Central Govt.
- IGST – Integrated GST, collected by the Central Govt.
- UTGST – Union territory GST, collected by union territory government
Advantages:
- GST is a transparent tax and also reduce number of indirect taxes.
- GST will not be a cost to registered retailers therefore there will be no hidden taxes and and the cost of doing business will be lower.
- People will be in benefit as prices will come down which in turn will help companies as consumption will increase.
- There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa.
- Separate taxes for goods and services, which is the present taxation system, requires division of transaction values into value of goods and services for taxation, leading to greater complications, administration, including compliances costs.
Disadvantages:
- Some Economist say that GST in India would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent.
- Some Experts says that CGST (Central GST), SGST(State GST) are nothing but new names for Central Excise/Service Tax, VAT and CST. Hence, there is no major reduction in the number of tax layers.
- Some retail products currently have only four percent tax on them. After GST, garments and clothes could become more expensive.
- The aviation industry would be affected. Service taxes on airfares currently range from six to nine percent. With GST, this rate will surpass fifteen percent and effectively double the tax rate.
Adoption and migration to the new GST system would involve teething troubles and learning for the entire ecosystem.