The Goods and Services Tax (GST) was implemented effective Jul 1’2017 as biggest tax reform since independence. Idea is to subsuming almost all the indirect taxes at the central and state level into one tax. It is also commonly referred to ‘One India One Tax’, but is it really so? It has been slightly over 20 months from the date of introduction so let’s have a look.?
We normally aware about these five tax rates under GST i.e. Nil, 5%, 12%, 18% and 28%. But do you know we have a separate rate of 3% on Jewellery, 29% to 50% on car depending upon the size and capacity of the car, 1% to 6% for Composition dealer and 1% on affordable housing properties (effective Apr 1’2019). The GST rate applicable to under construction commercial or residential transactions was 12% till 31st March 2019. Further, Kerala has been given an approval to charge Disaster/ Calamity Cess of up to 1% on all intra-state supplies of goods and services within Kerala, for up to two years. Now new addition in these complexities is the recommendation by GST Council in its 32 nd meeting of allowing certain states of northeast and small states to keep threshold for registration under GST at Rs 10 lakhs as against Rs 20 lakhs for other states. It means if these states follow different threshold, it will again hurt the implementation of ‘One India One Tax’ regime.
Multiple tax rates and threshold limits make the GST regime more complicated and defeat the basic purpose of unified tax regime. Due to different rates, there could be situation of inverted tax structure and you will have to follow the tedious refund process with associated conditions.
The term ‘Inverted Tax Structure’ refers to a situation where the rate of tax on inputs purchased of goods and services is more than the rate of tax on outward supplies of goods and services.