30 Aug 2022, 10:13 — 6 min read
The Goods and Services Tax (GST) is a tax system in India that replaces multiple taxes with a single tax. This includes the current taxes of excise, service tax, VAT and input tax. GST allows businesses to keep more of their profits, which will help spur economic growth in India.
It’s a new GST tax that’s being implemented in India starting from 1 July 2022. Here’s a quick rundown of what it is and what it means for you.
If you’re purchasing items that are subject to the GST, prices will change starting from 1 July 2022. Here are some examples:
GST replaces multiple state and central taxes, and is administered by the Central Board of Excise and Customs (CBEC). The main purpose of GST is to unify the country’s indirect tax system and make it more efficient.
Under GST, each product has a unique tax rate such as GST on sugar that depends on its composition. For example, basic food items like rice, wheat flour, milk and biscuits will be taxed at 5%, while luxury items like wine and cars will be taxed at 12%. There are also concessional rates for essential goods like foodgrain and medical devices.
GST has benefits for both consumers and businesses. For consumers, GST simplifies the taxation process by harmonizing different rates across states. This means that buying products in one state won’t have a significant impact on your overall tax bill. Businesses also benefit from GST because it brings down the overall cost of goods. This makes it easier for them to compete.
Sugar and chocolate are among the most commonly purchased items in India, so it makes sense that these two items have seen the biggest price hikes under the new GST regime.
Meanwhile, salt is not as popular in India as sugar and chocolate, so there hasn’t been as much of an increase in prices for this item under the recent GST regime.
The new GST rate does not apply to food items that are not considered to be sugary, salty, chocolate or spice related. These include milk products, grains, vegetables and fruits.
Consumers who are active in the informal economy may be impacted the most by this change as they will now have to pay more for their goods and services.
Businesses that deal with these types of items will also have to adjust their pricing accordingly as the recent GST rate will be applied to all sales made in India.
The GST is divided among the states according to their population. Each state receives a certain percentage of the total GST revenue. For example, Uttar Pradesh (population 200 million) receives 4% of the GST revenue, while Bihar (population 100 million) receives 0.8% of the GST revenue. The remaining 95% of the GST revenue is shared equally among all the states.
If there are any changes to the population of a state after July 1, 2017, then that state’s share of the GST revenue will change accordingly.
If you purchase any of these items from outside of India, you will have to pay GST on top of the original price. However, there are some exceptions to this rule. Agricultural goods, for example, are not subject to GST. This is because they are considered necessities in India and are not subject to variable prices.
Also read: How to register for GST online?
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Posted byVakilsearch Staff
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