India's tryst with GST

The year 2017 will forever be etched in Indian history as the year that saw the implementation of the biggest and most important economic reform since Independence - the Goods and Services Tax (GST). The reform that took more than a decade of intense debate was finally implemented with effect from 1 July 2017, subsuming almost all indirect taxes at the Central and State levels.

GST, which was publicised as ‘one nation, one tax’ by the government, aims to provide a simplified, single tax regime in line with the tax framework applicable in several major economies across the Globe. This single tax has helped streamline various indirect taxes and brought in more efficiencies in business. GST law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

The implementation of the GST got overwhelming support from the industry. The industry took this as an opportunity to redefine supply-chain model, customise IT processes, and evaluate internal and external arrangements to safeguard interest and minimise their tax costs.

As the GST journey progressed, there was a growing realisation of its far-reaching impact. Industry faced various challenges, ranging from new and unique concepts, complex documentation, high tax rates of certain goods and services to complex or unclear treatment of several common transactions. The matching concept for claiming credits, adverse and contrary advance rulings, ambiguity on aspects relating to Anti-Profiteering, GST refunds etc. are some of the emerging challenges that the businesses should be mindful of.

However, it should also be appreciated that the authorities have been quick to address public concerns by issuing a series of notifications, clarifications, press releases and FAQs, to resolve a wide range of issues.

There is hope that GST 2.0, which is at the works currently, will be a much improved version compared to the first one. The government has come out with new return filing process. There have been multiple reduction in tax rate for various goods. With the objective to curb tax evasion, the government has also introduced the E-way bill system across India, to track movement of goods.

Levy of GST

  • It is a dual levy with State/Union territory GST and Central GST
  • Intra-state supplies attract CGST + SGST/ UTGST
  • Inter-state supplies IGST which is the sum total of CGST and SGST/UTGST

Exclusions under GST

  • Basic Customs duty on import of goods into India
  • Petroleum products (petrol, diesel, ATF, natural gas and crude oil)
  • Alcohol for human consumption
  • Stamp duty and Real Estate

GST rate classification

  • 0% - Essential food and medicines, newspaper, education services, residential accommodation
  • 0.25% - Diamonds, other precious stones
  • 3% - Gold, silver, platinum, articles of jewellery
  • 5% - Common use items, sweets, restaurant services, tour operator services
  • 12% - Frozen meat, butter and cheese, Namkeens, Milk beverages
  • 18% - Standard rate for goods and services
  • 28% - Luxury and sin goods such as motor vehicles (additional cess imposed on certain luxury goods)

Benefits of GST

  • Wider tax base
  • Elimination of cascading effect of multiple indirect taxes
  • Rationalisation of tax structure
  • Harmonisation of Centre and State administrations
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