Goods and Service Tax (GST)

These days a very hot topic/name is floating around us very frequently and that is Goods and Service Tax (GST). Many of us wonder what is this GST all about and why there is so much of hue and cry for this and if it is so problematic then why are we bringing that law at all. Today we will discuss about GST.

GST is a name of tax which will be replacing all the existing indirect taxes in India which are nearly 20 in numbers and amount to approx 30% in terms of taxation out of which common people even don't know the name of some of taxes that are imposed on them so once this GST is passed by both the houses of parliament(Lok sabha and Rajya sabha) it will replace all the indirect taxes. Currently GST is in force in nearly 150 countries and max rate of GST currently is in Denmark and Sweden which is 25% and lowest is in Canada which is 5%.

In India, the unified tax will take the form of a 'dual' GST, to be levied concurrently by both the Centre and States i.e. in short the unified tax will comprise of both Central and State GST. Liquor has been kept completely out of the purview of GST. Petroleum products has been excluded from the list of product that will be covered under GST for the first three years from day when GST will be adopted however, if there is any kind of loss incurred by State governments than the Central government will bear that cost.  

Benefits of GST

1. As there will be only one tax throughout India all the goods and service will be available at same price at pan India level and it will ease in doing business as mobility of products from one state to another will become easier.
2. Reduction in corruption level.
3. At least general public will be well aware of that in what respect they are paying the tax.
4. Indian GDP may increase by 2-2.5 %
5. There can be an increase of 12-15% in exports of products.
6. As the taxation system will be eased and become transparent by replacing all the indirect taxes by a new one i.e. GST so the foreign investors/companies will be attracted to do business in India which will result in more job creation.
7. In long run the price of products may come down.

What will be the rate of GST?

Till date the proposed rate at which GST will be imposed is approx 27% which is too high and will be finalized by the GST council at later stage and which may be around 18-20% as per the statement given by Finance Minister Arun Jaitley in Lower House. One percent extra can be charged by State governments from where the goods are originated.

Tax and its type in India

What is a Tax and why we need to pay it?

Tax is that amount which we pay to government i.e a certain part/percentage of money that we earn and this may be in the form of direct or indirect taxes (in form of labor) and failure to pay make one liable of facing judicial action. We pay taxes in various form such as Income Tax, Sales Tax, Toll Tax etc. which is looked over by various concerned authorities. This tax is compulsory and not voluntarily paid as this is the major source of income for the central and state governments for carrying out various work of the society such as making roads, providing clean water, defense services/policing etc. Taxes are imposed by Central and State governments separately on various services and resources accordingly.  

Types of Taxes in India

1. Income Tax--> This is the type of tax which is imposed on person depending on his earnings mainly it include service class people who are salaried in private/public/government sector companies.This comes under direct tax. We don't need to pay tax for all the amount which we earn as government gives some exemption/relaxation in taxes i.e there is a slab for each group and people falling under that  and the slab is as follows:
           Less than Rs 250000        --------- Nil (For senior citizen it is 300000)
           Rs 250000 - Rs 500000   --------- 10%
           Rs 500000 - Rs 1000000 --------- 20%
           Rs 1000000 and above     --------- 30%
So in this case if someone has earning of Rs 1100000 and no investment is done than he will have to pay tax of Rs (30000+100000+30000)= Rs 160000
           Till Rs 200000                  ---- Rs 0
           Rs 250000 - Rs 500000   ---- 10% of Rs 250000 i.e Rs 25000
           Rs 500000 - Rs 1000000 ---- 20% of Rs 500000 i.e Rs 100000
           Rs 1000000 -Rs 1100000 ---- 30% of Rs 100000 i.e Rs 30000

Apart from these slab exemption government gives us relaxation to save tax for amount up to () by doing investment in different government securities, bonds and taking insurance for self and family through different sections of income tax exemption and avail tax exemption accordingly. This exemption benefit can be availed on bank EMI also. From this year 50% tax can be saved for amount invested in equity but till the investment of Rs 50000 only and when income is below Rs 1000000. We pay TDS i.e advance tax on monthly or quarterly basis so that fine is not imposed at the end for non payment of tax and if TDS is paid more than the actual tax to be paid then we can claim back our extra money paid by filling income tax return i.e by filling form 16 A.

2. Sales Tax--> This is the type of tax which is imposed on all the sale of products which is done in Indian market i.e sale starting from car to clothes and any other thing

3. Service Tax--> This is the type of tax which is imposed by government for the service provided by various industries and firms such as for example if we have our dinner in a restaurant than we have to pay tax for it which is 10.2% till date.

4. Toll Tax--> This is the type of tax which is taken by Toll Plaza on highways(national/state) from the car and truck passing through them so that cost of making and maintenance can be recovered which is invested either by government or private company. Toll tax is decided depending on the cost involved and the time frame in which it has to be recovered. Toll Plaza are available on highway on every 100 km.

5. Capital Gain Tax--> In this the owner has to pay tax for every sale of property, equity, bonds or any other valuable asset for booking profit i.e the tax is applicable for the difference between the sale and purchase of the asset. This is applicable for the transaction done in short period only i.e if the period is less than 1 year the tax is eligible except for property for which the minimum period for CGT is 3 years.

6. Value Added Tax(VAT)--> VAT is somewhat similar to Sales Tax as sales tax is imposed by central government for its earning but VAT is charged by state government for its major earning and VAT varies from state to state. VAT is added cost to the MRP of the product and VAT depends on the nature and type of product. But government has not included every product under this Tax system. But government has given proposal to take Goods Service Tax(GST) as tax by merging sales and service tax.

7. Education Cess--> This is the type o tax which is taken by government for improving the education level in India and is applicable on all type of taxes but mainly on income, sales and service tax and it is 3% of total tax payable.

8. Gift Tax--> Gifts received for amount more than Rs 50000 in a year is also considered as part of income and is applicable for tax. Gift received during marriages by parents and relative gets exemption from tax and also if a daughter-in-law gets a gift by father-in-law tax is exempted but the gift received by son-in-law by father-in-law is applicable for tax. Tax is calculated as per income tax rules.

9. Stamp Duty--> Tax or cost paid to government for buying or transferring any property or asset and also for making any legal document is known as stamp duty. It varies upon property to property.

10. Professional Tax--> This tax is taken by many state government by employee of private companies and is paid by all professional personnels.It varies from state to sate and is compulsory to be paid and is paid every month.

11. Custom Duty--> This tax is imposed to all the goods or products that are imported i.e is bringing goods from a foreign country. It depend on the nature of the product.

12. Excise Duty--> Excise duty/tax is payed/applicable on goods manufactured and distributed within the same country and is applicable for very low range of goods i.e on very few products. This different from Sales Tax and VAT i.e excise is paid in addition to these taxes.

13. Corporate Tax--> This tax is paid on generating income through corporate operations in the country. This tax is classified depending on Domestic and Foreign companies.

These are the major taxes applicable in India but other than these taxes many other taxes for government income for improving services such as Water Tax, House Tax (paid to municipal corporation), Road Tax (paid while buying a vehicle) etc.