Goods and service tax rate in India 20% in 2011 to 16 % by April 2013

GST was proposed to implement on April 2010, but due to some arguments between state and central Government with regards to revenue loss and compensation to the state government, the implementation is postponed to April 2011, but this time Central government is keen to implement GST. Honorable finance minister Pranab Mukarji ensured the compensation to state due to revenue reduction on implementing GST. Yesterday finance minister announced a three year road map.

The tax will be collected in three tiers rates.

1. Goods at lower rate
2. Goods at standard rate
3. Services.

During the first and second year GST on goods will charged in two rates. i.e. Goods at lower rate for necessary items and goods of basic importance ,Goods at standard rate for goods in general. Rates of GST on service will remain same from the beginning

And from third year i.e. April 2013, if everything is going according to planning, and there is not much Burdon of compensation (to state govt) on central government the tax rate will be reduced and there will be only two rates for Goods and services.

1. Goods at standard rate
2. Services

In GST taxable events are supply of Goods and supply of services, any economic events which is not supply of goods is considered as supply of services. a service provider or trader has to collect tax in two element called CGST( For cental government) SGST ( for state government) and paid separately.

Threshold limit for GST

The exemption limit of GST has been proposed to 10 Lakh Both for services and Goods. So any business with a turnover below 10 lakh will be exempted from levying GST.  Current threshold for excise duty is 1.5 crore, so more manufacturers liable for GST this will help to compensate state government lose to an extent.

Cost increase for Services

Definitely there is a price hike for services as the present service tax rate 10.3 go up to 16

Exempted Goods

All the exempted goods under VAT remain exempted under GST also.