1. All you need to know about GST
What is GST?
The current tax system in India levies cascading taxes which are ultimately borne by the common man. GST
aims at cleaning the multiple tax buckets and hence lowers the burden from end-users. Being a destination
based tax; GST would ease inter-state trade of goods and services.
What is input tax credit?
To make sure that tax is levied only on the amount of value addition at each stage of the supply chain, credit
for the taxes paid at the previous stage is granted. For example, a garment manufacturer gets credit for the
taxes paid on the materials purchased while computing the final indirect tax liability on his product that is
collected from the consumer. Similarly, a service provider, say, a telecom company, gets credits for the taxes
paid on the goods and services used in his business.
Who is liable to pay GST?
Businesses and traders with annual sales above Rs20 lakh are liable to pay GST. The threshold for paying GST
is Rs10 lakh in the case of northeastern and special category states. GST is applicable on inter-state trade
irrespective of this threshold.
Taxes GST Replaces
GST India will subsume the following taxes that are currently being levied by the Central and State
i. Central Excise Duty
ii. Duties of Excise
iii. Additional Duties of Excise
iv. Additional Duties of Customs
v. Special Additional Duty of Customs
vi. State Value Added Tax (VAT)
vii. Central Sales Tax (CST)
viii. Luxury Tax
2. ix. Entry Tax
x. Entertainment Tax
xi. Advertisement taxes
xii. Purchase Tax
xiii. Taxes on lotteries and gambling
xiv. Central and State Surcharges and Cesses on goods and services
The Goods and Services Tax will range from 0% to 28% depending on various product categories. The four-
tier GST tax slabs of 5%, 12%, 18% and 28% will be set lowest for essential items and highest for luxury goods
Which items are covered under GST and which are not subject to GST?
Daily use consumer items such as cereals, pulses, dairy produce, fresh meat, fish, fresh vegetables and fruits
are all exempt from GST, according to government. Education and skill development services have also been
granted exemption. Alcoholic drinks, electricity and five petroleum products (crude oil, petrol, diesel, natural
gas and aviation turbine fuel) are out of the purview of GST. These will continue to attract VAT and central
excise. The petroleum products have been excluded only temporarily.
What are the benefits of GST?
GST brings transparency on the taxes levied on the supply of goods and services. At present, when an item is
purchased, the common man sees only the state taxes on the product label, not the various embedded tax
components. GST will improve the ease of doing business as entry barriers along state borders will be
dismantled. The new indirect tax system is expected to improve tax compliance, boost revenue receipts of
central and state governments and accelerate GDP growth rate by an estimated 1.5-2 percentage points.
Elimination of cascading of taxes will result in reduced tax burden on many items.
When India Implements GST
Initially, GST was to come into effect from the new financial year i.e. from April 1, 2017. However, that
deadline was missed and GST will be implemented from July 1, 2017.
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