You are probably already aware of the effect of the Goods and Service Tax (GST) on taxing and tax calculation. Before GST took over, there would often be double taxation on goods and services at different stages, courtesy of taxes like Sales, Service, Entertainment, VAT, and so on.
However, the Goods and Services Tax eliminated the cascading effect of the taxes mentioned above. GST is a unified tax on the supply of taxable goods and services from the vendor or business to the customer.
Do you need to pay GST?
If you are the owner of a company and your turnover cross Rs. 40 Lakh in a financial year, you will have to pay GST.
If your company is based out of a special category state like Himachal Pradesh or states in North-East India and deals with goods, you will have to pay GST once your turnover crosses Rs. 10 Lakh. However, if it deals with services, you will have to pay GST once the turnover crosses Rs. 20 Lakh
What are GST rate slabs?
As per the GST act, essential goods and services are placed in lower tax brackets, while luxury items and services were placed in higher tax brackets. The GST council has sanctioned the taxation of over 1300 goods and 500 services. There are four GST slabs that taxable goods and services fall under. These slabs are 5%, 12%, 18%, and 28%. 81% of the listed goods and services are below the 18% GST slab.
Goods and Services that are exempt from GST
Seven percent of the listed goods and services are exempt from tax. These goods and services include fruits, vegetables, milk, buttermilk, organic honey, flour, salt, croissants, cereal grains, jaggery, meat, fish, eggs, chicken, postcards, printed and published books, newspapers, handicrafts, hotels that charge rooms for Rs. 1000 or less, and sketchbooks.
How do GST Rates Work in India?
As mentioned, there are four GST slabs for goods and services in India:
The goods subject to tax in the 5% bracket are fish filet, frozen vegetables, pizza bread, vegetables, peanuts, ayurvedic medicines, seasonings, oil, gas, fertilizers, ethanol, woven carpets, and so on.
The services that fall in this tax bracket are standalone AC and non AC restaurants, small eateries, eateries in public transport areas like airports and railway stations, and eateries situated in hotels that charge Rs. 7500 per room for a night.
The goods that are subject to tax in the 12 percent bracket are fresh fruit drinks, pickles, clarified butter, mobile phones, sewing machines, cheese, wooden frames for works of art, pictures and reflective surfaces, canned food blends, medicines, frozen processed meats, butter, diesel fuel, sausage rolls, pressure cooker, and so on.
The services that fall in this category are cinema tickets that cost under Rs. 100 and business class flight tickets.
The goods that are taxed under the 18% bracket are breakfast cereal, cleaning products, glassware, tubes, pumps, croissants, noodles,dried fruits, soups, sparkling water, deodorants, torches, chocolate bars, lamp fittings, beauty cases, oil powder, edible processed sugar, bubble gum, hair gel, after-shave products, and so forth.
Aside from these, many consumer electronics also fall into this category. Examples of consumer electronics are washing machines, vacuums, television sets, refrigerators, hairdryers, curling irons, and heating systems.
You will also find physical training equipment, stationery, musical instruments in this category. The services that are taxed at 18% are restaurants in hotels with room rates of Rs. 7500 per night, theater tickets that cost Rs. 100, financial services, and telecommunications.
The final GST rate slab is the 28% slab. Products like pan masala, tobacco, aerated beverages, luxury vehicles, air cleaners, airplanes, boats, sun protection, liquor, and many other commodities are taxed at 28%. The services that fall in this category include lodges, five-star hotels, and resorts that charge Rs. 7500 per night, theater tickets priced above Rs. 200, and so on.
Given how you purchase all types of products and services regularly, it is vital to know how much you will be taxed for every item you pick up. This article should give you the gist.