GST on gold, cars, real estate, clothes, readymade garments, sarees and unstitched items
What is GST ? - An Introduction
GST is the abbreviated term for Goods and Service Tax. It is an indirect taxation system or revenue system imposed on Goods and Services way back in 1954 by French Government. Later on 159 more countries adopted this system in course of time. India too adopted Goods and Service Tax system in the year 2000 under the Prime Ministership of Atal Bihari Vajpayee. From then till date various modifications have been made in this law. The recent modification is that four GST bills have been passed by Rajya Sabha and the last one will be implemented on 1st of July, 2017 at 12:00 AM by Prime Minister Narendra Modi.
GST is a multi staged value addition tax system based on destination or source of the goods or services. Let us understand this briefly. The consumer items that you buy are the ready made products. Before being ready made goods they are processed through various phases. For example, a saree which is bought by you was a clump of yarn which was processed to thread. This thread is then woven with beautiful designs to produce a saree. In case of printed saree the weaver weaves the yarn to a cloth which is again designed by some other people. Next comes the packaging, labelling and selling. Now the saree is ready to be sold to the wholesaler followed by the retailer and then to you. So, all these processes are gone through investments. In each of the process mentioned above, the government imposes tax to its liability owner. The final liability owner is the consumer. In short, everybody included in this process have to pay GST on the purchase value as imposed by the government. The revenue will also vary on location or source of the products.
Three types of GST are imposed on Goods and Services which are as follows:
- CGST (Central Goods and Services Tax)
- SGST (State Goods and Services Tax)
- IGST (Integrated Goods and Service Tax)
The revenue produced from the goods and services that come under CGST are collected by the Central Government. The revenue produced from the goods and services that come under SGST are collected by the State Government. Similarly, the revenue produced by the goods and services that come under IGST are collected by Inter-state sales. This transaction is made simpler with the introduction of the new GST rule. According to the new GST rule, if a product transaction is done within a state, then CGST and SGST both will be imposed on the product. If the transaction is done outside a state, i.e., two different states are included in the transaction, then only IGST will be imposed on the product.
GST is made to subsume the previously imposed indirect cess on goods and services which included State level and Central level taxes. The taxes that are subsumed by GST are:
- Central Excise Duty
- Commercial Tax
- Value Added Tax (VAT)
- Food Tax
- Central Sales Tax (CST)
- Entertainment Tax
- Entry Tax
- Purchase Tax
- Luxury Tax
- Advertisement Tax
GST on Gold
As per the new GST rule, 3% tax will be imposed on gold and gold made jewelleries. Precious and semi precious gems will also be taxed at 3% under the same. The tax slab set by the government has four slabs of which GST on gold goes below the lowest tax slab (5%). Previously, dealers had to pay 1% Excise Duty + 1.2% VAT along with 10% import duty or customs duty on gold. But after the revision of GST, 1% additional tax rate will increase with which the effective rate of gold will rise from 12.43% to 15.67%. The only facility that can be availed by the dealers is that they can indulge themselves in input tax credit. As a matter of fact, gold making charges will be taxed at 18% making gold jewelleries a bit costlier for purchasing.
GST on Cars
GST could make your decision a bit tougher if you are planning to own a car. According to new GST structure, the government has imposed a tax of 28% + cess on all cars. The luxury vehicles will be taxed at 28% + 15% cess while the small vehicles like Alto, Kwid, Celerio, Baleno, Polo, i20 etc will be taxed at 28% + 1-3% cess. Previously , 25%-27.5% tax was levied on the small cars which will rise over 29% after the revision of GST laws. This would account to 1.5%-2% increase in the GST on small cars. The Sedan and SUVs will have no change in tax as the tax rate remains static at 43%. Luxury vehicles such as Mercedes-Benz, BMW, Audi, Jaguar, Volvo etc will have to pay 12% less tax as of new GST plan because the tax rate will decline from 55% to 43%. The industrial vehicles are listed under 18% GST slab.
GST on Real Estate
New GST law applied on real estate will prove to be a bit burden on the residents as the maintenance charges of society buildings and flats will rise from 15.55% to 18% that marks the increase in maintenance by 2.5%. This is applicable for those residents whose housing maintenance is greater than Rs 5000. The property owners will have no issues on new GST regime as they will still have to bear the previous annual tax rate as government did not subsume the Property Tax. Along with these, tax on utility bills will be taxed under a separate head which will cause an additional charge apart from the annual maintenance. The renovation of a housing society could get a bit costlier as the commodities included will have a little bit more tax imposition. But this could be lowered by availing input tax credit. The bigger the society buildings the higher will be the tax. If the annual maintenance collection of a housing is more than 20 lakh, GST will be imposed. But if it is within the range of 20-75 lakhs then a composition scheme can be adopted.
GST on Textiles, Clothes, Readymade Garments and Sarees
GST on clothes and readymade garments will not freak you out. This is because of the fact that as per the new plan of GST, government will impose 12% tax on garments above Rs. 1000. Previously the tax rate was 5%. So, the net increase in GST will be 7%. Garments below Rs. 500 will be taxed at 5% which is the existing tax rate. But you can also avail the government enabled input credit system to lower the tax rate. Ready made garments will not have any Excise Duty and will continue to pay a VAT of 5.5-6% and 7-7.5% on garments over Rs. 1000. 2% GST is levied on sarees over Rs. 1000. Coming on to fibres, synthetic and other man-made fibres will be taxed at 18% whereas cotton will be taxed at 5%. Natural fibres like silk and jute are excluded in the list as there is no taxation for them. For unstitched items, the GST remains same as before which is 5%.
According to the new GST plan that is going to be launched on 1st of July, 2017, GST on some other consumer goods have been modified as well which are going to be briefly discussed now. Footwear below Rs. 500 will be charged 5% GST and those over that will be charged 18%. 5-7% GST will be taxed on leather shoes. GST is not applicable on cosmetics that are meant for married women such as sindoor, alta, bindi and kumkum.
GST is beneficial in certain ways because it aims in the reduction of tax cascading effect. It also allows input credit which is a new feature introduced in GST. Apart from these, single taxes are allowed in inter state transactions. Input credit is an innovative way to waive off extra taxes that come along with cascading effect of tax.