Good and Services Tax (GST Bill Meaning Hindi / Eng pdf) | Benefits | Drawbacks | GST Tax Slab
The Goods and Services Tax or GST Bill was passed by the Indian Rajya Sabha on August 2016 and it has been hyped to be India’s biggest tax reform since the independence of India. This tax reform will simplify the existing system of taxation in India. The Goods and Services Tax system will transform India into a united market as it will replace all the indirect taxes with a single tax. The Goods and Services Tax or GST Bill aims to make India a nation with only one taxation system. This procedure will create a single market for covering 29 states.
Definition of GST
The full form of GST is Goods and Services Tax. Goods and Services tax or GST is actually an indirect tax which is applied when a customer buys a good or a service. This tax is an individual tax for the whole country. This tax aims to make India a united market. The main theme of this tax is to apply a single tax on the supply of goods & services. Goods and Services tax will remove different layers of taxation which are purchase tax, VAT, entertainment tax, etc.
This tax system will apply a single tax from the manufacturer to the customer. With the help of GST, the other layers of taxation will be formed into a single layer and thus the GDP of India will also increase. It is expected that the GDP of India will be increased by 2% with the help of GST.
Details of GST Bill
|Name of Bill||GST Bill|
|Name of Tax||Goods and Services Tax|
|GST Slab rate||5%, 12%, 18% and 28%|
|Bill Passing Date||August, 2016|
|Bill Passed In||Rajya Sabha|
|Implementation Date||1 April, 2017|
|Motive||To create a single taxation system in India|
Type of Taxes in India
There are two types of taxes and we will know about them below.
- Direct Tax: Direct Tax is a tax paid by an individual or a company directly to the government. Direct Tax is applicable for several individual/corporate earnings like salary, investments, etc.
- Indirect Tax: Indirect Tax is paid by an individual indirectly to the government. If an individual consumes a service they are obliged to pay tax to the authorities. For instance, when an individual eats in restaurants they are obliged to provide service tax to the authorities. The service tax is eventually gained by the government through the service providers.
Percentage of GST in India
Currently an individual is obliged to pay 12% on excise duty and 14% of VAT on good (equaling to 26%). Also an individual has to pay 12% service tax on several services. Thus the rate of GST can be between 12% and 26% in India. The average rate of GST is 18% around the world.
Importance of GST
Currently an Indian citizen has to different types of taxes once they buy something. For instance, if an Indian citizen buys biscuit, they are obliged to pay Excise Duty, VAT and Customs duty on the purchased thing. Also an Indian citizen is obliged to pay Service Tax and VAT for the foods they buy at hotels. This problem of maintain several types of taxation will be solved by GST as it will imply a single tax on the supply of goods or services. GST will also provide a tax administration free of corruption. If GST is applied properly through the Indian country, everybody will be able to see a new era where the type of taxation is transparent to the people. GST will also solve the shortcomings of supply chain by applying a single tax on it.
The final consumer who buys a good or a service will have to bear the GST charge only according to the new system.
Expensive and Cheaper things under GST
GST will make manufacturing cheaper but it will also make services costly. Under GST, a lot of manufactured goods will be cheaper. But the price of services is expected to be increased under GST.
According to the current tax system in India, a consumer has to pay approximately 25-26% tax while buying manufactured goods due to Excise Duty and VAT. But with the GST system the rate of tax is expected to be 18% which will eventually make the goods cheaper.
Also, the current rate of service tax in India is 15% and it applies to all the services in India other than the vital services such as ambulance services, sports events and cultural activities. After the implementation of GST, the rate of tax through the whole nation is expected to be 18% which will eventually make the services more expensive. Currently an Indian citizen doesn’t have to pay much for staying at hotels or eating at restaurants but under GST they would be obliged pay more for these services.
The pundits have analyzed the effects of GST in India and they have provided a list of things which will be cheaper under GST. Below we will showcase the list.
- Entry-Level cars, Two Wheelers, SUVs will be cheaper under GST.
