All the different types of indirect taxes and implement a “single taxation” system. This system is called as GST (Goods & Services Tax). The main expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name suggests, the GST will be levied both on Goods and Services.
GST was first introduced during 2007-08 budget session. On 17th December 2014, the current Union Cabinet ministry approved the proposal for introduction GST Constitutional Amendment Bill. On 19th of December 2014, the bill was presented on GST in Loksabha.
France was the first country to introduce this system in 1954. Nearly 140 countries are following this tax system. GST could be the next biggest tax reform in India. This reform could be a continuing process until it is fully evolved.
A four-tier GST tax slabs have been decided by the Finance ministry. Below are the details;
- Zero Tax rate : There won’t be any tax on almost 50 % of items in the Consumer Price Index basket, including grains used by the common man.
- 5% Tax slab : This is applicable on items of mass consumption used by common people.
- There would be two standard rates of 12% and 18% under the GST regime.
- All the items (especially luxury items) which are now taxed at around 30% will fall under 28% GST rate slab.
- An additional cess would also be levied on luxury cars, tobacco products & aerated drinks besides the highest tax rate (28%).
- The tax rate proposal will now be placed in Parliament for its approval.