Everything you must know about GST

Understanding GST: One nation, one tax!
 

Although GST has been introduced recently, the idea dates back to the year 2000. A committee was set up in 2000 to draft the GST law. However, it took around 17 years for GST to finally come into force. After being passed in the Rajya Sabha and Lok Sabha in 2017  the GST Law came into force on 1st July 2017.¹

Goods and services tax is the indirect tax that has replaced various erstwhile indirect taxes in India. Earlier, there were VAT, service tax, excise duty, etc. Now, all these are covered under a single tax, GST. It can also be seen as a multi-stage, comprehensive, and destination-based tax. Goods and services tax is benefitting both taxpayers and the government in multiple ways. The loopholes of multiple indirect taxes have also been removed to a great extent with GST.

Note: GST is a destination-based tax. That means the state where goods are being consumed will receive the tax and not the state that manufactures the goods. ²
 

What is goods and service tax? Types of GST
 

Depending on the transaction of goods & services and the tax collecting authority, GST can be of four types:
 

● CGST
 

Central Goods and Services Tax. The central government governs the CGST.
 

● SGST
 

State Goods and Services Tax. The state government is responsible for the collection and governance of SGST.
 

● UTGST
 

Union Territory Goods and Services Tax. Union territories are the governing authorities for UTGST. It works similarly to SGST.
 

● IGST
 

Integrated Goods and Services Tax. The center collects IGST, which is later split between the state(s) or UT(s) and the central government.
 

How are taxes implemented and collected?
 

Broadly, two types of purchase and sale happen. Taxes are levied based on the nature of the purchase and sale of goods and services. To understand GST meaning, let's have a look at how taxes are levied, collected, and shared:
 

● Intra-state supply
 

Goods and services that are produced and consumed within a state or union territory are referred to as intra-state transactions. CGST and SGST/UTGST are levied on these transactions.

As per Section 8 of the CGST Act, the tax collected is shared between the state/UT and the central government. The section also specifies that the tax rate cannot exceed 14% for each CGST and SGST. The CGST goes to the central government, and the SGST goes to the state government.²
 

● Inter-state supply
 

On the other hand, goods and services that happen between two or more states are referred to as inter-state transactions. Only IGST is levied on these transactions. Exports and imports in India also attract IGST. The center collects IGST, and according to the IGST Act, the tax is shared with the participating states and union territories.
 

GST tax structure for various goods & services
 

For regular taxpayers, the GST structure ranges between 0%, 5%, 12%, 18%, and 28%. On some goods, GST of 3% and 0.25% is also levied. Apart from GST, some products also attract cess that may range from 1% to 204%. Usually, products like cigarettes, petrol, aerated water, tobacco, motor vehicles, etc. include cess.³
 

● List of items with 0% GST⁷
 

Various basic edibles and health services charge no GST rate. There are 149⁴ sections of goods and services in this list. Some of these include:

• Milk
• Salt
• Eggs
• Curd and lassi, other than pre-packaged and labelled
• Gur,  other than pre-packaged and labelled
• Besan, etc.
   

● List of items with 5% GST⁷
 

There are multiple products and services that attract 5% GST. Some of these are:

• Pre-packaged and labelled goods
• Tea, other than unprocessed green leaves of tea
• Coal
• Packed products like milk, curd, paneer, etc.
• Raisin
• Edible oils
• Woven Fabric of manmade textile materials
• Life-saving drugs
• Agarbatti
• Domestic LPG
• Coffee roasted , etc.
   

● List of items with 12% GST ⁷
 

Some items attract 12% GST. Some of these items are:

● Processed food

● Butter

● Ghee

● Fruit juice

● Fruits

● Jam

● Jelly

● Umbrella

● Almonds

● Pasta, etc.

 

● List of items with 18% GST⁷
 

18% GST is levied on multiple products. These include:

• Hair oil
• Ice-cream
• Toothpaste
• Cornflakes
• Soap
• Perfumes
• Soup, etc.
   

● List of items with 28% GST⁷
 

Luxury items attract 28% GST. These are:

• Small cars (1- 3% cess)
• Caffeinated or carbonated beverages
• Products containing tobacco or nicotine and their substitutes which are intended for being inhaled without consumption
• Luxury motorcycles and bikes exceeding capacity of 350 cc have a 3% cess⁵
• Consumer durables, etc.
   

Conclusion
 

GST has removed the cascading effects of tax to a great extent. It has now become easier for  the centre, the state, and the consumers to benefit from the new taxation system. Tax evasion has also been curbed, and the taxpayer base has also increased. With GST, the problem of different taxes has been erased. Unlike earlier, particular goods and services now have similar prices across all the states.

The GST process is mostly electronic, which makes the collection process transparent. GST registration, return filing, application for refund, etc., can now be done via the GST portal. Hence, it has also increased the pace of the process!
 

FAQs
 

1. What is the maximum IGST that can be levied?
 

The highest limit of 28% of IGST can be levied on certain luxury goods² by the GST Council of India⁶.

2. Who has jurisdiction over IGST?
 

The IGST falls under the jurisdiction of the central government. The collected tax is later split between the state/UT and the central government.²

 

3. When was GST introduced?
 

Goods and Services Tax or GST was introduced in 2017. It has replaced the multiple indirect taxes in India with a single tax.
 

4. What is the range of GST that can be applicable in India? ⁷
 

The GST rates range from 0% to 28%, depending on the type of good.