Goods and Service Tax – GST is the buzz word these days. India is going to become the first country to implement GST system.
Most of you might have already heard this word GST but not many of you are pretty sure about what exactly it is. Want to know what is GST? Then here you go…
What is GST?
The Indian government has been planning to abolish all different kinds of taxes and implement one single tax system which is called as GST or Goods and Service Tax. The main intention behind implementing this kind of tax system is to remove all other taxes and levy just GST. It is understood from the name itself that it would be applied to all kinds of goods and services.
How is the GST applied to goods and services?
This Goods and services is levied at the final stage. That means, it is the destination principle based tax where the final consumer is going to be responsible for paying the tax for the goods or services used. At every stage, whether purchase or sale, GST is collected for all kinds of Goods and services. Any tax paid for the procurement of the Goods and services will be set off against the tax that has to be paid for supply of goods and services. The wholesalers, retailers or the manufacturers will be paying the GST but they can claim back for the paid tax. This is called as the Tax Credit Mechanism.
What is the GST percentage or rates applicable?
It is basically applied in four stages:
- 5 percent
- 12 percent
- 18 percent and
- 28 percent
The lowest percent would be for the most essential items and the highest would be for luxury goods and services like SUV or any luxury cars, tobacco products etc.
Pros of GST
- The entire process of taxation becomes transparent, which means all the indirect taxes will be reduced.
- Your business operating cost is going to get reduced and the hidden costs also will be eliminated.
- When the business cost or the production cost is getting lowered, then the cost of the products will also get lowered which is a direct profit fo the consumers.
- Whether it is a manufacturer or a service provider, it is going to be the same tax and hence complications will be eliminated.
- Corruption less and transparent taxation system will be developed.
Cons of GST
- A finance experts and the economists say that this kind of tax system is going to effect the real estate market hugely.
- SGST and the CGST are said to be just new names for the same old CST, VAT and excise duty tax.
This is all just the information that everyone has at least. The pros and cons of this new GST Goods and Service Tax system can be understood better, in fact, can be seen practically when it gets started from 1st July. All you can do is just wait and see how it is going to effect you or benefit you in future.