- The cost of Cars will fall under GST. For instance, if the price of a car is Rs.5 Lakh, according to the current taxation system in India, an individual is obliged to pay Rs. 6.25 lakh for that Car including various types of tax. But, under GST, the cost of that car will be Rs. 5.9 lakh applying a tax rate of 18%.
- The cost of paint and cement will decrease under GST.
- Wood articles and Plyboards will be cheaper under GST. The current rate is 26% for plyboards but it will fall down to 18% once the GST Bill is passed.
- Price of Electronic items such as Computer, Refrigerator, etc. will get cheaper.
- Price of Movie Tickets will be lower.
- After the GST Bill is passed, the prices of DTH Satellite TVs will decrease.
- Currently Battery sector is an unorganized sector in India which has to pay overall tax of about 40-45%. But after the GST Bill is passed, this sector will see a price fall.
The pundits have also made a list of the things which will be more expensive than their current rate under GST. Below we will showcase the list.
- The cost of Cigarettes will be increased under GST as the price of tobacco will be more under GST than the current price.
- The rate of staying at hotels or eating at restaurants will increase under GST.
- Mobile phone calls will be costlier under GST.
- If anybody opts to buy bags, shoes or electronics online they would be obliged to pay more under GST as the e-commerce industries will be obliged to pay tax under GST.
- The rate of Textile and Branded jewelleries would be increased under GST. Currently, an India customer is obliged to pay 2 percent more than the production cost but once the GST Bill is passed, they would be obliged to pay 6 percent more than the production cost.
- Airline and Train tickets would be more expensive under GST.
The rate of investment and insurance premium would be much higher than the existing rate under GST.
Types of GST
Due to levy of different charges by the State and Union Government individually, cascading of taxes is caused. GST will solve the problem of maintaining multiple tax-rates. GST will chiefly have three types of taxes.
- Integrated GST (For tackling inter-state transactions)
Central and State GST will be applied to all the transactions made for buying goods or services. The services or the goods which are exempted from current taxation system will also be exempted from GST. Exempted goods which are outside the domain of GST and the exchanges which are beneath the recommended edge limits, both would be levied on the same cost unlike state VAT, which is levied on the value of the goods comprehensive of central excise.
Benefits of GST
- GST will benefit businesses and industries in India.
- GST will provide easy compliance.
- GST will make India a unified nation and a single structure will be maintained for taxation in India.
- GST will remove the cascading of taxes.
- GST will improve the competitiveness.
- GST will benefit the manufacturers and exporters.
- GST will benefit the Central and State Governments of India.
- GST is very simple and easy to administrate.
- Indian government will be able to provide better control on the leakages using GST.
- GST will provide advanced revenue efficiency.
- GST will provide a single and transparent tax system to the consumers and the burden of the overall tax system will be taken off under GST.
Taxes which will be replaced by GST
|Type of Tax||Tax Name|
|Central||Central Excise Duty|
|Central||Duties of Excise (Toilet & Medicinal arrangements)
|Central||Added Duties of Excise (Specially Important Goods)|
|Central||Added Duties of Excise (Textile products)
|Central||Added Duties of Customs (Mostly known as CVD)|
|Central||Exceptional Added Duty of Customs (Known as SAD)
|Central||Cesses and surcharges|
|State||Central Sales Tax
|State||Entry Tax of all forms|
|State||Entertainment Tax (not imposed by local bodies)
|State||Taxes on advertisements
|State||Taxes on lotteries, betting and gambling
|State||State cesses and surcharges
Logbook of GST Bill
- Kelkar Task Force of India suggested to introduce inclusive Goods and Services Tax (GST) based on the principle of VAT in 2003.
- In the budget speech of the financial year 2006-07, a proposal was made to introduce GST. In the budget speech, it was suggested that GST should be introduced in 2010.
- After a proposal was made in the financial year 2006-07, the responsibility of creating a plan and road map for the implementation of GST was given to the EC of State Finance Ministers.
