With the announcement of the GST bill of 2016, the economic scenario of India saw a lot of changes, shifts and apprehensions. With all the hoopla around the bill, the common man is left asking – “How does it affect me?”
First things first, what is GST? Leave aside what the scholars have to say. It is basically a comprehensive indirect tax to subsume various taxes levied by the central and state government. Simply put, GST abolishes indirect taxes and puts them under one bracket.
With tax evils such as dual taxation and exorbitant tax rates rampant in the economy, the need for a unified indirect tax system has been felt for long. Discussions on GST begun as early as the 2000s, and 16 years later, the GST bill was passed in the Rajya Sabha. Come 2017, GST is a reality.
But why GST? Will the common man, who is concerned with the cost of his daily necessities, be benefitted by this seemingly scholarly unified tax system? GST is a concept that will help increase tax base, prevent tax leakage and necessarily lower the prices of goods with its uniform no-exceptions rate across India. It will do away with the cascading effect of taxes, which in simple terms, means “tax on tax”.
What else? It is also expected to impact supply-chain optimization, IT systems, tax compliance systems and product pricing.
While the finalization of rates of commodities supposed to come through in May 18-19 and GST slated to make its debut on July 1st, the GST Council has presently agreed upon tax slabs of 5%, 12%, 18% and 28%.
Coming back to the actual “goods”, food grains remain untaxed while articles of daily use like soap, toothbrush and others come under the 12-18 % bracket. White goods, including refrigerators and air-conditioners, emerge cheaper as they are deemed to be taxed at 28%. Luxury cars maintain their status at 28% GST plus cess, with demerit goods at par with them, thanks to the higher rates of sin tax. Subsidized facilities at work places are being brought under the tax bracket as well.
Whether this unified tax structure will prove to be a boon or not can be rightly assessed after the final roll out, but here is hoping that GST proves to be an iconic step in the economic history of India.