1) What are final GST rate slabs?
The Goods and Services Tax (GST) will be levied at multiple rates ranging from 0 percent to 28 percent. GST Council finalized a four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess.
Service Tax will go up from 15% to 18%. The services being taxed at lower rates, owing to the provision of abatement, such as train tickets, will fall in the lower slabs.
In order to control inflation, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.
The lowest rate of 5% would be for common use items. There would be two standard rates of 12 percent and 18 percent, which would fall on the bulk of the goods and services. This includes fast-moving consumer goods.
Highest tax slab will be applicable to items which are currently taxed at 30-31% (excise duty plus VAT).
Ultra luxuries, demerit and sin goods (like tobacco and aerated drinks), will attract a cess for a period of five years on top of the 28 per cent GST.
The collection from this cess as well as that of the clean energy cess would create a revenue pool which would be used for compensating states for any loss of revenue during the first five years of implementation of GST.
Finance minister said that the cess would be lapsable after five years.
The structure to agree is a compromise to accommodate the demand for the highest tax rate of 40% by states like Kerala.
While the Centre proposed to levy a 4% GST on gold but the final decision on this was put off. During a press conference, finance minister Mr. Jaitley said, 'GST rate on gold will be finalized after the fitting to the approved rates structure of all items is completed and there is some idea of revenue projections'.
The principle for determining the rate on each item will be to levy and collect the GST at the rate slab closest to the current tax incidence on it.
The GST will subsume the multitude of cesses currently in place, including the Swachh Bharat Cess, the Krishi Kalyan Cess and the Education Cess. Only the Clean Environment Cess is being retained, revenues from which will also fund the compensations.
2) What are CGST, SGST and IGST?
India is a federal democracy that is one which has clear demarcation of powers, responsibility and revenue collection between the states and the centre in its constitution. For example, law and order fall under the state's jurisdiction while the nation's defence is the centre's responsibility. The GST too needs to have clear provisions on what areas the centre and the state are allowed to collect revenue from taxation to prevent an overlapping.
The Central GST or CGST is the areas where the centre has the powers and State GST where the State has taxation capabilities. The IGST or Integrated GST is for movement of goods within the states of the Indian union. This will be collected by the union, however, will be transferred over to the states. Thus it is essential that if and when the GST comes out it is rolled over in the entire nation simultaneously.
3) What are the differences between the UPA's GST and the NDA's GST?
Below are the primary differences:
- Petroleum sector has been kept out of the ambit of GST
- Liquor for human consumption is exempt however tobacco and tobacco products will fall under GST.
- There is a 1% tax on top of the GST for inter-state movement of goods and services.
4) What are the taxes that GST replaces?
The GST replaces numerous different indirect taxes such as:
- Central Excise Duty
- Service Tax
- Countervailing Duty
- Special Countervailing Duty
- Value Added Tax (VAT)
- Central Sales Tax (CST)
- Entertainment Tax
- Entry Tax
- Purchase Tax
- Luxury Tax
- Advertisement taxes
- Taxes applicable to lotteries.
5) What will be the short-term impact of GST?
The GST will fuel inflation for the short term. The GST rate starts at 5% and 18% taxation services such as restaurants, movies etc. are bound to increase prices. Another problem with the GST that many pundits feel is not including liquor and petroleum under GST's ambit. These are major revenue sources for the government and experts feel this is being done due to a few crony capitalists who need some time to funnel away their black money as the GST promises to widen the taxpaying population.
Also, read: Impact on GST on E-Commerce
6) When will GST be implemented?
The government may not be able to meet the initial GST implementation date of 1st April 2017. Its widely assumed that GST rollout will start only after 1 July 2017. Keep checking the article for latest updates.
7) What is a constitutional amendment?
A Constitutional Amendment as the name suggests is any change in the Constitution. A democracy like India derives all its rules and laws from the Constitution and hence any change in the Constitution is a change in the fundamental fabric of the country. The GST is the One Hundred and Twenty-Second such proposed amendment and hence is named The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014.
In simple terms bills other than the Constitution Amendment Bill are just modifications to topics that are already mentioned in the constitution. The introduction of a few new IITs is a perfect example. All these requirements are a simple majority in both the houses and the President's Approval. However, the GST requires a Constitution Amendment Bill which is a direct change in the Constitution and requires two-thirds of the votes in both Lok Sabha and Rajya Sabha.
8) What are the finer points in the implementation of the bill?
Several committees were set up to evaluate the feasibility and implementation of the GST. Some fine points which were considered are:
- The problem of separating the taxation powers of the state and the centre which resulted in CGST and SGST.
- Exemptions from the GST which currently includes Petroleum and Liquor for human consumption.
- GST will be applicable on imports too along with the Basic Customs Duty which has not been scrapped.
- The GST will be applicable at the point of sale. In comparison, the Value Added Tax is a destination based tax while excise duties are taxed at the origin.
- The workings in the implementation of IGST.
9) What is the Empowered Committee?
The Empowered Committee is a committee of the Finance Ministers of the states. It was set up by the Vajpayee Government to look into the Value Added Tax model. The committee has had an influential hand in shaping and structuring of the GST.
10) What will become costlier and cheaper?
According to experts, these items could become costlier:
- Cigarette prices likely to go up as GST rate for tobacco will be higher than current duties
- Commercial vehicles such as trucks will become costlier
- Mobile phone calls may get costlier as service tax will go up
- Textile and branded jewellery may become costlier
And these could become cheaper:
- Auto: Prices of entry-level cars, two-wheelers, SUVs may fall
- Car batteries likely to get cheaper
- Paint, cement prices likely to fall
- Movie ticket prices likely to fall as entertainment tax will come down
- Electronics items like fans, lighting, water heaters, air coolers, etc. will get cheaper