Table of ContentsTaxation RatesComponents of GSTImpact of GST on Indian EconomyGoods and Services Tax (GST) impacts key sectors of the Indian economyReal EstateE-commerceTravel and TourismRide Hailing AppsSmartphone Goods and Service Tax (GST) is an indirect tax levied in India on the sale of goods and services. Goods and services are divided into five tax brackets for tax collection: 0%, 5%, 12%, 18% and 28%. Petroleum products and alcoholic beverages are taxed separately by different state governments. There is a special rate of 0.25% on raw precious and semi-precious stones and 3% on gold.[1] Additionally, a 22% tax or other rates in addition to the 28% GST apply to a few items such as soft drinks, luxury cars and tobacco products. The tax came into force on July 1, 2017, thanks to the implementation of around 100 and first amendments by the Indian government. The tax replaced the existing multiple cascading taxes levied by the central and state governments. Tax rates, rules and regulations are governed by the Goods and Services Tax Council which comprises finance ministers from the center and all states. The GST has simplified a series of indirect taxes with a unified tax and is therefore expected to radically reshape the country's $2 trillion economy. Say no to plagiarism. Get Custom Essay on “Why Violent Video Games Should Not Be Banned”?Get Original Essay The Goods and Services Tax was launched on July 1, 2017 at midnight by former Indian President, Pranab Mukherjee, and Indian Prime Minister, Narendra Modi. The launch was marked by a historic midnight sitting (June 30 – July 1) of both Houses of Parliament, meeting in the Central Hall of Parliament. Although the session featured notable guests from the business and entertainment industry, including Ratan Tata, it was boycotted by the opposition due to the problems it would inevitably cause for middle-class Indians. and lower. This is one of the rare midnight sittings held by Parliament, the others being the Declaration of Independence of India on August 15, 1947 and the Silver and Golden Jubilees of that occasion. After its launch, the GST rates were changed several times, the latest being on January 18, 2018, when a group of federal and state finance ministers decided to revise the GST rates on 29 goods and 53 services. Simply put, Goods and Services Tax is an indirect tax levied on the supply of goods and services. The GST Act replaced many indirect tax laws that previously existed in India. Now let us try to understand the definition of Goods and Services Tax: “GST is a comprehensive, multi-stage, destination-based tax that will be levied on each value added. » “Input tax credit”: - First of all, “input tax” refers to the tax you pay to the government. for the goods you purchase. “Output tax” refers to the tax you pay to the government. for the goods you sell. This “output tax” will be added to the price of the product and will therefore be paid by consumers. And now, let’s see what “input tax credit” means… For example, Fathima makes dresses. She has to pay a tax of Rs.50. She bought fabric from Anusha. Anusha paid 40 rupees tax to the government on the fabric she sold. So, now Fathima pays only 10 rupees tax to the government andinform the government. around Rs.40 which Anusha paid for the fabric. The government verifies receipts. And then, on paper, the total tax paid by Fathima reads Rs.50/-. This is the concept of “input tax credit”. This means you can claim the “input tax” “credit” paid by your raw material supplier. GST is an indirect tax for the entire country. So, before the Goods and Services Tax, the tax levy pattern was as follows: Under the GST regime, the tax would be collected at each point of sale. In case of interstate sales, Central GST and State GST will be charged. Intrastate sales will be chargeable to integrated GST.ObjectivesGST: Ensure that the cascading effect of tax on tax is eliminated. Improving the competitiveness of the original goods and services, thereby also improving the GDP rate. Ensure availability of credit for inputs throughout the value chain. Reduce complications related to tax administration and compliance. Make a unified law involving all tax bases, laws and administrative procedures across the country. Decrease unhealthy competition between states due to taxes and revenues. Reduce flat tax rates to avoid additional clarification issues. Tax regime The single GST (Goods and Services Tax) replaced several old taxes and levies, including: Central Excise Duty, Service Tax, Additional Customs Duty, Surcharges, Value Tax added at the state level and Grant. [Other levies applicable on interstate roads transportation of goods has also been removed in the GST regime. GST is levied on all transactions such as sale, transfer, purchase, barter, rental or importation of goods and/or services. India has adopted a dual GST model, meaning that taxation is administered