GST stands for Goods and Services Tax. It is an indirect tax system introduced by the government of India. GST comprises of most of the existing indirect taxes such as VAT, Service Tax, etc. The GST bill was passed in the Lok Sabha in 2017.
Types of GST:
There are 4 types of GST:
- CGST – It is short for Central GST.
- SGST – It is short for State GST.
- IGST – It is short for Integrated GST.
- UTGST - It is short for Union Territory GST.
CGST – Here, the tax will be imposed by the central government of India. It will replace excise duty, service tax, SAD (Special Additional Duty), CVD (Countervailing Duty), ADE (Additional Duties of Excise) and other indirect taxes levied by the central government. CGST will be applicable on supplies within a state and the tax revenue will go only to the central government.
SGST – Here, tax will be imposed by the state government. It will replace sales tax, VAT, entertainment tax, entry tax, luxury tax, Octroi, purchase tax and taxes on lottery. SGST will be applicable on supplies within a state and the tax revenue will go only to the state government.
Both CGST and SGST will be levied only if the annual turnover is more than Rs.20 lakhs. Registration for both is required only if the turnover is more than Rs.20 lakhs. Dealers can use the Composition Scheme to avail benefits, if the turnover is Rs.50 lakhs.
IGST – It will be imposed by state and central government together, but is collected by the central government. The revenue is shared by both central and state governments. It will replace Central Sales Tax (CST). It will be applicable on interstate import and supplies. No exemption limit has been defined by the government for this type of GST. If dealers supply in different states, then they have to register for this GST. It will also be applicable on free supplies. For this type of GST, the composition scheme is not available.
UTGST - It will be imposed and collected by the Union Territory (UT) governments. It is applicable to the supply of goods and services that occur in the Union Territories of India. There are 5 Union Territories in India. They are Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu, and Chandigarh. This is charged along with the Central Goods and Services Tax (CGST). Hence, for a transaction in a Union Territory, the tax charged is the sum of both CGST and UTGST. The CGST is collected by the central government, while the UTGST is collected by the UT government.
GST Rates in India 2018:
The GST rates have been revised a number of times since the inception of the Goods and Services Tax (GST). The latest rate revision was brought into effect in the 28th GST Council meeting which was held on 21 July 2018. In this meeting, the council revised the rate of 45 goods and 2 services.
The following table reflects the changes in the rates applicable to the goods and services:
|Goods or commodities||New rate||Old rate|
|1) Rakhi (only if it is not made of semi-precious or precious material)||Nil||18%|
|Sal leaves and products of the same||Nil||18%|
|Raw material for brooms||Nil||12%|
|Phosphoric acid of fertilizer grade||5%||12%|
|Coir pith compost||Nil||5%|
|Stone, wood deities, marble||Nil||5%|
|Jewellery boxes and handbags||12%||18%|
|Solid biofuel pellets||5%||18%|
|Knitted caps if the retail sales value exceeds Rs.1,000||5%||12%|
|Textile floor, handmade carpets||5%||12%|
|Ethanol which is sold to companies that are responsible for marketing oil for mixing with fuel||5%||18%|
|Unpolished Kota stones and similar items||5%||18%|
|Brass kerosene pressure stove||12%||18%|
|Handicrafts that are not handmade||12%||18%|
|Zip and slide fastener||12%||18%|
|Rubber roller that is hand-operated||12%||18%|
|Fuel cell vehicle||12%||28%|
|Grafting putty, glaziers’ putty, resin cements||18%||28%|
|Televisions up to 68cm||18%||28%|
|Food mixers and grinders||18%||28%|
|Milk coolers, freezers, ice cream freezer, refrigerators, water coolers||18%||28%|
|Hair clippers and shavers||18%||28%|
|Storage water heaters||18%||28%|
|Hand dryers and hair dryers||18%||28%|
|Varnishes and paints, lacquers and enamels||18%||28%|
|Electric smoothing irons||18%||28%|
|Pads for applying cosmetics||18%||28%|
|Work trucks that are not fitted with handling/lifting equipments||18%||28%|
|Trailers and semi trailers||18%||28%|
|Motor vehicles utilised for special purposes||18%||28%|
GST Rates in India 2017
The GST Council has proposed a four-tier tax structure wherein rates are either nil or very low so far as essential food items are concerned. The reason for this is that these food items constitute around 50% of the consumer basket, and contributes significantly towards ensuring that widespread inflation is kept in check even after the revised tax slabs under GST have been implemented. Negative items and luxury goods, however, are expected to be taxed at a considerably higher rate in order to maintain revenue neutrality for state and central governments following the implementation of the new GST rates. Other precious metals are likely to see the implementation of an extra concessional GST tax slab as these metals are currently taxed at just 1% under VAT.
Following is a table of commodities and services and the GST rates applicable to them:
|Commodities / Services||GST Rate|
|Items that are not listed in any other category, such as electrical appliances, oil, soaps, etc.||18%|
|All services like professional charges, fees, insurance, banking, restaurants, telecom, etc.||18%|
|Essential farm produced mass consumption items such as wheat, rice, food grains, etc.||NIL|
|Mass consumption and common use food items like mustard oil, tea, spices, etc., but not including processed foods||5%|
|Cars and white goods||28%|
|De-merits and luxury goods and items that fall under the sin category, such as aerated drinks, tobacco, luxury cars, pan masala, etc.||28% + CESS|
GST Council implements rate cuts leaving 35 goods in the highest tax bracket
By July 2018, the GST Council reduced tax rates on 191 goods, leaving only 35 items in the 28% tax category. Some of these include:
- Dishwashing machines
- Digital cameras
- Video recorders
- Parts of automobiles
- Motor vehicles
- Aerated drinks
- Sin items such as tobacco, cigarette, and pan masala
At the time of GST rollout, there were 226 goods in the highest tax slab. Over a period of 1 year, the GST Council has slashed the taxation rates for 191 items in total. The highest tax slab may be further rationalised to ensure that only sin goods and super luxury goods are taxed at 28%.