GST (Goods and Services Tax) was enacted w.e.f. July 1, 2017 all over India except the state of Jammu and Kashmir. However, the J&K assembly also passed the new legislature and enacted the same w.e.f. July 8, 2017 and India became the 165th country to implement GST around the globe. This major tax reform will contribute to a more Developing India with ease of doing business.
Why Dual GST system?
The Federal System of Constitution of India empowers both the Central Govt. and State Govt. to levy taxes. Therefore, it leads to Double Taxation problem on most goods and services which ultimately increase the costs of goods and services.
To protect the rights and powers of Centre and State governments, the GST system was split into the concept of Dual GST. The outlines of the new system are as below:
CGST = Central GST: To be collected by Central Government
SGST/UTGST = State GST/ Union Territory GST: To be collected by State/Union Territory Government
IGST = Integrated GST: To be collected by Central Government and shared with State/UT Government.
This Dual Structure will not increase the tax burden on the society. Actually it would be the revenue which will be shared between various governments. This can be understood as:
|
Actual Rate of GST |
Share of Centre (CGST) |
Share of State/UT (SGST/UTGST) |
|
5% |
2.5% | 2.5% |
|
12% |
6% | 6% |
| 18% | 9% |
9% |
| 28% | 14% |
14% |
How GST will affect the Taxability of goods and services?
Till now, various governments levy various taxes at different rates. All these taxes will be subsumed in Dual GST concept, which is as follows:
Also, the taxability in all the cases was different with their own legislature and sets of rules. However, in GST, the taxability is centered only on “Supply” of goods and services.
What is still outside GST net?
GST will not be applicable on the following products:
- Alcoholic Liquor for Human Consumption
- Petrol, High Speed Diesel, Natural Gas, and Aviation Fuel
- Excise duty on petroleum products.
- Stamp duties
- Taxes by Local Bodies continue to be levied.
- Basic Custom Duties (BCD) on Imports
Therefore, introduction of GST is considered as a major tax reform and also a game changer in the history of the country.
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