by both the Union and state governments. Transactions within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State Governments. For interstate transactions and imported goods or services, an integrated GST (IGST) is levied by the central government. GST is a consumption/destination based tax. Therefore, taxes are paid to the state in which the goods or services are consumed and not to the state in which they were produced. IGST makes tax collection more difficult for state governments by preventing them from collecting taxes owed to them directly from the central government. Under the previous system, a state would only have to deal with one government to collect tax revenue. Rates GST is imposed at varying rates on varying items. The GST rate is 2.5% for soaps and 28% for laundry detergents. GST on movie tickets is based on slabs, with 18% GST on tickets costing less than Rs. 4,000.100 and 28% GST on tickets costing more than Rs.100 and 5% on ready-made clothes. The reservation rate for properties under construction is 12%. Certain industries and products have been exempted by the government and remain exempt from GST, such as dairy products, flour mill products, fresh fruits and vegetables, meat products and other groceries and essentials. . Checkpoints across the country have been abolished, ensuring free and rapid movement of goods. The central government had proposed to shield state revenues from the impact of GST, hoping that in due course, GST would be levied on petroleum and petroleum products.. The central government had assured states of compensation for any revenue loss suffered by them from the date of GST for a period of five years. However, no concrete laws have yet been passed to support such action. The GST Council has adopted a concept paper discouraging changes in rates. The E-Way bill must be generated for every interstate movement of goods beyond the threshold of Rs 50,000 (US$790). Components of GST There are 3 taxes applicable under GST: CGST, SGST and IGST.CGST: collected by the central government on an intra-state sale (eg: in Maharashtra) SGST: collected by the government of the state on an intra-state sale (eg: in Maharashtra) IGST: collected by the central government for an inter-state sale (eg: Maharashtra to Tamil Nadu) In most cases, the structure tax of the new regime will be as follows: Transaction New Regime Old Regime Sale within the State CGST + SGST VAT + Central Excise/Service Tax Revenue will be shared equally between the Center and the State Sale to another State IGST Central Sales Tax + Excise/Service Tax There will be only one type of tax (Central) in case of interstate sales. The Center will then share the IGST revenue based on the destination of the goods. Illustration: Suppose a dealer from Gujrat has sold goods to a dealer from Punjab worth Rs. 50,000. The GST rate is 18% including IGST alone. In this case, the dealer has to charge Rs. 9,000 in IGST. These IGST revenues will go to the central government. The same dealer sells goods to a consumer in Gujrat worth Rs. 50,000. The GST rate on goods is 12%. This rate includes CGST at 6% and SGST at 6%. The dealer has to collect Rs. 6,000 as goods and services tax. Rs. 3,000 will go to the central government and Rs. 3,000 will go to the Gujarat government as the sale is within the state. Here is the list of indirect taxes in the pre-GST regime: Central Excise Duty Excise Duty Special Additional Customs Duty Cess State VAT Central Sales Tax All these taxes have been replaced by Central GST, GST of State and integrated GST. Impact of GST on Indian Economy The impact of GST on macroeconomic indicators is expected to be very positive in the medium term. Inflation would be reduced as the cascading effect (tax on tax) of taxes is eliminated. It is very likely that government tax revenues will increase with the expansion of the tax net, and the budget deficit is expected to remain under control. Additionally, exports would increase, while FDI (foreign direct investment) would also increase. Industry leaders believe the country would move up several levels in ease of doing business with the implementation of the most significant tax reform ever in the country's history. After much deliberation, our GST Council has finalized rates for all goods and major service categories under various tax slabs, and GST is expected to plug the loopholes in the current system and boost the Indian economy. This is done by unifying indirect taxes for all states in India. The GST tax rate is set at 0%, 5%, 12%, 18% and 28% for various goods and services, and almost 50% of goods and services. services are subject to a tax rate of 18%. But how will our lives change after GST? Let's see how GST on some daily goods and services will impact the pocket of the end user. Footwear and clothing/clothing: Footwear costing more than INR 500 will have a rate ofGST of 18% compared to an earlier