GST: All you need to know

GST will convert the country into unified market, replacing most indirect taxes with one tax.

Written by Surabhi | New Delhi | Updated: December 19, 2014 12:03 pm
Goods and Services Tax, GST, What is GST GST will convert the country into unified market.

As the name suggests, the Goods and Services Tax (GST) will be levied both on goods (manufacturing) and services. GST will convert the country into unified market, replacing most indirect taxes with one tax. It would have a dual structure – a Central component levied and collected by the Centre and a state component administered by states.

At the Central level, it will subsume Central excise duty, service tax and additional customs duties while at the state level it will include value-added tax, entertainment tax, luxury tax, lottery taxes and electricity duty. Central sales tax (CST) will be completely phased out. Entry tax or octroi would be subsumed from the start. But state taxes on petroleum products will continue for a few years after GST is introduced, as per the deal brokered between the Centre and states on Monday. State taxes on alcohol and tobacco, too, would remain.

As with VAT, the tax will be charged on each stage of value addition. At each stage, a supplier can off-set the levy through a tax credit mechanism. This means, the consumer pays GST added on by only the last dealer in the supply chain.

The rate for GST is as yet undecided, but it would be in a range that would make exports competitive. A sub-committee of the Empowered Committee of state finance ministers had proposed revenue-neutral rates (RNR) for the Central and state components at 12.77 per cent and 13.91 per cent, respectively, taking the effective GST rate to 26.88 per cent. This is much stiffer than the 14-16 per cent in most countries as well as the recommendation of a taskforce of the Thirteenth Finance Commission of 12 per cent (7 per cent for state GST and 5 per cent for central GST).

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  1. R
    Rohit Agarwal
    Dec 9, 2016 at 11:16 am
    nice
    Reply
  2. R
    Rohit Agarwal
    Dec 9, 2016 at 11:16 am
    nice one
    Reply
  3. A
    ANIL SHARMA
    May 13, 2015 at 9:38 am
    Simplified tax structure is always Get benificial for all
    Reply
  4. A
    Ashutosh
    Dec 20, 2014 at 5:04 pm
    Whichever the system the current one or the new GST - Central and State Both inclusive the tax should not be more than 10% - - INDIRECT TAX breaks the bone of the poor and and middle cl as they pay more in "real" terms and all Governments want the actual taxpayer to be unaware of his actual contribution - hence taxing indirectly - Does any government have the guts to directly collect equal amount of tax as INCOME TAX and zero by indirect tax.? In that case all poor and illiterate will also come to know that how much money is paid by everyone to the Government but then VOTE BANK politics and appeats will end. ANY TAKERS MODIJI ??
    Reply
  5. H
    HarishNayak
    Dec 20, 2014 at 10:28 am
    It is over ambitious to expect media to give you honest news.
    Reply
  6. D
    Dixit Vijay
    Dec 20, 2014 at 8:53 am
    26.88%... isn't it a joke... its of no use... aam aadmi not relieved from tax burden...
    Reply
  7. G
    Gopal
    Dec 19, 2014 at 8:11 pm
    A tax rate of 26.88 per cent is too high. If such a high tax is imposed then most income tax should be removed except for the rich. I hope a sensible rate of GST is used. A very high GST would hurt the poor more since the tax is regressive. Somewhere between 15% and 20% would be more sensible. Overall GST is needed given the poor compliance and corruption in the tax regime.
    Reply
  8. G
    Gyanod
    Dec 19, 2014 at 3:42 pm
    So the public has to pay this 26 to 27 percent. Has anyone thought abt public what they want.
    Reply
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