GST is a tax on goods and service having a comprehensive and continuous chain of set off benefits starting from the producer’s and service provider’s up till the retailer’s level. It is essentially a tax charged only on value addition at each stage. The supplier at each stage is permitted to set off, through a tax credit mechanism, the GST, paid on the purchase of goods and services as available to set-off the GST to be paid on the supply of goods and services. The final consumer will only bear the GST charged by the last supplier in the supply chain, with set off benefits at all previous stages.
GST Rate Slabs
- Exempted categories – 0
- Commonly used Goods and Services – 5%
- Standard Goods and Services fall under 1st slab – 12%
- Standard Goods and Services fall under 2nd Slab – 18%
- Special category of Goods and Services including luxury – 28%
Types of GSTs in India
First, Central Goods and Service Tax (CGST) that has come with a subsuming effect on the following taxes:
- Central Sales Tax (CST)
- Central Excise Duty
- Service Tax
- Excise levied under medical and toiletries preparation Act
- CVD (Additional Customs Duty- Countervailing Duty)
- SAD (Special Additional Duty of Customs
- Educational Cess and Secondary & Higher Educational Cess (EC and SHEC)
GST Rate Slabs
The tax collected under CGST would go to the Central Government.
Second, State Goods and Service Tax (SGST) falls under State Goods and Service
Tax Act 2016 and would subsume the following State taxes:
- Taxes on lottery, betting, gambling
- State Sales Tax
- Luxury Tax
- Purchase Tax
- Entertainment tax (unless levied by the local bodies)
- Entry tax (all forms)
- State Cess
The revenue collected under SGST goes to the State Government.
Third, Integrated Goods and Service Tax (IGST) shall be charged during movement of goods from one state to another. In other words, it is the tax on inter-state supply of goods and services. The revenue generated from IGST shall be apportioned between the central and the state government as per the recommendations of Goods and Service Tax Council.
Fourth, Union Territory Goods and Service Tax (UTGST) that shall be charged when the supply of goods and service takes place in Union Territories of India. India has seven Union Territories namely, Chandigarh, Dadra and Nagar Haveli, Delhi, Lakshadweep, Puducherry, Andaman and Nicobar Islands, and Daman and Diu.
Since, both Delhi and Puducherry have their own legislature along with an executive council of Ministers headed by a Chief Minister, their functioning resembles a state more than a union territory. Hence, SGST would be applied on Delhi and Puducherry. However, UTGST will be levied in the remaining union territories viz. Daman and Diu, Lakshadweep, Dadra & Nagar Haveli, Chandigarh and Andaman & Nicobar Islands.