History of GST
The implementation of the Goods and Services Tax (GST) in India was a historical move, as it marked a significant indirect tax reform in the country. The amalgamation of a large number of taxes (levied at a central and state level) into a single tax is expected to have big advantages.
One of the most important benefit of the move is the mitigation of double taxation or the elimination of the cascading effect of taxation. The initiative is now paving the way for a common national market. Indian goods are also expected to be more competitive in international and domestic markets post GST implementation.
The GST was launched by the President of India, Pranab Mukherjee , and the Government of India at midnight on 1 July 2017. The launch was marked by a historic midnight (30 June – 1 July) session of both the houses of parliament convened at the Central Hall of the Parliament. After its launch, the GST rates have been modified multiple times, on the recommendation of GST council.
The current indirect tax structure, which comprises of so many different taxes, can be classified as:
Central taxes: levied by the Central Govt (includes Central Sales Tax, Excise Duty etc.)
State taxes: levied by the various State Govt (VAT, Service Tax)
Goods and services are divided into five tax slabs for collection of tax – 0%, 5%, 12%,18% and 28%. Petroleum products and alcoholic drinks are taxed separately by the individual state governments. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.
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