GST basics: 7 misconceptions cleared
The rumour mills have gone on an overdrive mode since the launch of GST.
Here’s a reality check by ET Wealth for both GST supporters and its detractors.
1. Now it’s one nation one tax
Myth : Since GST will replace all other taxes on all goods and services, we are in a single tax regime.
Reality : Though this was the original idea, petroleum products—petrol, diesel—are still outside GST’s ambit and, therefore, their tax rates vary significantly across states.
For example, petrol is still sold in Mumbai at Rs 74.30 per litre (as on 5 July) compared to Rs 63.12 in New Delhi. Similarly, some other items, such as liquor, have also been kept out of GST for now.
2. Small businesses will suffer
Myth : The life of small businessmen will become difficult under GST because of computerised billing, need for Internet connectivity.
Reality : Shops can do manual billing under GST and Net connectivity is needed only at the time of filing monthly return and can be managed from a cyber cafe.
3. Prices will shoot up
Myth : Personal expenses will go up on account of GST making it inflationary because tax rates have been fixed at higher levels—18%, 28%.
Reality : Though the GST rates seem high, it is only because the entire tax is now visible to the consumer. Earlier most taxes—central and state excise, additional excise, purchase tax, etc.—did not reflect on your bill. If one adds up all the taxes, it would have been more for most items (ie effective tax rates will be lower for most products).
For example, the price of chicken dish in Kerala should fall because there was a 14.5% tax on live chicken earlier, which has come down to zero now under GST.
4. Corporates may try to profiteer but govt won’t
Myth : Business will try to rob you of the GST benefits, but the government won’t make money at your expense.
Reality : Some state governments are also acting greedy and not passing on the GST benefits to consumers. For example, the Maharashtra government has increased the vehicle registration tax by 2% after auto firms passed on the GST benefit by cutting prices by 2-3%.
5. No tax other than GST is now a reality
Myth : For every good or service that has been brought under GST, there won’t be any additional tax.
Reality : GST only subsumes central and state taxes and the levies charged by local bodies are still outside its ambit. Using this loophole, the Tamil Nadu government has allowed its local bodies to charge 30% tax on movie tickets over and above GST. GST is 18% for movie tickets up to Rs 100 and 28% for tickets that cost more than Rs 100.
But because of local body levies, tax in Tamil Nadu will be 48% for tickets up to Rs 100 and 58% for tickets that cost more. Not surprisingly, the cinema hall owners in the state went on strike. “Action of the Tamil Nadu government is against the spirit of the GST and the GST council should take action against it,” says Amit Sarkar, Partner and Head, Indirect Taxes, BDO India.
6. Economic growth will rise
Myth : GST will push up the economic growth.
Reality : Real economic growth comes from both organised and unorganised sectors. Tax evasion becomes difficult in GST, so cost advantage of unorganised sector goes and this will result in some businesses shifting to the organised sector. So, what happens will not be an in increase in ‘real’ economic growth but an increase in ‘recorded’ economic growth. However, there will be a small uptick in ‘real’ economic growth due to the improvement in the ease of doing business.
7. Pay GST twice for card payments
Myth : GST will be charged twice, if you make payments via credit card.
Reality : There is no additional GST for credit card payments and the confusion arose only because there is GST on additional fees—convenience charges—levied by companies. For example, you make a Rs 10,000 payment and a company charges Rs 50 as convenience fee for helping you make the payment via the credit card, you have to pay 18% GST on that fee too—earlier you paid a 15% tax on it. So the 3% increase is very small—just Rs 1.5 on Rs 50.
Ease of doing business seems only for big businesses and foreign investors. Rural artisans even below Rs 20 lakh category have to register under GST and register online ay advance tax on goods in each state they intend to travel with the goods for temporary sales, pay advance tax online or through bank on expected sale amount, and file all details of actual sales within 7 days of return.
This is impossible for semi-literate artisan sellers in far off rural areas. They cannot afford travel, capital for production AND advance tax prior to sales.
This effectively prevents them from the ability to travel freely across the country to attend various bazaars and melas or personally deliver goods.
Please clarify.
How GST will play a role in property matter. As I am seeing earlier we were paying tax 5.5% BUT now I HAVE to pay 12%. Due to this customers total cost of property is increasing.
How Modi and team is saying that every person in India can buy a home ?
