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Ever since the indirect taxation scheme is announced in the country, the government is trying to make it more convenient for the people. Be it implementing the proposed GST rate in India, introducing some regime compliant techniques or framing the GST rules and regulations for enhancing the organization of the system, it is always on the move. This revolutionary step is not an impulsive decision or a one-day task. It is an outcome of rigorous planning by the council of authorities over a long span of time. It was a dream conceived almost ten years ago which has now turned into reality. After a number of ups and downs, plotting of plans, rejections and approvals of the GST bill finally came into effect in July 2017.

Reasoning

Let us consider the four GST tax slab rates for instance. Finance Minister Arun Jaitley in his recent interview disclosed the principal logic for this rate structure. He stated that the distinction in the percentage of levy depending upon the article type will help to curb regression. In this way, the poor and the rich will not be forced to pay the same tax. So according to him, this format is fair to the low-paid section of the society. India is a diverse country where it is impossible to measure every class with the same scale. Despite the ultimate goal of “one nation, one tax”, the government has implemented 4-stage taxes varying due to a difference in the value of the items. A single rate may impose the same amount of tax on a “bathroom slipper” and a pair of Nike shoes. Necessary daily use products will have lower rates while there will be a higher tax on luxury items. Such as- food articles which are consumed regularly will have zero rate tax whereas huge taxes will stick with exotic cars and deluxe utilities.

Application

This comprehensive tax applies to individuals and businesses distinctively. Every unit of the market will pay it according to the proposed GST rate in India as follows:

  • Every supplier and service provider with a worth of more than 20 lakh in a financial year is liable to remuneration
  • General taxable consumers are levied with GST
  • Inter-state logistics require a definite amount of IGST to be duly paid
  • GST is not imposed on Farmers and crop producing businessmen
  • Distribution agents have to pay GST on the basis of the value of their product
  • Collectors who sell items promoting their own name and the ones supplying goods to represent another brand are charged with tax
  • This list also includes Electronic commerce engineers
  • Non-Residential Indians
  • Tax deduction and collection sources

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Rate structure

A four-level order is laid with 5%, 12%, 18% and 28% of tax excluding the no tax slab, based on the different categories of articles:

0% category- Implemented on necessary utilities and indispensable goods such as organic food items, human blood, stamps, print media and common cosmetic materials

5% tax- Applies to basic amenities and mass consumption commodities. Selective food and drinks, toiletries, cooking stoves and burners, medicines and diagnostic instruments, spices and metallic products fall under this section.

12% slab- On standard products and services including processed food, dry fruits, ceramic house-ware, synthetic and fibrous products, stationery articles, LPG stoves, artworks and antiques.

18% rate- Imposed on quality products such as cold storage fruits and vegetables, dairy products, electrical, electronic items, cement, stone and concrete products

28% levy- On luxury items and classic materials such as air conditioners, deluxe automobiles, private jet, barbecues, commercial plastic and rubber products, vending machines, protein concentrates and fur apparel.

Impact of GST rate framework

As Mr. Jaitley said, this scheme should not have an adverse effect on the underprivileged. Earlier, a single 15% imposition of tax on every product and service was suggested by some counselors. But it was declined considering the social divisions throughout the nation. The data mentioned above depicts how the proposed GST rate in India influences the disparate sectors of the market in different ways. Small businesses are most likely to benefit from this reform. Suppose that the yield is not more than 70 lakh per annum, then the producer can choose composition scheme. This scheme provides a discount on the tax to such business owners. Also, in order to confirm single consolidation, industrialists are divided on the basis of their turnover in the financial year. 90% of them have to pay SGST, 10% are charged with CGST and business owners of over 1.5 crores value would pay IGST. Some ambassadors even claim that this kind of rate plan will magnify revenue, control inflation and help in stabilizing the market. Not only this, but GST is believed to have a long-lasting impact on national economy.

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