Goods and Services Tax (GST) is an indirect tax which was introduced in India on 1 July 2017 and was applicable throughout India which replaced multiple cascading taxes levied by the central and state governments. It was introduced as The Constitution 101 Act 2017, following the passage of Constitution 122nd Amendment Act Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India. Under GST, goods and services are taxed at the following rates, 0%, 5%, 12% ,18% and 28%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. GST replaced a slew of indirect taxes with a unified tax and is therefore set to dramatically reshape the country's $2.8Tn economy.
The single GST(goods and service taxes) replaced several former taxes and levies which included: central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi. Other levies which were applicable on inter-state transportation of goods have also been done away with in GST regime. GST is levied on all transactions such as sale, transfer, purchase, barter, lease, or import of goods and/or services. India adopted a dual GST model, meaning that taxation is administered by both the Union and State Governments. Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption-based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced.
Goods and services tax is continuously upgraded by the GST council for better results for the proper implementation. In the latest 23rd GST council meeting, several important decisions were taken by the panel and GoM to resolve immediate problems of the business community.There is a lot of speculation on the merging of slab tax rates and the same has been conveyed by Arvind Subramaniam in its suggestion. It is said that the two tax rates i.e. 12% and 18% might get merged into single slab rate across the product portfolio in order to maintain the multiplicity of tax rate applicability on a range of products.
Cost inflation index is the index for the inflation rate in the country. Central Board of Direct Taxes (CBDT) issues this index every year. CBDT on 5th June 2017 announced the Cost of Inflation Index for FY 2017-18 (AY 2018-19). The biggest change this year is that the base year was changed from the earlier FY 1981-82 to FY 2001-02.
It is a measure of inflation that is used for computing Long Term Capital Gains (LTCG) on the sale of capital assets as per IT Section.48. It is announced for each Financial Year but not based on Assessment Year. Hence, the applicable rate of CII will be for that particular financial year. To arrive at a capital gain, it is very much important to calculate the LTCG. For this purpose Cost of Inflation Index is a must. This revision of base year was proposed by the finance minister to address problems faced by taxpayers while calculating capital gains tax payable on the assets acquired on or before 1981. Taxpayers faced the problem of non-availability of relevant information for calculating fair market value of assets such as house property, jewellery as on 01.04.1981.