In the previous tax regime laws in India, the taxation included VAT(value-added tax), excise duty, entertainment, luxury, and other taxes. GST (Goods and Services) subsumed all these taxes under the ‘one nation, one tax’ regime. Being an indirect tax, the consumers pay GST on the purchase of any goods or services.
Before the imposition of GST, businesses could indulge in profiteering. The new tax regimes have successfully eliminated it and an anti-profiteering authority is set up. It ensures the suppliers pass on the tax deduction benefits to the consumers.
Types of GST
1. SGST (State Goods and Services Tax)
SGST is levied on the transactions of goods and services within the state territories. The amount of revenue generated from this tax is collected and exercised by state governments. Taxes such as luxury, entertainment, and VAT are clubbed together in SGST thereby reducing the tax returning hassles for the businesses.
2. CGST (Central Goods and Services Tax)
Central government levies taxes on the states for intrastate transactions of goods and services. CGST is imposed with SGST or UGST. Central authorities collect the tax revenues and dispense half of the profits to the states. It promotes better stabilization of the states. To determine the payable taxation, businesses can use the GST calculator online. It computes the figures accurately.
3. IGST (Integrated Goods and Services Tax)
For inter-state transactions of goods and services, that is, from one state to another, the IGST taxes are imposed which are shared among the state and central governments. From importing to exporting, everything is taxed under this taxation law.
IGST taxpayers are eligible to claim an input tax credit that helps the suppliers to save costs at every stage of the supply chain process.
4. UGST (Union Territory Goods and Services Tax)
UGST taxation laws are similar to SGST. In the transactions of goods, the laws are implemented in the union territories and the consumers are liable to such indirect taxes accordingly.
GST Taxation on Goods and Services
The products and services are subject to GST taxation under the following tax slabs categorization as 5%, 12%, 18%, and 28%. Fresh meat, milk, chicken, eggs, vegetables, and more such products are exempted from the GST taxation.
The government decided to keep the food items nil or low to not affect the pockets of the individuals. The reason being, eatables take up 50% of the consumer basket. Other luxury items are taxed at higher rates to neutralize the revenue generation from all the essentials.
If businesses have an annual turnover of about 20 lakhs (10 lakhs – for Northeastern states), GST registration is mandatory for them.
Despite this, the businesses have to register GST if:
- Supply is being done on behalf of eligible taxpayers
- Input service distributor
- Businesses operating on e-commerce platforms
- Tax Paying businesses under reverse charge
- Persons accountable to deduct TDS (Tax Deducted Source)
The entities gain several benefits from legal recognition as renowned suppliers of goods and services and avail input tax credit.
GST on Government Services and Plannings
When it comes to GST taxation, even the government is considered as a person or a business-providing entity. Taxation is imposed if the transactions are carried out by the central or state government.
The government or local authority is exempted from GST if they exclude offering the following services:
- Services by the Postal department such as speed post, express parcel post, life insurance, agency services by a person except for central, state, and the authority of union territory.
- Aircraft-related services around the precincts of port and airport.
- Transporting goods and services
Import Duties in India
To import tax from international borders, it attracts multiple government taxes called custom duty. Import duties are governed by the customs act, 1962. Import duties are levied by the countries:
- to protect the local economy from allowing cheap foreign products.
- Generate revenue for the government
- Monitoring the overseas transactional activities of the goods
Tariff rates vary depending on the products and are estimated based on certain factors such as the location to be shipped and the material used. The Central Board of Indirect Taxes and Customs (CBIC) is accountable to collect the custom duty taxes. Custom rates fluctuate with the launch of the financial budget.
Types of Import Duties Levied
1. Basic Customs Duty (BCD)
Basic tax is levied on the goods imported. Imposed taxes range from 0-100% (exceptions during Covid)
2. Countervailing Duty (CVD)
Also, named as additional customs duty, this tax is levied on the goods that have the advantage of government subsidies or tax exemptions in the country of the goods’ manufacture. It also ensures that local products are not pushed to disadvantage due to cheap imports. The products are taxed at 0%, 6%, and 12%.
3. Anti-Dumping Duty (ADD)
ADD taxation recovers the funds from the products imported at a price lower than the market price. It also contributes to the importing of quality products via international borders. ADD taxation is charged within the dumping margin (difference between the price of the products and the price at which it is imported).
4. Social Welfare Surcharge
The tax return under this taxation law is exercised in the social welfare projects such as health, education, and social security. The SWS returns are recovered at the rate of 10% on average of cess and duties applied.
5. Protective Duty
Government imposes protective duties following the tariff commission guidelines to protect the interests of domestic producers of goods.
GST Benefits to Consumers
Goods and services laws have brought a unified front on various consumer goods in India. Before GST laws, the consumers had to commute to different states for the purchase of goods at a lower rate. The GST laws have eliminated these hassles and extended the profitable threshold for consumers. It has also led to the overall price drop in the marginal rates.
Goods and services laws have reduced the tax liabilities of the consumers to a great extent. Clubbing all the taxes under GST has proved to be the biggest reform in the country. Government imposes various taxation within the country and across the borders for significant revenue growth thereby boosting the Indian economy.