Why cannot the government raise a heritage subsidy so the artisans can keep earning a fair wage? Swachlaya programme is an eye wash as the streets in mumbai are still dirty and the garbage collection is a myth. In order to ensure the programme takes off in all sincerity the workers have to be taught what hygiene means and they must be housed in proper accomodation. Why can the government not look into this before they talk big about GST which is another tax besides the tax they will charge us on our earnings? so who says it is one tax only and maharashtra is charging another 3% so the customer does not benefit. What sort of small mindedness is this when a government is of the people for the people and by the people. Maybe the Maharashtra government should be given some lessons on our democratic rights and uniformity of application of rules and taxes.
For India to change it will take another 1000 years not less.
i have a AC Restaurant and my yearly income around 40,00,000/-, i am confused about GST Rate,
Restaurant Below 50,00,000/- GST @ 5%
AC Restaurant GST @ 18%
Pleased tel me About GST Rate for Our Restaurant Business.
if you wanna join in composition scheme, then u would be liable to pay only 5% on your annual aggregate turnover.Otherwise you need to pay 18% . but in composition scheme you wont get ant input tax credit. In regular GST Dealer can get ITC. For more details whatsapp @ 9000985793
Can you please explain me previously vehicles were charged 48% of tax with all ED, Cess, Vat. But I can’t get when we talk about GST One nation One Tax. What is the ewason of Cess on vehicle why it’s charging 28%+15% = 43%. Does cess comes in one nation tax. If govt is charging GST then why this cess does it come from govt pocket. It’s just making Nation people fool around. And please bring the pertoleum in GST too. For the welfare of the nathion.
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clearly the end for artisans and anything that has hand labour added value. If handicraft made from marble then 28% whereas the raw material part of below 33%, if made from wood or granite or sandstone then? Different HSN for raw material base is non sensical for hand crafted artisans. Composite below 75 lacs is very good but how can one restrict the sale within state. the tax can be increased to 5% for all artisan and craft and for turnover upto 75 lacs on the condition that there is NO SET OFF. 75 lacs should include sales anywhere in India and export. What it the loss to Government and this is one country. If within 75 lacs there is export what is the objection? No artisan knows if he will get an export order but if he gets then?? All design and small craft will shut down or again be exploited by middle man & back again to the cash economy. Any product or industry where GST rate is 28% and where product is made by artisan and then sold direct to customer — will not survive and never grow.
I am running cloth business ( Ready made and cloth), yearly sales approximately 35 lakhs and I will purchase from Interest State dealers and Unregistered dealers and sales only with in State and I have closing stock of interstate purchase.Can I apply Composition scheme. Please clarify as early as possible.
Good job done! You have dispelled some myths. In fact, certain people are creating all sorts of rumours to defame the Govt.. Govt, on its part, should continue to educate businessmen in e-filing of returns.
Dear Sir,
We are the travel agent and tour operator from Maharashtra.
As per new GST Rates, we have to charge 5% GST for our tours.
If we manage the tours, it is fine.
However, tours sourced from other suppliers has an issue.
e.g. Supplier ‘A’ from Karnataka supplies the tour package to us.
He charges Rs.50,000 + 5% GST = Rs. 52500/-
When we sell this package tour to our customer, then the pricing is-
Rs.52500 + 5000 (Our Margin) = Rs. 57500 /- + 5% GST = Rs. 60375/-
It is quite clear that GST is cascaded and package cost is inflated.
How we will do business ? Customers will directly go to Hotels/ Suppliers.
Your urgent clarification is highly appreciated.
Small businessman having sales/supply above 75 lakh ( and even all registered dealers including composition dealer ) will have to keep quantitative record of goods. How can he do it without aid of computer? That’s why keeping manual billing is impossible. Moreover such businessmen are not much literate and therefor they will have to maintain records on computer with necessary software and with the help of competent accountant, this will increase his cost and they will suffer. Your reply to myth No 2 is therefore wrong.
Reply fast
It is clearly explained in this article.As I am not a business women I don’t have much doubts about GST.Thank you
Though on paper the concept of GST is very good, it needs to be seen what would be the real impact on the economy as a whole and the businesses in particular. The unorganised sector will be at a great disadvantage because most of them don’t even have the required licences to operate a legal business & therefore they would find it very difficult to even enroll under the composition rule which applies to business before 20 lakhs turnover. Add to that the clause of ” Reverse charge”, applicable to most transactions.
Little more transparency about gst was needed, information must be easily available to all.
Some vidious in all rignal language & some posters in front of regarding shops wrt. Items sold in the respective shop etc…
Equity trading costs are ever increasing since the time of P Chidambaram Again GST and stamp charges have gone up
I want the purches Jio fone
I am interested in training of GST please guide me from where should I get training.
I want learn gst pls u guide for me………….