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India’s Government has been hard at work in introducing various reforms. The latest of these reforms is the Goods and Services Tax or GST as it is referred to in India. The GST came into effect on the 1st of July 2017. Through the GST India’s Government seeks to simplify its tax system in as far as taxes on Goods and Services in India.
Previously India had nearly a dozen central and state taxes, under GST the tax system will be unified. One of the consequences of the previous tax system was that it resulted in goods moving slowly due to multiple taxes. The movement of goods will be seamless and at a lower cost. The implications are positive from a value chain and consumer perspective. Double taxation was also another consequence under the previous tax regime. Under GST there will no longer be tax on tax on any purchases. From a fiscal stand point it is expected that GST will contribute a 2% points boost in GDP.
A total of 1211 goods and services have been categorized into varying tax slabs in which they carry a tax rate of 0% (no tax), 5%, 12%,18% or 28%.
0% (No Tax)
Some of the goods that will carry no tax include the following:
- Fresh meat
- Fresh fruits and vegetables
Hotel and lodge services with a tariff below Rs 1,000 ($15.42) will carry no tax.
Some of the goods that will carry a 5% tax include the following:
- Apparel below Rs 1000 ($15.42)
- Footwear below Rs 500 ($7.71)
- Frozen vegetables
- Pizza bread
Transport services (railways, air transport) will carry a 5% tax.
Some of the goods that will carry a 12% tax include the following:
- Apparel above Rs 1,000 ($15.42)
- Frozen meat
- Fruit juices
- Sewing machines
- Ketchup & Sauces
Services such as State-run lotteries, Non-AC hotels and business class air tickets will carry a 12% tax.
Some of the goods that will carry an 18% tax include the following:
- Footwear costing more than Rs 500
- Ice cream
Services such has AC hotels that serve liquor, telecom services, IT services, branded garments and financial services will carry an 18% tax. Hotels and lodges with tariffs of Rs 2,500 ($38.55) to Rs 7,000 ($107.94).
Some of the goods that will carry a 28% tax include the following:
- Chewing gum
- Shaving creams
- After shave
- Hair shampoo
- Washing machine
Services such as Private-run lotteries authorised by states, hotels with room tariffs above Rs 7,500 ($115.65) and cinemas will carry a 28% tax.
*exchange rate conversions are at the time of publishing this article.
Economic and Investment Analyst
BCom Economics, University of Pretoria
BCom (Hons) Business Management, University of Pretoria