- EC (Empowered Committee) released its first discussion paper on GST based on the inputs from the Centre and States in November 2009.
- The 115th Amendment Bill of the Constitution was introduced in the LokSabha in March 2011 for introducing GST. As per the prearranged process, the bill was sent to the Standing Committee on Finance of Parliament. The bill was referred to the Standing Committee for further analysis.
- In August 2013, LokSabha was given the report of the Parliamentary Committee. Maximum commendations made by the EC and Standing Committee were approved and the draft copy of the Amendment Bill was revised appropriately.
- After the 15thLokSabha was terminated, the 115th Constitutional Bill for introducing GST was lapsed.
- On June, 2014, the government of India referred the draft to the Empowered Committee (EC).
- After an agreement was made between the Cabinet and Empowered Committee, the Cabinet approved the suggestion for introducing GST in the country on December 17, 2014. The Cabinet decided to amend the Constitution and introduce the GST Bill in the Parliament.
- On December 19, 2014 the Bill was introduced in the LokSabha and it was eventually passed by the LokSabha on May 6, 2015.
- The GST bill was then referred to the Select Committee. Select Committee submitted their report on July 2015.
- The bill was not tabled in the Monsoon and Winter Sessions of 2015 and the Budget Session of 2016.
- On August 2016, The GST Bill was passed by the Rajya Sabha.
Procedures after GST Bill is passed
- GST Bill will need to be approved by a two-thirds majority in Rajya Sabha as the bill is a constitutional amendment. According to the bill, GST must be implemented from April 1, 2017.
- The GST bill will need to be approved by 50 percent of the 29 state assemblies. Currently the BJP-led government is in power in 11 states. All the other major political parties are expected to approve this bill except for AIADMK in Tamil Nadu and CPI (M).
- GST is of three types and thus three pieces of enabling legislation will need to be approved which are A Central GST law (by Parliament), A State GST Law (by state government) and an integrated GST Law (by Parliament).
- An IT infrastructure needs to be developed for GST. A non-government private company was set up on March 28, 201 named Goods and Services Tax Network (GSTN). This company will assign a company with the responsibility of IT infrastructure. Till now five companies have placed their bids for developing the IT Infrastructure. Renowned companies like Microsoft, TCS and Infosys have placed their bids.
The Effects of GST Bill on Modi Government
After the implementation of GST, many countries had to face severe problems and major inflationary problems. The problems were so severe that most of the governments who implemented GST lost their respective elections after implementing GST. Below we will know about some of the instances faced by several countries after they had implemented GST.
- In the 1993 National Elections of Canada, the then Prime Minister of Canada lost the elections due to the implementation of GST.
- After implementing GST, the Australian Government lost badly in the 1998 Election.
- Singapore had to deal with an inflation in 1994 after it introduced GST.
The Modi Government will also have to deal with the consequences of passing the GST Bill. The GST Bill was passed as a 122nd Amendment Bill in the RajyaSabha, and it enabled a single taxation system in India named Goods and Services Tax. The Modi Government must worry about it as this bill will be implemented from April 1, 2017 and the inflation created by GST takes at least two years to settle down. If the Modi government fails to handle the inflationary problems then they will be in deep trouble. If the problems are not sorted by the Modi Government, they will suffer in the 2019 LokSabha Elections and other Assembly Elections.
Overall, GST Bill or Goods and Services Tax is a blessing for India. It will help the consumers as it will decrease the burden from their shoulder of paying different layers of taxes. It will eventually decrease the price of the manufactured goods. GST will increase the costs of services but it is fine actually considering the benefits that GST will provide. GST is very simple and easy to use and to administer and thus it will solve many problems of India. Also, the cascading of taxes will be stopped by GST and different types of frauds will also be stopped under GST. If the Modi Government is active enough to solve the major inflationary problem caused by GST, GST will be appreciated by the common people of India. GST is expected to take off from the following year after the procedures are completed thoroughly for implementing GST.
To read GST bill in Hindi please follow this link.