GST or Good and Services Tax is a landmark indirect tax reform that Indian government will roll out on July 1. The intent for such a reform is to cut down on cascading of taxes or in simpler terms, paying tax on tax. It does so by streamlining the tax rates, number of taxes to be levied and the places where it should be levied. For example, if goods are transported from one state to another, under GST, the state tax will go to the one where the end user resides. Until GST rolls out, the tax levied on goods is paid to the state sending the goods. If you have been clueless about what is GST, we have a quick recap for you to get up to speed with the indirect tax reform. Keep reading.
What is GST? A Quick Recap
How does it work?
GST has been designed to work as a tax that will be levied at the destination instead of the point of origin. We will take up our example mentioned earlier here. The goods going from one state to another will be taxed. However, the tax amount will go to the state which receives the goods instead of the one sending the goods. This way, goods’ transportation will become efficient as there will be fewer stops for tax payment by the transport. Also, the tax middlemen can be eliminated and as a result, corruption can be curbed.
Also Read: Here’s What GST May Not Be Addressing Yet
How is it computed and who has to pay it?
GST is calculated on the basis of value added to any good or service offered at any stage. For example, a satellite TV operator will only have to pay taxes on services it offers. However, for goods and services such as set-top boxes and their transportation, it will be credited the tax it pays for them. Also, businesses that have sales of over Rs 20 lakh are liable to pay GST. In certain cases and certain regions, the threshold is lower at Rs 10 lakh.
How are imports and exports taxed?
For imports, there is integrated GST or IGST. This is because they are treated as inter-state goods. For exports though, no GST is applicable. In case you pay tax on goods and services used in export, the tax amount will be refunded to you.
Also Read: Here’s What Comes Under GST
Why are fuel and liquor not under GST’s ambit?
As far as fuel is concerned, the GST council is yet to take a decision on how to bring it under GST’s ambit. This means the prices of petrol, diesel, LPG, CNG, jet fuel, etc may go up or down. Liquor comes under states’ subject list. This means a central body cannot decide on matters pertaining to states’ subject list, hence keeping liquor out of GST’s ambit. A constitutional amendment can bring liquor under GST’s ambit, though.
What is GST council and how does it take decisions regarding GST?
The GST council is the body that decides on matters pertaining to GST. It is a body consisting of state finance ministers with union finance minister acting as its head. To decide on a matter, a 3/4 majority of members present and voting is required to finalise a decision. For this purpose, the union government has a weightage of 1/3 in the voting process. The state governments together get 2/3 weightage of votes.