GST demystified…

image_pdf

A lot of people have been talking about something called the GST for the last few months.

Depending on which conversations you listen to, there has been excitement AND concern when it comes to this mysteriously named phenomenon. So what is it? GST stands for Goods and Services Tax. Simply put, it is a uniform tax that our government charges on most Goods and Services that are sold in India.

  • Goods are basically phones, soaps, cars, and just about anything you buy from any store.
  • Services include any services that are provided like being serving food in a restaurant, giving a haircut, showing a movie or even giving tuitions.

 

So for example, if you go to a shop to buy a bar of soap that costs you Rs. 118, the revenue that goes to the soap company may be Rs. 85, the shopkeeper may keep Rs. 15 as his profit, but an additional 18% or Rs. 18 is charged by the government as the GST on the good, which is the bar of soap.

OK that sounds reasonable. So what’s all the chatter about? GST is an INDIRECT tax and was implemented in India from July 1, 2017. Prior to that, there were many different indirect taxes charged by the Central, State and Local governments such as Excise, Service Tax, Luxury Tax, VAT, Sales Tax, Octroi, etc. Phew…yes it was as complicated as it sounds!! Basically, your bar of soap could cost you Rs. 105 in one state, and Rs. 118 in another, because each state had its own system for taxing goods and services.

OK so what was the problem? It was difficult for companies to keep up with all the different requirements, it was difficult for the governments to collect taxes properly, and it was difficult for consumers to understand. Now with GST, there is only ONE indirect tax in the entire country to be collected by the Central Government who will in turn distribute to the State and Local governments.

That’s it? Is it really that easy? Not quite – all Goods and Services fall under the following slabs – 0%, 5%, 12%, 18% and 28%. If an item is thought to be an essential item for everyone in the country (e.g. milk, eggs, low cost hotels,) it falls under the lowest GST slab i.e. 0%. If it is considered a luxury item (e.g. cars and movies) it falls under the highest GST slab i.e. 28%. For the rest it is somewhere in between with most items falling under the 18% tax bracket.

Sounds complicated! So who decides all this? The GST Council, which consists of lawmakers in the Central Government and State Governments and is headed by the Finance Minister of India, Shri Arun Jaitley.

Got it! So what’s the big deal?

  1. our entire GST system is on a technology platform called the GST portal. Because this is automated, it makes it very difficult to cheat and not pay the taxes (as was being done before!).
  2. it makes it easier for companies, shops and service providers as there is only one tax that needs to be paid.
  3. it makes it easier as a consumer to understand what you are paying for.

Try this! The next time you go to your favourite restaurant, look at your bill carefully – besides the amount for the food you should see 18% GST added to your food bill (broken up into 9% for CGST or Central GST and 9% for SGST or State GST).

4. in long run this will improve the ease of doing business. BUT there will be pain in the short term since everyone has to get used to the new tax structure, the new rules and deadlines for filing taxes and the new technology platform.

Don’t other countries have this as well? The richest country in the world, the USA does not have GST but yes many other developed countries have similar GST systems. Although none have done it at the scale like India has and certainly not using the same level of technology like India has.

Spread the love
No Comments Yet

Leave a Reply

Your email address will not be published.

Write to us at
mail@currentkids.in

Help us keep currentkids, current! We’d love to hear about your crazy adventures and experiences. Send us your pictures, travel diaries, thoughts on cool new gadgets, gaming experiences and anything else you find interesting!

About Us

Welcome to our entertaining and empowering news source for kids with inquisitive minds! This is a digital space that keeps kids aged 8 and above (and your families!) connected to what’s happening in the world. We filter a wide variety of news, events, and interesting bits of trivia to develop short, relevant, unbiased content in creative formats. We give everyone something to relate to and get engaged with in short bytes of information with a snappy, chatty feel. We believe in encouraging curiosity, creativity and continued learning in our safe digital space.

Why is reading non-fiction important?

This helps curious minds to learn more about the outside world. It also enriches their vocabulary and their general knowledge. Simplified news helps children to express their opinions easily with their friends and family and gives them some perspective on complex issues. Our safe news website will give you parents a useful tool with which to navigate the digital world with your children.

We hope you enjoy our posts!

Biyash & Sunaina

Subscribe to our weekly newsletter and stay current!

 

You have successfully subscribed to the newsletter

There was an error while trying to send your request. Please try again.