Goods and service tax has been the newly introduced tax resume. It has been it force since July 2017. The regime has classified all the services and business categories into various groups. Each group is assigned different tax rates based on the business type and usage. Now the system is aimed at one single purpose – to remove the cascading effect. The previous taxation system had an application of VAT at every level.
For instance let’s consider the manufacturer to customer cycle. Manufacturer buying raw material has application of VAT on it, transport of goods from manufacturer to Warehouse has application of VAT and excise duty on it, From Warehousing or Wholesaler to retailer VAT is again applied, from retailer to customer as well VAT is applied on sales price. Also along with VAT there were a series of other taxes applied as well. To remove all the extra tax rates applied, GST was launched. It brought all the tax rates under one name. GST consideration is mandatory for buying or selling of goods in India.
Today in India there are only two tax rates applicable, one is GST and another one is Excise duty. This simplifies the entire tax structure in India.
The Inter state transfer is registered under CGST and SGST and the intra state transfer is registered IGST.
Process of GST
Under GST the entire procedure is recorded as follows –
If a person considers inter state transfer he or she will purchase the goods under SGST and CGST if it is inter state purchase. If it is an intra-state purchase then the purchase will be made after application of IGST (IGST is nothing but a combination of both SGST and CGST under tax regime.) Later on the sale of the goods would also be done through application of SGST and CGST in inter state and IGST under intra state sale of goods.
Such sales and purchases are recorded and filed on the online GST portal at the end of every month or quarter. This sums up to net debit or credit in the person’s account for tax payment or receivable. This amount stays credited in the GST account (if credit) and is set off against upcoming debits and vice versa.
In the case of the plastic industry the tax applicable is 18% on BOPP Rolls. Now purchasing such rolls triggers for SGST application of 9% and CGST application 9%. This sums up to the entire tax applicable @ 18%. Similarly if it is intra state purchase then IGST applicable would be 18%.
Tax distribution is done among the state and centre in tax percentage proportion. The CGST directly gets credited to the central government account and the SGST is the income of the state government. Also the IGST gets collected by the central government, later on the centre distributes the tax in the proportion among the states in which the trade is executed.
Previously there were multiple tax rates applied such as –
- Purchase tax
- Sales tax
- Luxury tax
- Tax applicable to lotteries and winnings
- Entertainment tax
- Centra Excise duty
- Customs duty
- Advertisements tax
- Excise duty and many more.
All these have been converted into SGST, CGST, IGST and excise duty.
There are currently five tax rates applicable on every commodity or service. These are 0%, 5%, 12%, 18% and 28%. There are also other rates such as 0.25%, 3% etc. As per revised tax structure Diamonds and precious stones are taxed at 0.25% from 3%.
This cap consists of all the basic essentials that are necessary for survival. These include milk, curd, educational services, besan, prasad, vegetables, unpacked paneer and food grains, salt, Gur, unbranded atta and maida, health services, Lassi, Eggs, Khansari sugar, spare parts for manufacturing hearing aids etc.
This cap contains the major goods. They are tea, sugar, edible oils, Milk powder, Nuts, Spices, Fabric, Coal, Domestic LPG, Kerosene, Coffee, Matting, Footwear, Apparels, Raisin, Roasted coffee beans, Agarbatti, Life saving drugs etc.
The segment includes butter, Ghee, Almonds, Juice, Computers, Mobile phones, Umbrella, Coconut water etc.
Hair Oil, Ice cream, Soap, Pasta, Printers, Computers, Capital goods, Toothpaste, Corn Flakes, PVC etc.
Consumer durables items and luxuries, Cars and exclusive motorcycles, aerated drinks etc.
There are constant updates in inclusion and exclusion of things from the tax applicable brackets. Thus latest data should always be reviewed.
Recently there have been many updates from the government the tax regime. The items such as Rakhis, Sanitary napkins, Broom raw materials, Marble or stone, Khali dona, Sal leaves etc. have been brought under the 0% tax bracket.
Similarly Fabrics costing below 5081 Rs, Handloom, Coverings or textile floors, Kota stones, ethanol, Biofuel pellets and marine engine have been revised for 5% tax bracket.
Along with this Bamboo following, fuel cell vehicle, handicrafts, handbags, Television upto 68 cms have been bright under 12% tax bracket.
Washing machines, vacuum cleaners, food grinders, paints, hair cleaners, storage water heaters, trailers, powder puffs have been put under the 18% bracket.