rate of 14.41. but rates for shoes below INR 500 have been reduced to 5%. So you have to pay more to buy shoes above 500 INR. And when it comes to ready-made garments, the rates have been reduced to 12% from the current 18.16%, which will make them cheaper. Cab and Cab Rides: Now taking an Ola or Uber will be cheaper as the tax rate has been reduced. drop to 5% compared to 6% previously for a taxi reservation made online. Air Tickets: Under GST, the tax rate for economy class for air tickets is fixed at 5%, but the tax for business class tickets will be higher. rate of 12%. Train fare: There will not be much impact. The effective GST tax rate has been increased from 4.5% to 5%. But a passenger traveling for business can claim an input tax credit on their train ticket, which can help them reduce their expenses. People traveling by local train or sleeper class will not be affected, but first class and AC travelers will have to pay more. Movie Tickets: Movie tickets costing less than INR 100 will be charged at the GST rate of 18% but the prices are above INR. 100 will have a higher tax rate of 28%. Life Insurance Premium: Premium amounts on policies will increase, with an immediate visible impact on the premiums of your term and endowment insurance policies, as GST rates have been increased in the areas of life insurance , health and general insurance. Mutual Fund Returns: The impact of GST on your mutual fund investment returns will be largely marginal as GST will be charged on the TER i.e. the total expense ratio of a mutual fund. The TER is commonly referred to as the expense ratio of a mutual fund company, and this is expected to increase by 3%. The return you get as an investor will be reduced to that extent unless the concerned mutual fund company i.e. AMC absorbs it, but it will anyway.It there will be a marginal difference. Jewelry: Gold investment will become slightly expensive as there will be 3% GST on gold and 5% on manufacturing charges. The earlier tax rate on gold was around 2% in most states and GST is increased from the current rate to around 2% to 3%. Buying a property: Under construction properties will be cheaper than those ready to move in. in properties. The GST rate for an under construction property is 18%, but the effective rate on this type of property will be around 12% due to the input tax credits the builder will benefit from. Educational and Medical Facilities: The education and medical sectors were kept outside. the scope of GST and primary education and healthcare are exempt from GST. This means that a consumer will not pay any tax on the money they spent on these services. But due to the increased tax rate on certain goods and services purchased by these organizations, they may pass on the additional tax burden to consumers. Hotel Stay: For your hotel stay, if your room rate is less than Rs 1,000, then there will be no GST, but anything above Rs 5,000 will be subject to a 28% tax. Buying a car: Most cars in the Indian market will become slightly cheaper, except hybrid cars as the GST rate will be 28%. on all vehicles regardless of their make, engine capacity or model. However, beyond this 28%, an additional tax will be collected, which maybe 1%, 3% or 15%, depending on the car segment concerned. Mobile phone bills: People will have to pay more on mobile phone bills, in the form of GST. on telecommunications services is now 18%, compared to 15% previously. However, telecommunications companies could absorb this 3% increase due to fierce competition. Restaurant Bills/EATING OUT: Your restaurant bill will depend on whether you dined in an air-conditioned establishment that does not serve alcohol. Now, meals in five star hotels will be charged at the GST rate of 18% and non-air-conditioned restaurants will be charged at 12% and 5% GST will be charged for small hotels, dhabas and restaurants which do not exceed a figure of 5%. annual business of INR 50 Lakh.IPL and other related events: Events like IPL i.e. sporting events will have a GST rate of 28%, which is higher than the previous rates by 20%. This will increase the price of your tickets. And the GST rate for other events like theatre, circus or Indian classical music performances or folk dance performance or drama show will be at the GST rate of 18%, which is lower than the rate of previous imposition. DTH and cable services: The money you pay for your DTH (Direct-To-Home) connections or to your cable operator will be reduced a bit as the rate is fixed at 18%, which is lower than the earlier taxes which included an entertainment tax in the range of 10% to 30%, with the exception of the 15% service tax. Amusement Parks: Ticket prices for amusement parks and theme parks will increase as the previous service tax of 15% will become 28% under GST. Here is a list of some items which are completely exempt from the GST regime: Unprocessed grains, rice and wheat, etc. Unprocessed