On the historic midnight of June 30, 2017 – July 1, 2017, Hon’ble President Mr. Pranab Mukherjee, Hon’able Prime Minister Mr. Narendra Modi, in presence of a strong gathering at the Central Hall of Parliament in New Delhi, pressed the button to launch what is being seen as one of the most significant amendmants, particularly in the tax structure of free India.
The Goods & Service Tax is here and it is not only making news across the nation, it has hijacked the scene on Social Media in India. People are talking, discussing, debating, opining, supporting and cricizing over various forums and spaces; various aspects of the taxing scheme that GST has to present to them. But as far as Modi govenrment and its administration is concerned, after a big bang change in the landscape of Monetory Policies in India in form of “Demonetization”; the big bang on the fiscal front is here with GST sweeping away on and replacing as many as 15 different indirect taxes that negged Indian Buyers and Sellers on their face. These taxes are:
- Central Excise Duty
- Commercial Tax
- Value Added Tax (VAT)
- Food Tax
- Central Sales Tax (CST)
- Introit
- Octroi
- Entertainment Tax
- Entry Tax
- Purchase Tax
- Luxury Tax
- Advertisement tax
- Service Tax
- Customs Duty
- Surcharges
Of course, the math part of the deal is far more compliacted a stuff with different slab structures, applying to different items, categorized into various categories of common goods, luxury goods etc. But before we move into the math involved here, there are few salient features of the tax scheme that need to be explored first.
GST applies to all kind of transactions, that of Sales, Purchase, Leasing, Transfer, Barter and Import of Goods & Service and given our federal structure, India has adopted a dual GST Model which enables both central and state Govt. to charge CGST and SGST. For any inter state affair, the tax shall be collected under IGST head lavied by Central Govt. GST being a consumption based tax is to be paid to the state in which the goods or services are being cosumerd and not where they are being produced. Clearly, the approach here is to tax the party that consumes goods or services rather than the producers. This, kind of hints at the a micro-economic fact that those with higher pruchasing power and a willingness to pay more for convenience and luxury at their doorsteps, are being taxed under the GST, which is a really good thing.
The approach remains the same, as and when it comes to the slab structure in GST. The items that are in the category of basic needs and essentials are into lower slab structures, that of 0, 5 and 12 % with an additional cess to be lavied along. Essential commodities like Puffed Rice, Papad , Bread etc. have been given an exemption in here while things like Edible Oil, Sugar and regualrly used household sutff is being taxed at 5%. Frozen meat, milk beverages, confectionaries fall under the 12% GST slab while things like. The common commodities of health care and cosmetics like Shampoo, Detergent etc are to be taxed at 18% while the luxury items like ACs, Jewllery, Luxury Cars, Services at Hotels and Reataurants will be taxed at 28% GST rate. The entire point in here is about taxing the consumer with higher speidng power, more and providing as much as exemption possible for those who are willing spend more on basics. The great thing is that the essentials will become less expensive and luxurious goods and services will incurr more charges from July 1, 2017 as the concept is to take from the rich and invest into the poor.
To throw light on the last part of the last paragraph so written, one has to understand the overall aggregated approach here of the government. The businesses which for years have been utilizing various loop holes and evading taxes, some way or the other, will now have to comply and pay in full, their taxes standing against them as GST calls for a single, common structure across the nation and for various businesses. Now, no more would a business be able to use a few grey areas of a given taxing authority and use their norms to evade taxes and will have to pay a given amount as per the GST structures. the money received from these taxes, will amount to higher income for the state and is expected to be spent in creation of new infrastructure and for the improvement of the weaker sections of of society in our country.
A lot has been spoken about the Modi’s move of first criticizing the GST in 2011 and then implementing it in 2017. One has to understand that if the government or the PM had to do it for the heck of it, they could have gone on and tried doing the same by winning support from opposition in the early days in the center itself. But they didn’t, as implementing GST came with a challenge of first establishing the GST Network with much needed infrastructure in place. In 2011, the same was not available and this being the minimal baisc requirement for having GST in place, GSt would not have been possible then in any ways. However, with a massive network equipped and able to handle 1, 20, 000 transactions per second, GST in 2017 is surely the ways ahead for the fastest growing major economy in the world as India enters an new era of economic reforms and development.
True Reflections of A Dark Shadow 