All about GST:

GST has been the buzz word this month! GST stands for Goods and Service Tax. It is an indirect tax levied on sale of goods and services. France was the first country to introduce GST in 1954.Since then, GST has been adopted by over 150 countries worldwide. When implemented in India, GST will replace as many as 17 state and federal taxes. The GST Bill will change what we pay for nearly everything!

Understanding GST:

Lets understand GST with an example: Suppose you buy soap for Rs.50 per piece, it includes Excise Duty, VAT or CST, Customs duty on the imported raw materials, etc. So, currently you will have to pay multiple taxes on the same product. Let’s take another example; the food you buy at hotels will have VAT as well as Service Tax.

Once GST is introduced, VAT, CST, Octroi, Entry Tax, Excise Duty, Service Tax, etc will be a history. One single tax GST is levied on both goods and services. The prime advantage of GST is that it eliminates the Cascading effect of taxes. It is believed that GST will replace as many as 17 state and federal taxes

GST INVOLVES 3 STEPS
Stage 1 : Manufacturer Stage
Let's assume that a manufacturer of shirt buys raw materials like cloth, thread, buttons and other equipment that is required to stitch the shirt. This raw material costs the manufacturer Rs 200. This Rs 200 includes a tax – say @ 10% tax - Rs 20. Once the shirt is made, the manufacturer has added his own value to the input material say Rs 60. Then the total cost of the shirt is now Rs 260 (Rs 200 + Rs 60). With a 10% tax rate, the tax on this shirt would be Rs 26. However, since the manufacturer has already paid Rs 20 as tax while purchasing raw material, under GST the tax incidence will now be only Rs 6 (Rs 26 - Rs 20).
Stage 2 : Wholesaler Stage
Now, the wholesaler would buy the trousers at Rs 260 sells at Rs 300. Applying the same 10% principle, the tax would amount to Rs 30. But, out of this Rs 30, Rs 26 are already accounted for from stage one. So the effective tax incidence for the wholesaler would be Rs 4 (Rs 30 - Rs 26).
Stage 3: Retailer Stage
Now that the retailer has bought the trousers at Rs 300, and sells it at Rs 320. Using the 10% rule, the tax would be Rs 32. However, with Rs 30 already accounted for in the earlier two stages, the tax incidence would be Rs 2* (Rs 32 - Rs 30).

To sum up, the total GST for the entire chain, from manufacturer to retailer is Rs (20 + 6 + 4 + 2 = 32). This eliminates cascading effect.

The proposed GST won’t be that simple. They are making Central GST and State GST - Dual GST System. But we are not alone - countries like Brazil and Canada follow dual GST system.

What will be cheaper under GST?

• Online Shopping : GST is expected to bring down the cost of logistics significantly, even making inter-state trade smoother because of a uniform tax rate. This will facilitate faster movement of goods across the country and help bring down costs for e-commerce companies. Overtime, e-commerce companies are expected to pass on the benefits of this to the end consumer.
• Branded Clothes! : Excise duty and VAT will be subsumed under the GST. This will make branded clothes cheaper.
• Cars and Two wheelers : The automobile industry may be the biggest beneficiary of the GST. From making cost to spare parts, paint, logistics, the cost is likely to come down at every level of manufacturing and sale of a model. Right now, the prices are different across various states, this will also be done away with with GST.
• LED TVs : Currently, there's a 24.5% tax on a Rs 20,000 LED TV. With the GST rate likely to be fixed at 18-20% band, you will shell out less for LED TVs and other gadgets.
• Building materials
• White Goods : A/c, Fan, Mobile phone
• Consumer Goods : Paints
• Processed goods
• Cements
• Buying a house,
• Movie tickets

What will get Expensive under GST?

• Eating Out : Yes, your restaurant bills and eating out bills are likely to go up once GST is rolled outSo, be ready to pay more for outside food!
• Say goodbye to cheap calling on mobile phones! : On your mobile bill, there is a service tax of 15% currently. If GST comes in at the expected 18-20%, then your mobile bills will go.
• Jewellery to become more expensive :If you are planning to buy jewellery, it will be advisable to buy it before the GST regime comes into place. This is because, currently, only a 2% effective tax passed on to the consumer but once the GST model is in place, at least 6% effective tax rates could be imposed, impacting your jewellery buys.
• Banking
• Insurance
• Clothes
• Travelling
• Sporting events
• Ambulance Services
• Cultural Programs
• Trucks
• Pilgrimages

It is estimated that India will gain US$ 15 billion a year by implementing the GST at it would promote exports, raise employment and boost growth. And it was truly a historic moment when the Rajya sabha passed the GST bill unanimously making the 122nd amendment to the Indian constitution. But there is a long way to go. With the need for State governments to ratify the bill with 2/3rd majority, GST may see the light of the day earliest by April 2017.