milk, (fresh) vegetables, fish, meat, etc. Without Atta, Besan or Maida branding. Coloring book/drawing books for children. Sindoor/Bindis, bangles, etc. The Goods and Services Tax (GST) impacts key sectors of the Indian economy. As their companies are vulnerable to any major changes in the economy due to the implementation of a new policy, the founders and employees of these companies are extremely concerned about the impact of the four tax brackets of 5%, 12 %, 18% and 28% which have been specified in the GST. Many Indian businesses have limited capital and resources, meaning any confusion can quickly escalate into panic. Alongside these affected parties, millions of customers are wondering how this new tax system will impact the amount of money they will need. pay to benefit from their preferred goods and services. The impact of GST on the most popular sectors of the Indian startup ecosystem, including real estate, e-commerce, hospitality, smartphones and ride-hailing services. Real Estate Under the new tax structure, due to the benefits of input credit that most builders will enjoy on the major raw materials they purchase, the base price of real estate projects launched after July 1, 2017 will be comparatively cheaper. The purchase of real estate under construction will benefit from a net effective rate of 12%, compared to 5.5% previously (including value added tax and service tax). Real estate players such as Prop Tiger and Quikr want to pass on this cost-benefit ratio to property buyers. “For new projects with 100% input credit transferred to the buyer and land cost accounting for 50% of the project cost, we"We expect house prices to fall by around 1% in the western and northern markets and by around 3% in the southern markets," said an Edelweiss report. However, prices of ready to move in apartments with completion certificate, before GST comes into force on July 1, would remain stable as these properties are outside the scope of GST Any price change in the segment will depend. only demand and supply.E-commerce E-commerce sites like Flipkart and Amazon.in will have to collect TCS (tax collected at source) at a flat rate of 1% and pay this collection to the listed sellers. on their websites This will likely impact prices and make online shopping more expensive Although the latest notification issued by the government states that the provisions of “TDS (Section 51 of the CGST/SGST Act, 2017). and TCS (section 52 of the CGST/SGST Act of 2017) will come into force from a date to be communicated later. »Travel and tourism According to room rates, there are four bands for hotels and lodges. While hotels and lodges priced below $16 (Rs 1,000) per day have been exempted from GST, with accommodations costing between $16-$39 (Rs 1,000-Rs 2,500), $39 - $117 (Rs 2,500-7,500) and above $117 (Rs 7,500) will attract 12%, 18% and 28% tax bracket respectively. Budget travelers also have reason to rejoice, as air travel for economy class passengers has become cheaper. On the other hand, business class fares are going to cost more with a marginal increase in GST rate from 9% earlier to 12%. Tax rates on Ride Hailing Apps are expected to increase from 14.5% to a range between 29% and 43% for Ride Hailing Apps. drivers who do not own a car and are associated with the Ola and Uber taxi rental programs. This is because leases become more expensive after GST. For example, these people were paying an EMI of Rs 25,000 before GST, and in the current scenario, they are likely to pay an EMI of around Rs 35,000 to Rs 40,000 after GST. Thus, the GST will reduce the tax rate for ride-sharing services marginally. The new tariff structure, compared to the previous service tax rate of 6%, is a step in the right direction by the GST Council. But even if the 1% drop could please consumers, the driver partners of Ola and Uber will be affected. Smartphones Under GST, mobile phones are taxed at 12%, compared to an earlier range of 8-18% applied in various countries. States. As a result of this average reduction in taxes collected, Apple reduced the prices of its iPhone by 7.5% and Lenovo announced a reduction in prices for models sold in physical offline stores. Motorola phones, an entity owned by Lenovo, sold in physical stores are also expected to see a downward price revision in the coming days. Positive and Negative Impact of GST: Positive Impact: - As there will be no interstate tax, transportation of goods will be much easier. There will be no checkpoint burden for states. And this will also benefit the transport sector and suppliers of goods. This leads to improved business efficiency, which helps improve the economy. With the elimination of interstate taxes, more goods will be imported and exported between states. This leads to an improvement in business and thus an improvement in the economy. The input tax credit allows people to reclaim the tax paid by their suppliers. So,.