Ten Doubts About GST You Should Clarify
The Narendra Modi-led government will inaugurate the new indirect tax at the stroke of midnight of June 30 in Parliament.
Seventeen years in the Building, India rolls out of the Goods and Services Tax (GST) from July 1, 2017.
The GST is intended to be considered a unified in direct tax across the country on services and products. In the current procedure, tax is levied at each period separately by the Union government and the States at varying rates, around the full value of the goods. However, under the GST system, tax will be levied only on the value added at each stage. It is just a single tax (collected at several different points) using a full setoff for taxes paid sooner from the value string.
Thus, the last consumer will bear just the GST charged by the last trader in the distribution chain with set off benefits at all the preceding stages.
What Exactly Is State GST and Central GST?
For transactions within a Nation, there is likely to be two aspects of GST - Central GST (CGST) and also Nation GST (SGST) - based on the worth of goods and services. Both the Centre and the States will simultaneously levy GST across the value chain.
In the case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST). The IGST will be roughly equal to CGST plus SGST.
Why was GST established?
The GST has been established to subsume various indirect taxes levied at different levels, with the thought of decreasing red-tape, plugging leakages and paving the way for a transparent indirect tax strategy.
How does GST affect the common man?
The impact of the GST on the rates of goods and services will largely depend on the item under consideration. Additionally, it will be dependent upon the respective State governments and their intervention with respect to commanding prices of important commodities. Milk, as an instance, that will be very likely to observe that a spike in prices after GST is implemented, may be sold at cheaper rates, if the State government offers a subsidy onto it.
How can GST help in getting rid of tax evasion?
A comprehensive IT system, GSTN, will allot universal GST numbers (similar to PAN) to all manufacturers, traders, stockists, wholesalers and retailers. This may simplify the administration of all indirect taxes and plug leakages. The federal government also intends to incentivise tax compliance with dealers.
Whether the GST will soon be beneficial to this inferior or not only time can tell. Prices of vegetables and fruits will likely climb under the GST regime and services like eating in restaurants will probably receive more expensive. What's going to likely get cheaper will be items such as clothes, as cascading taxes at various stages of manufacturing would no longer connect with them.
Is GST planning to benefit people below the poverty line?
Regarding people living under the poverty line, there might not be an immediate effect of the GST to them as such since basic necessities like food are unlikely to pull the GST but raised ranges of their GST with a larger tax base should give an impetus to this government to devote more money for social and poverty alleviation programmes. Therefore, the GST should benefit all sections of the society. Additionally, the GST, being a nationwide tax, can cause potentially higher inflation in the very first few years of its introduction however would gradually increase the general GDP.
How can GST affect tax penalties of a salaried person?
(Source: The Hindu)
The GST is a direct tax collected from clients that buy artificial products or solutions. So whether you're earning a salary or not, provided that you purchase something, you'll be paying tax.
Which are all those items which could eventually become costlier and which can be those which can eventually become cheaper?
Officially, services are expected to become costlier under the GST regime, because the expected GST rate could be higher than the existing service tax rate of 1-5 \%. Clearly, the GST is forecast to bring down prices of indigenously manufactured goods on account of current effective indirect taxes (central excise @ 12.5percent, State VAT @ 5 percent-15\% etc.) Being higher as compared to recommended lower GST speed = 5\% along with standard GST rates @ 12\% and 18 percent. Therefore, cost of certain kind of goods may possibly come down according to the effective rate of indirect taxes being paid at present and the tax brackets under which goods are grouped under the GST.