GST in India

GST in India

The Goods and Service Tax (GST) Consitutional Amendment was finally passed after 16 years as the Rajya Sabha voted in favour of it on Wednesday. The bill was unanimously passed by the members of the house.

It is one of the most widely accepted indirect tax system in more than 150 countries. Edelweiss, in a research note dated December 7, 2015 said, "Globally, GST has been structured as a destination-based comprehensive tax levied at a specified rate on sale and consumption of goods and services within a country. It facilitates creation of a national tax standard with consumers paying uniform rates of GST, thereby enabling flow of seamless credit across the supply chain."

It further said, "The net effect is that the seller or service provider charges GST but does not retain it, and pays GST but receives a credit for it, making him a pseudo collecting agent for the government. On most goods and services, the tax rate is uniform, but depending on the circumstances in a country, certain goods and services can be declared ‘exempted’ or charged at a lower rate."

This will essentially pave way for the government to set up a GST committee to be set up which will determine the rate of taxation. The GST rate will come into place after the Centre and the States agree upon it, said Finance Minister Arun Jaitley to the media today after the passage of the bill.

Goods and service tax is taking India by the storm. GST will bring in “One nation one tax” to unite indirect taxes under one umbrella and facilitate Indian businesses to be globally competitive. The Indian GST case is structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods etc.

France was the first country to implement GST to reduce tax- evasion. Since then, more than 140 countries have implemented GST with some countries having Dual-GST (e.g. Brazil, Canada etc.) model. India has chosen the Canadian model of dual GST.

List of countries with GST and the rate:

How Indian GST model compares with GST in other countries

Particulars	India (proposed)	Canada	UK
Name of GST in the country	Goods and Service tax	Federal Goods and Service Tax & Harmonized Sales Tax	Value Added Tax
Standard Rate	0% (for food staples), 5%, 12%, 18% and 28%(+cess for luxury items)	GST 5% and HST varies from 0% to 15%	20 % Reduced rates- 5 %, exempt, zero rated
Threshold exemption Limit	20 lakhs (10 lakhs for NE states)	Canadian $ 30,000 (Approx Rs. 15.6 lakhs in INR)	£ 73,000 (Approx Rs. 61.32 lakhs)
Liability arises on	Accrual basis: Issue of invoice OR Receipt of payment -earlier	Accrual basis: The date of issue of invoice OR the date of receipt of payment- earlier.	Accrual Basis: Invoice OR Payment OR Supply -earliest Cash basis (T/O upto 1.35mn): Payment
Returns and payments	Monthly and 1 annual return	Monthly, quarterly or annually based on turnover	Usually quarterly. Small business option- annual
Reverse charge Mechanism	Apply on goods (new) as well as services (currently under Service tax)	Reverse charge applies to importation of services and intangible properties.	Applicable
Exempt services	Manufacture of exempted goods or Provision of exempted services (to be notified)	Real estate, Financial Services, Rent (Residence), Charities, Health, Education	Medical, Education, Finance, Insurance, Postal services

Particulars	India (proposed)	Singapore	Malaysia
Name of GST in the country	Goods and Service tax	Goods and Service Tax	Goods And Services Tax
Standard Rate	0% (for food staples), 5%, 12%, 18% and 28%(+cess for luxury items)	7% Reduced rates- Zero rated, exempt	6%
Threshold exemption Limit	20 lakhs (10 lakhs for NE states)	Singapore $ 1 million (Approx Rs. 4.8 crore)	MYR 500,000 (Approx Rs. 75 lakhs)
Liability arises on	Accrual basis: Issue of invoice OR Receipt of payment -earlier	Accrual Basis: Issue of invoice OR Receipt of payment OR Supply - earliest Cash basis:(T/O upto SGD$1mn): Payment	Accrual Basis: Delivery of goods OR Issue of invoice OR Receipt of payment
Returns and payments	Monthly and 1 annual return	Usually quarterly Business option- Monthly returns.	Large organsations- Monthly
Reverse charge Mechanism	Apply on goods (new) as well as services (currently under Service tax)	Reverse charge applies to supply of services	Reverse charge applies to imported services
Exempt services	Manufacture of exempted goods or Provision of exempted services (to be notified)	Real estate, Financial services, Residential rental	Basic food,Health Transportation, Residential property, Agricultural land

 **USA does not have GST as it ensures high autonomy for the states**

Thus we find GST model across the commonwealth countries are similar with some variations. Unlike India, other countries have a much higher threshold for GST applicability thus reducing the burden for small businesses. This will bring in challenges for our SMEs.

• 28% slab on these items

- Chocolate, Custard Powder, Instant Coffee
-Powder, Hair Dye, Hair Cream, Perfume, Screen Care Product
-Municior and Pidicious Products, Sunscreen Lotion
-Liquid Shop, Detergent, Shaving Cream, Razor, After Chev
-Electric Heater, Electric Hot Plate, Vacuum Cleaner, Dish Water
-TV, freeze, washing machine, leather items, wig
-Printer Xerox machine, fax machine
-The clock, the video game console
- Cement, pants, varnish, putty, plywood board
-Mica, tiles and ceramic products, steel pipes
-Plastic fitting and plastic floor coverings
- Aluminum window frame
-Installed Wire, Lamps, Light Fittings

• 18% slab on these items

-Suboo, Tooth Paste, Hair Oil
-Corn Flex
-Paper, cake, jam, jelly, ice cream
-Mineral Water
-cotton yellow
-Core Mattress
-Register, Account Book, Notebook, Eraser, Fountain Pen
-Nepkin, Tissue Paper, Toilet Paper
-Plastic things to do
-Camera, speaker, pipe, helmet, can, sheet
-Citicide, Refinery Cement
-Plastic tubes, pipes and household goods
-Byiodel, tube, pipe, nuts, bolt
-LBG stv
-Electric motor, generator
-Composition frames, goggles, optical fiber
-Children car
-Nicotine gum
-Mix Food, Soft Drinks
-Contact, Diabetic Food Slide

• 12% on these items

-Mobile Phones
- Ghee, butter oil
Dry Fruit, Fruit and Vegetable Juice
-Soya Milk Juice, Soy Milk-Drink Drinks
-Compare, candle
Homeopathic medicines - Ayurvedic-Yunani and Sidhwa
Homoeopathic medicines
-Procex and freshen beef-fish
-chachma lenses
-Pancil Blaster
-birth,
-LED Lite
-Curmic items in bathroom and bathrooms
-Stainless copper and aluminum ware
-Electric vehicle, bicycle, bicycle parts
-Good equipment

0% slab on these items

-Grouse, rice, other grains, flour
-Mand, siten
-Mamra
-Bread
-Gal
-Dood, yogurt, lassi
-Khulu Paneer
-Inda, meat, fish
-Honey
-Fresh fruit, vegetables