On 1st July 2017, the government of India introduced the goods and services tax (GST), which consolidates all indirect taxes levied on goods and services. With basic GST slabs of 5%, 12%, 18%, and 28%, it simplifies taxation. Before GST rates were put in place, the centre and the state governments implemented systems to calculate and charge taxes on goods and services as they saw fit.
Here is a look at the taxes that GST has replaced.
CGST explained
The central goods and services tax is a government levy on the intra-state supply of goods and services.
Taxes levied by the centre that falls under GST
- Central excise duty
- Additional excise duty
- Special additional duties of customs
- Service tax
- Additional customs duty or countervailing duty
SGST explained
State taxes that fall under GST
- State value added tax
- Central sales tax
- Luxury tax
- Octroi and entry tax
- Entertainment and amusement tax
- Tax on advertisements
- Purchase Tax
- Taxes on lottery, betting, and gambling
- State surcharges and cesses that relate to goods and services
Now that you know the taxes that it replaces take a look at how GST is beneficial.
Additional read: How to Calculate GST
Benefits of GST
It leads to an increase in revenue
It has been predicted that GST will boost the economy and increase India’s GDP in the long run. As far as immediate impact goes, GST has undoubtedly broadened the taxpayer base by standardising the threshold for liability. Tax compliance is also going to be easier in the long term. An online taxation system means greater efficiency, accountability, and therefore lowers chances of getting away with tax fraud.
Additional read: What is GST?
It simplifies tax filing for businesses
As a business owner, you may find that adjusting to the new GST regime requires time, money, and management. But in the long term, the process of filing GST returns will become a lot easier. Moreover, since all major indirect taxes have been consolidated, you will find that you no longer need to maintain large departments specifically focused on dealing with the hitherto extensive tax documentation. What’s more, if you are a start-up, you no longer need to register for various individual taxes like VAT and Service Tax.
Additional read: Impact of GST
It has made certain items more affordable
If you're a private taxpayer, you'll notice that the cost of certain products has been reduced—for example, the decrease in the tax on private taxis from 6% to 5%. For air travel, flying economy class got marginally cheaper with a tax of 5%. The price of eating out hasn’t seen any significant changes. However, this depends on the nature of the establishment—whether it has AC or not, whether it serves alcohol, and whether the turnover is less than Rs. 50 lakh per year. On the other hand, you will find that you don't have to pay GST on unprocessed cereals like rice and wheat, unprocessed milk, vegetables, fish, meat, and unbranded flours.
With this information in hand, be sure to stay abreast of the latest GST updates and deadlines. This way, you can make sure that you file GST returns and charge customers GST appropriately.
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