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All You Need To Know About India’s Goods And Services Tax

All You Need To Know About India’s Goods And Services Tax
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All You Need To Know About India’s Goods And Services Tax

First brought up in 2000, GST took 17 years of discussion to be introduced.

In its 28th meeting, the Goods and Services Tax (GST) Council made changes to several tax brackets on Saturday.

Among other changes, GST on multiple domestic electrical appliances has been reduced from 28% to 18%. These appliances include refrigeration devices, televisions, grinders, vacuum cleaners, water heaters, and hair dryers.

Taxes on artwork made of wood, iron and other materials have also been reduced from 18% to 12%, while those on handmade products like lace, carpets and tapestries have been brought down to 5%. Other changes include 5% GST being extended to footwear having a retail sale price of up to Rs. 1000 per pair, while those above that price will continue to attract 18%.

The Goods and Services Tax on certain commodities is being brought down to nil. These include stone, marble, and wooden deities, raw material for broomsticks, and, most notably, sanitary napkins. Placing GST on sanitary napkins had long been opposed by critics, who objected to a commodity that acts as a basic necessity for women being taxed.

India’s Goods and Services Tax (GST) is an indirect tax that serves as a single replacement for multiple taxes that were previously levied by the Centre and the states. It was introduced in the country on 1 July 2017, following the passing of the Constitution (One Hundred and First Amendment) Act in 2016.

The introduction of GST was preceded by the passing of four supplementary bills— the Central GST Bill, the Integrated GST Bill, the Union Territory GST Bill, and the GST (Compensation to States) Bill— following the constitutional amendment.

GST, like the regular Sales Tax and VAT, is applied at every stage during the production process. However, unlike other taxes, both direct and indirect, it is refunded to all the involved parties apart from the final consumer.

Before the Goods and Services Tax was introduced in India, there was a clear demarcation between the taxes levied by the centre and those levied by the states. The sharp distinction was intended to avoid overlaps or conflicts between the two.

Central Sales Tax was collected by central government for all the states, while service tax was also levied for all services by the centre. Additionally, the Centre charged and collected custom duties on goods being imported or exported.

Atal Bihari Vajpayee’s administration was the first to come up with the concept of GST, back in 2000. It became a possibility only 17 years later, after a lot of discussion.

Uniform taxation on goods and services is a policy followed by almost 160 other countries in the world, including France, China, Japan, Canada, Australia, and South Korea.

The Role Of  The GST Council

All You Need To Know About India’s Goods And Services Tax

The 28th GST Council meeting. (Source- Official Twitter account of Piyush Goyal)

A 33-member constitutional body known as the Goods and Services Tax Council was set up to make recommendations to both the central and the state governments on issues related to this tax. Usually headed by the Union Finance Minister, the council is now being chaired by Piyush Goyal who is handling the ministry in the absence of Arun Jaitley.

The GST council is responsible for decisions about how GST should be implemented in the country, and making changes to the same.

It not only figured out what the various tax brackets would be once the Goods and Services Tax was introduced, but also decided which goods and services would fall under which tax bracket.

The council is also responsible for deciding how much money was meant to go to the Central government from these taxes, and how much would remain with the state governments.

Tax Brackets Under GST

The GST Council introduced different Tax Brackets, with different kinds of goods and services under each. The first slab is the exempted GST Rate Slab, which has no tax at all. This primarily includes edibles and bare necessities.

The second bracket is the 5% GST Rate Slab, and mostly covers packaged food items and some luxury food items. The 12% Rate Slab comprises edibles like frozen meat, dairy products, and other fast-moving consumer goods. 

The 18% rate slab includes most of the goods and services, amounting to a little less than half of all the items that fall under GST. The final slab is 28%, and has luxury consumer goods and luxury services.

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