GST or Goods and Services Tax



What is GST –or the Goods and Services Tax? 

GST in simple words.

Concept simplified.

·         A tax system that replaces other indirect taxes for example – customs, excise, luxury, sales, services tax etc.


·         It is considered to be the biggest tax reform in India so far.  Although it is an international tax regime implemented by more than 160 countries. 

·         So the tax rates for different categories are equal throughout the country.
·         Earlier they were different for different states.
·         There are four slabs for GST viz. – 5, 12, 18 and 28 percent.
·         For essential goods like some food items GST is 5 percent and for luxury items it is 28 percent.

Advantages -


  • ·        There’s no tax on milk, wheat, rice.
  • ·         Prices of basic food items remain the same.
  • ·         Prices of essential items used by middle class families are either same or have gone down like for soaps, LED bulbs have reduced in prices.
  • ·         Biggest benefit of GST is that it eliminates double taxation. The manufacturers don’t have to pay for the raw material they are using. For example, if the manufacturer is making plastic toys in his factory, now he doesn’t have to pay tax on the plastic he’s using as a raw material because for it the tax has already been paid by the manufacturer of plastic.
  • ·         So tax complexities have been resolved to quite an extent.
  • ·         There’s medical relaxation in terms of tax for the use of ICUs or incubators.
  • ·         Because of growing interest in sports prices of bicycles and other sport equipments have gone down.
  • ·         It encourages tax payments as now there’s more transparency in the system
  • ·         It has cut down on transactional cost. For example, when Indian trucks go from one state to another, they would spend 60 percent of their time on check posts clearing various tolls. This was extremely costly for businesses.





Disadvantages – 

·         Banking and telecom services (which now fall in the 18 percent tax slab, earlier was in the service tax category), chit-funds, mobile phones as also cars, clothes,  gold, cosmetics have gone up in prices.

·         Good news for the lower and upper-middle class but certainly not for the elite as now they have to pay 5 percent extra for luxury products.


·         In the unorganized sector, for example, the handloom sector whose turnover is less than 20 lakh per annum, the artisans are in trouble because they have to pay tax at every point of production.  For production of a single saree, tax is levied on spinning, weaving, block printing so the cost of production goes up. And for the output of one or two sarees a month, this cost is too high.

·         Earlier there were no taxes for the handloom sector, even if they were exported to different states.

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