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What taxes has GST replaced and how is GST beneficial

  • Highlights

  • GST has replaced all indirect taxes on goods and services

  • Through GST only value-addition is taxed

  • It benefits businesses as well as individual taxpayers

  • It is expected to give the economy a boost

On 1st July 2017, the Government of India introduced the Goods and Services Tax (GST), which consolidates all indirect taxes levied on goods and services. With basic GST slabs of 5%, 12%, 18%, and 28%, it simplifies taxation. Prior to GST rates being put in place, the Centre and the State governments implemented systems to calculate and charge taxes on goods and services as they saw fit.

Here is a look at the taxes that GST has replaced.

CGST Explained

The Central Goods and Services Tax is a levy made by the state government on the intra-state supply of goods and services.

Taxes levied by the Centre that fall under GST

- Central Excise Duty
- Additional Excise Duty
- Special Additional Duties of Customs
- Service Tax
- Additional Customs Duty or Countervailing Duty

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SGST Explained

State taxes that fall under GST

- State Value Added Tax
- Central Sales Tax
- Luxury Tax
- Octroi and Entry Tax
- Entertainment and Amusement Tax
- Tax on advertisements
- Purchase Tax
- Taxes on lottery, betting and gambling
- State surcharges and cesses that relate to goods and services

Now that you know the taxes that it replaces, take a look at how GST is beneficial.

Additional Read: How to Calculate GST

Benefits of GST

It leads to an increase in revenue

It has been predicted that GST will give the economy a boost and increase India’s GDP in the long run. As far as immediate impact goes, GST has certainly succeeded in broadening the taxpayer base by standardising the threshold for liability. Tax compliance is also going to be easier in the long-term, and an online taxation system means greater efficiency, accountability, and therefore lowers chances of being able to get away with tax fraud.

Additional Read: What is GST?

It simplifies tax filing for businesses

As a business owner, you may find that currently adjusting to the new GST regime requires time, money and management. But in the long term, the process of filing GST returns will become a lot easier. Since all major indirect taxes have been consolidated, you will find that you no longer need to maintain large departments that are specifically focused on dealing with the hitherto extensive tax documentation. What’s more, if you are start-up, you no longer need to register for various individual taxes like VAT and Service Tax.

Additional Read: Impact of GST

It has made certain items more affordable

As a private taxpayer, you will find that the cost of some products has reduced, such as the decrease in the tax levied on private taxis from 6% to 5%. For air travel, flying economy class got marginally cheaper with a tax of 5%. The price of eating out hasn’t seen any major changes, although this depends on the nature of the establishment—whether it has AC or not, whether it serves alcohol, and also on whether the turnover is less than Rs.50 lakh per year. On the other hand, you will find that on unprocessed cereals like rice and wheat, unprocessed milk, vegetables, fish, meat and unbranded flours, you don’t have to pay GST.

With this information in hand, be sure to stay abreast of the latest GST updates and deadlines. This way, you can make sure that you file GST returns and charge customers GST appropriately.

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