What is GST in simple words? GST, or Goods and Services Tax, is a tax that customers have to bear when they buy any goods or services, such as food, clothes, electronics, items of daily needs, transportation, travel, etc. The concept of GST is that it is an “Indirect Tax”, ie, this tax is not directly paid by customers to the government, but is rather levied on the manufacturer or seller goods and the providers of services. The sellers usually add the tax expense into their costs, and the price the customers pay is inclusive of GST. Thus, in most cases, you end up paying a tax even if you are not an income taxpayer.
Who introduced GST in India?
Prime Minister Narendra Modi launched GST into operation on the midnight of 1 July 2017. But GST was almost two decades in the making since the concept was first proposed under the Atal Bihari Vajpayee government. The development of GST took many consultations, negotiations and revisions before it was launched in its final form in 2017. The launch of GST was also made difficult by the fact that it required a Constitutional Amendment, and hence, a two-thirds majority approval in the Parliament, and a nod of more than at least half of the states.
What are the benefits of GST in India?
GST was brought in as a revolutionary change and India’s biggest tax system overhaul since Independence. GST replaced a plethora of indirect taxes such as states’ sales tax, service tax, excise, etc., with a single central tax regime applied uniformly on all products and services. However, the biggest benefit of GST was that it opened up entire India as a single unified market allowing for free movement of goods across states’ borders, as opposed to the earlier scenario where state borders became barriers. GST allowed for faster movement of trucks and led to requirements for fewer warehouses across several states. However, GST has multiple tax rate slabs for different categories of products – a fact that still makes it more complicated than many expected.
What are the different types of GST?
- Central GST (CGST): GST paid on each transaction is divided into two equal parts: the part for the Centre is termed as CGST.
- State GST (SGST): The part of a state’s share of GST, when a transaction takes place within the state, is called SGST.
- Union territory GST (UGST): When a transaction takes place within a union territory (UT) without a legislature, the part of GST that the UT gets is called UGST.
- Integrated GST (IGST): When a transaction takes place between two states/UTs or between a state/UT and any foreign territory, IGST is levied without any bifurcation on the applicable GST rate.
What items are not taxed or covered under GST?
There are a few products, which were not under the purview of GST till long after its launch.
- Alcohol for human consumption: On alcohol, the power to tax remains with the states.
- Petroleum products: GST was not imposed on five petroleum products — crude oil, diesel, petrol, natural gas and ATF.
- Tobacco: Along with GST, the Central Government has the power to levy additional excise duty on tobacco products.
- Entertainment tax: The power to decide on entertainment tax levied by local bodies remains with the states.
Also, there are some exceptions on Indian Railways tickets, where instead of the destination, the origin of the journey is taken into consideration. For example, if Rajdhani Express is registered in Delhi, on the tickets from Delhi, CGST and SGST will be levied, while IGST will be charged when the journey originates at a place other than Delhi.