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11 Jul 2017

One week after GST: What is true, what is not?

GST: Myths and facts

The launch of GST has been accompanied by several myths about the new tax regime, both from supporters and critics.

Uninformed people make uninformed choices, so here's an attempt to make people aware of the new system and what exactly it entails.

To start with, India implemented the 'one nation one tax' mechanism that divides taxes on goods and services into four fixed slabs.

In context

GST: Myths and facts

A brief look at tax rates under GST

Under the GST, taxes on 1,211 items are fixed at 5%, 12%, 18% and 28%. Gold and rough diamonds were exempted from this list: they will be taxed at 3% and 0.25% respectively. Several items like fresh meat, milk, newspapers and kajal are completely tax-free.


Myth: GST is applicable on everything, and prices will increase

There are several items that don't fall under the ambit of the new regime, like petrol and diesel, liquor, and as mentioned earlier, gold and rough diamond.

Also, it might seem like the tax rates are high, but that's only because the entire tax structure is now visible to the consumer.

Earlier, the individual taxes (central, state, purchase etc) didn't necessarily reflect on bills.

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Myth: There won't be any tax apart from GST

GST subsumes only central and state taxes, not local levies. Tamil Nadu allowed regional bodies to charge 30% tax on movie tickets. So despite 18% GST on tickets costing below Rs. 100, effective tax on them will be 48%.


Myth: Small business will suffer, and corporates will loot people

In contrast to rumors, small businesses won't suffer. They need internet only when filing monthly returns, which can be done in cyber cafes. The rest of the time, they can bill manually.

Not just corporates, the government can also prohibit benefits from reaching the public. In Maharashtra, automakers cut prices of vehicles by 2-3%, but then the government upped registration fees by 2%.

Myth: There will be double GST in credit card transactions

Incorrect. There is no extra GST for payments via credit card, but there's a GST on convenience free levied by banks. So if your bank charges you Rs. 50 for a transaction, you have to pay 18% on that fee, compared to the earlier 15%.

Myth: GST will lead to economic growth


Myth: GST will lead to economic growth

Rumors saying GST will bring in economic growth aren't necessarily true. Since tax evasion has now become difficult for the unorganized sector, many are likely to move to the organized sector.

Hence not real, but recorded GDP is expected to increase.

At the same time, the regime facilitates ease of doing business, so some growth is expected.

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