The Goods and Services Tax (GST) is the commonly discussed topic these days, from the perspective of its understanding and also the changes and updates which the government is bringing in from time-to-time.
GST has undergone multiple changes in the recent times.
On 29th March 2017, government introduced sales tax bill in the parliament. These four bills were CGST, Compensation GST bill, Integrated GST bill, and Union Territory GST bill.
Changes, updates and rationale
The 14th Goods and Services Tax Council (GSTC) meeting has introduced multiple changes in the Indian tax system. Rates for goods as per new law are nil, 5%, 8%, 12%, and 28% and compensation cess is to be applied on certain goods and services. This has also been approved for a number of categories.
As per the bill, healthcare and educational services have been exempted from the purview of GST. The rationale behind such tax segregation is that the utility goods or daily used goods cannot be taxed at the same rate as luxury goods items.
It is apparent that the governments’ step to introduce six categories of tax is keeping in mind the needs of the common man. The nil categories do not levy any tax on certain goods and services. Additionally there is cess, which is being introduced on certain items like aerated drinks, luxury cars, etc. This very well explains what is Goods and Services Tax bill.
GST will now allow the central government to impose and collect tax; this would be taken care of by the GST bill and Union Territory Goods and Services Tax. As per the Finance Minister, additional tax might be introduced to provide compensation to state and the compensation would also be paid to the state in regards to the existing tax framework.
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GST and common man
As per the GST bill, the common items of use are taxed at a minimum rate of 5%. The items of mass consumption, such as salt and species fall under such bracket. Other Items of common use, such as soap, toothpaste, oil and other household utilities are being taxed at 12% to 18%, which in earlier scenario was 20%.
The products such as washing machine, refrigerators, and air conditioning will be taxed at 28% against the present rate of 30 to 31%.
However, Goods and Services Tax does not look great for the service employees. The service employees who receive subsidized products are likely to receive more quantity of the products because of this tax regime.
Although, it is debatable as to what benefits the GST would bring to the common man but it has certainly brought normalization to the tax system of the country by simplifying the tax rates.