The Goods and Service Tax or GST is a taxation system where there is a single tax in the economy for goods and services. This taxation system is meant to create a single taxation system in the entire country for all goods and services.
The GST is likely to be at 18 per cent, and is widely expected to be implemented next year in April.
GST is a ‘destination-based’ tax, which means it’s charged where goods are consumed, as opposed to where they are produced. Because it shifts the power that several Indian states have had in imposing indirect taxes on the production and movement, a centralised GST Council has been set up that will decide which taxes will fall in the purview of states and which can be subsumed into the GST. A dispute resolution mechanism will also be established to resolve any GST-related disputes.
What will become cheaper?
Expect many goods and purchases to become cheaper with the exception of fuel, liquor and tobacco. While several industries are expected to be beneficiaries, the entertainment industry may be a big winner as it will significantly bring down the 27 per cent entertainment tax. Here’s how going to the movies will become cheaper: the central and state taxes come to about ₹66 on a ₹300 movie ticket. The tax could come down to about ₹46. Stocks of PVR cinema have shot up in recent weeks. Another beneficiary is the construction and building materials industry, which means the housing sector may also be a big winner with things like paints and cement becoming cheaper.
Right now we pay around 4-5% Tax on packaged foods. But after GST the total tax on these products will definitely go up which will increase its retail price. Similarly Jewelery, Mobile Bill, Credit Card Bill, Services rates will also go up.
And Prices of those goods and Services on which we used to pay taxes above 18% will be reduced.
Fr example taxes will be reduced on Mini SUV for which we are paying 30-40% Tax right now. After GST it will be reduced to 18%. Similarly Consumer goods like AC, Refrigerator and Transportation cost will also go down.
More than 150 Countries have implemented GST and each of them faced Rise in Inflation for next 3-5 Years.
1. GST is a transparent Tax and also reduce numbers of indirect taxes. With GST implemented a business premises can show the tax applied in the sales invoice. Customer will know exactly how much tax they are paying on the product they bought or services they consumed.
2. GST will not be a cost to registered retailers therefore there will be no hidden taxes and the cost of doing business will be lower. This in turn will help Export being more competitive.
3. GST can also help to diversification of income sources for Government other than income tax and petroleum tax.
4. Under Goods and Services Tax, the tax burden will be divided equally between Manufacturing and services. This can be done through lower tax rate by increase Tax base and reducing exemptions.
5. In GST System bothe Central GST and State GST will be charged on manufacturing cost and will be collected on point of sale. This will benefit people as prices will come down which in turn will help companies as consumption will increase.
6. Biggest benefit will be that multiple taxes like octroi, central sales tax, state sales tax, entry tax, license fees, turnover tax etc will no longer be present and all that will be brought under the GST. Doing Business now will be easier and more comfortable as various hidden taxation will not be present.
1. Critics say that GST would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent.