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The Criteria Behind the Levying and Payments of the Goods and Service Tax


Goods and Services Tax regime has subsumed a plethora of indirect taxes into one single tax system. GST council, responsible for the structure of this tax regime and creating the GST tax rate list, has not fixed rates on goods and services. The GST rates fluctuate depending on socio-economic changes and feedback from suppliers and consumers. The GST impact on economy is also a criterion that’s taken into consideration when deciding the tax rates under this regime. 

Criteria of Tax Rates:

GST council decided that few goods are necessary household items, and such products should have a lower tax rate. This decision meant that the rates for some essential goods should be lowered. This is considered as one of the criteria so that necessary items reach the maximum population without burdening them with the additional costs of taxes. Earlier, some daily use items that are considered to be essential for every household were exempted from tax. Other items saw a change in tax rates. Lotteries and other such services are going to be taxed at 28%. Whereas vegetables are exempted from taxes. 

The structure of GST rates is simple, and it is arranged in 5 different tax slabs. 0% for the goods and services that are exempted from taxes. 5% for products that are essential and are widely used by all classes of society. And the other three slabs being 12%, 18% and 28% depending on revisions and calculations made by the GST council. 

Tax Rates of Goods and Services:

0% Tax Slab: Items that attract 0% tax rate are vegetables, salt, bread, eggs, flour, newspaper, etc. The main intention for the majority of food items to be exempted from taxes is to ensure that it is available to everyone at affordable prices. Goods that are essential for every household are kept under this slab. Commodities such as Sanitary Napkins, Music books, Picture books, Colouring, and drawing books are all exempted from taxes.

Services that are kept under this tax rate are the bank charges, and account services related to Jan Dhan Yojana. 

5% Tax Slab: The services and goods that are widely used but are not considered to be as essential goods and services come under this tax slab. This is the lowest tax slab. There is some discontent among some restaurants because of the Input Tax Credit being removed under this tax rate. Goods that fall under this tax rate are Insulin, Biogas, Walking sticks, Natural cork, Marble Rubble, Coir mats, floor covering and matting, Chakki atta(wind-based) braille watches, braille typewriters, etc. Other necessary braille items are all included in this tax rate. 

Services that come under this tax rate are tour operator, renting of motor cab without fuel cost, radio taxi, transport services in AC, Pilgrimage travel via non-scheduled or chartered flights, the printing of newspapers, etc. 

12% Tax Slab: Goods and services that come under this tax slab are not luxuries, but they also don’t fall under the economic range. Goods such as Plastic beads, All diagnostic kits, fixed speed diesel engines, playing cards, carrom board, chessboard, corrective spectacles, intraocular lenses, Walkie Talkie used by police, paramilitary and defense forces. Menthol and menthol crystals etc. 

Services that come under this tax rate are the construction of buildings ( for the purpose of sale), Air travel ( Excluding economy), Accommodation between Rs.1000 and Rs.2500, Hotel room tariff between Rs.1001 and Rs. 7500, movie tickets less than Rs. 100. Etc. 

18% Tax slab: Goods under 18% tax rate are aluminum foil, headgear and its parts, transformers, industrial electronics, precast concrete pipes, dental wax, school bags, handbags and shopping bags made of artificial plastic material, toilet cases, cotton or jute, rear tractor tires and tubes, electrical filaments or discharge lamps, winding wires, bamboo furniture, swimming and paddling pools, televisions or monitors up to 32 inches in size, baby carriages. Etc. 

Services that are under this tax rate are Outdoor catering, the supply of work contract, the supply of food, party arrangements, and shamiana, hotel accommodation for the value of Rs. Seven thousand five hundred one and above, circus, theater, movie tickets with the amount of Rs. 100 or above etc. 

28% Tax Slab: This is a tax slab that applies to “sin-products” and luxury goods and services. This is the highest tax slab under GST, and there are seldom any changes to the items and services in this tax slab. Recently lottery is added under this tax rate. Goods such as sunscreen, pan masala, luxury cars, yachts, hair clippers, etc. come under this tax slab. Services that come under this tax slab are betting in casinos, gambling in a race, etc. 

In the recent GST council meeting, they reached upon a decision that the council will be levying a new tax slab of 0.25% to 3% on cut and semi-precious polished stones. Its also decided that group insurance schemes for paramilitary forces will be exempted. Along with that, GST is exempted for Senior citizens for the administrative fee collected by NPS (National Pension System). 

There is a continuous revision of tax rates on all goods and services. Feedback from different sections of suppliers and consumers is considered, and the implementation of appropriate changes happens, depending on that feedback. The GST council has made several changes to tax rates on different items to accommodate a better balance for consumers and suppliers. 

Conclusion

The GST Council determines the GST tax rate list depending on numerous factors. It aims to help the overall GST impact on economy, create ease of doing business, remove the burden of taxes on the general population, and levy balanced tax rates. GST council is also alert in taking feedback. For example, There was a tax rate of 12% for state-run lotteries and 28% for state-authorized lotteries. There was a demand for a uniform tax rate for lotteries from a group of ministers. GST council considered this and announced a change in the GST tax rate list for lotteries. With the new change, lotteries are going to be taxed 14% CGST and 14% SGST. This new change will make the total tax rate to become 28%. 

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