GST rates

In July 2017, India saw a significant overhaul in its indirect taxation structure. With many indirect taxes being replaced with unified taxation known as Goods and Services Tax, it was one of the most significant indirect tax reforms in Indian history. However, the GST rates in India are variable for different lines of products and services.

As of now, taxable products and services in India are categorised into 5 GST slabs. Several reasons accompany the variable GST rates in India. Before moving to that, first, let’s understand what GST implies.

What is GST?

GST or Goods and Services Tax is a simplified indirect tax structure followed in India since 1st July 2017. It is a convenient, location-based taxation system that is levied at each stage of value addition. GST has replaced multiple indirect taxes that were levied in India on products and services.

Know the reasons why GST carries variable rates in India

As already mentioned, the GST levy in India is done across 5 major slabs, viz. – 0%, 5%, 12%, 18% and 28%. They are applicable to goods and services depending on the ascertained slab. Know the reasons that define this variable structure of GST rates in India.

  1. To redistribute the tax burden as per the consumer’s income level

As per the tax structure for GST, basic necessary goods and services are under the 0% tax slab. The higher you move on the slabs, they include product and service categories or industries that serve high-income groups.

It means that people belonging to poor and middle-income group end up paying low to no GST on consumables. As for the high-income group, since people belonging to this category can afford high rates of taxes, the government shifts the tax burden, and consumer of such items end up paying GST at higher rates. This new taxation regime aims to redistribute the tax burden as per the consumers’ income levels.

  1. To bring the unorganised sector within regulation

Previous distribution of indirect taxes failed to regulate the unorganised sector within their purview. However, with the detailed categorisation of various items under GST, businesses operating in unorganised sectors could also be brought into the ambit of GST levy. Such companies need to obtain GSTIN and levy taxes on their products as well.

Also, the distribution of these categories under various slabs of GST rates in India has enabled them to be classified as per their consumption by people belonging to different income segments in India. It has made GST a more fruitful taxation system.

  1. To improve the production and growth of businesses

GST levy, depending on the variable rates applicable, helps improve the production process by reducing the cost of input. Also, the tax on value addition further reduces the cost of production. It, thus, provides support for business growth across industries as businesses end up blocking minimal finance when including levied tax in the invoice carrying their GST identification number.

Further, these businesses can make the most of the reduced financial burden and utilise additional funding in the form of business loans to boost their growth. Lenders like Bajaj Finserv offer beneficial features such as Flexi Loans and no-charge part prepayment or foreclosure to help businesses grow sustainably with the minimal financial hurdles.

GST implementation serves multiple other purposes as well including the aim to create a more organised working sector and assist small businesses to grow minus the tax burden.

Therefore, it becomes necessary to obtain GSTIN through the GST registration procedure for your business. Make sure you know everything about GST so that you can make the most of it in your business.


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