Goods and services tax also called as GST. It is a new tax system that is impement on the 1st July 2017. It replaces the multiple taxes like vat tax, excise duty and implment the single unified gst tax system. It eliminate the tax on tax system for people, as it is also referred as cascading effect.
Most of GST burden is on the consumer. Because, GST is added at every step of production and selling, but the business man or service provider get input tax credit. So, final GST is paid by the consumer/ customer itself.
Input tax credit is a process where business owner minus what GST they paid while buying those product and then remaining value they send to the government.
Ex. 1000 product worth buy with 18% GST it became 180 rs. GST. He then sell it to 2000 rupees then 18% GST becomes 360 rs. So, he minus 180 rupees as input tax credit and pay only 180 rupees to government.
The point here is this, the tax is primarily get off for business man as input tax credit but only the consumer give the actual GST to government.
GST is also not applied on petrol, diseal, petroleum and natural resoures and alcohol products. Here traditional VAT and central excise duty tax is applied.
Types of GST
GST types means how tax work in different states, union territories. It is categorized as,
- CGST – Central GST tax
- SGST – State GST tax
- IGST – Integrated GST tax
CGST and SGST is collected on every intrastate transactions, like transaction in the same state. See, there is 18% GST of which 9% is of Central and 9% is State tax.
Integrated GST work is in inter state business. In this total tax is collected by central GST and then remaining it send to the respective state.
GST Tax Slabs / Rate
GST is applicable differently based on categories of product.
GST is zero for essential items like fruits, vegetables, milk, eggs, basic education material and some life saving medicines etc.
5% GST – Daily essential products like ghee, butter, cheeze, packaged food, basic personal care items, soaps, hair oil etc.
18% GST – This is applicable to all items except above, includes electronics TV, AC, Monitors, cars, mobile, business or services.
40% GST – Applicable on luxury item and tobacco, pan masala, carbonated drinks and imported cars.