The 50th GST Council meeting fell on 11th July 2023. GST is not a production and supply-based tax. It is a consumption-based tax. The changes in consumption prices and the relativity factor bring a story to the table of the readers. The changes have the backing of consumption capacity. A blog throws light on the relativity between consumption and GST rates.
GST is a consumption-based tax. It is not a production-based tax. The place of consumption decides the nature of the tax. The three types of GST taxes are SGST, IGST, and CGST. If the charges are collected based on production, the beneficiary is from the origin, and not the general public. GST solved this problem, and now the collected tax goes to the place of consumption. The selling states ban the product to control the flow of revenue out of state. As the selling state gets revenue, the products from other states get a free marketing entry. The consumption-based tax encourages production and consumption. Poor states produce fewer products and consume many products. Rich states tend to produce more products and consume more products. The GST tax help poor states generate tax revenue. GST brought a new tax system to the country, and it never settles with less return.
How the taxes are decided based on consumption?
The consumer pays double times if the tax is a production-based one. The burden of tax is shifted to the consumer from the producer. The tax chain is divided between manufacturer, wholesaler, retailer and consumer. In the distribution process of a product, the price changes as the wholesaler and retailer add value. The original and the final price has difference due to the supply chain and value addition at each stage. GST is the unified tax that addresses the problem of the business cycle. Simplification of the tax process makes the tax system effective. The different types of taxes collected in India are corporate tax, income tax, central excise, customs, service tax, and central taxes. Corporate and income tax is like income tax. All the other taxes are consumption taxes.
Consumption tax has no capital income. Income tax has capital income. From 2021 to 2022, GST constituted around 28.5 per cent of tax collection. Income and corporate tax are with the quantum of 28.3 and 28.1 per cent. The main source of income for the Indian government is income, corporate and consumption tax. The highest GST-paying state is Maharashtra as per the data from November 2022 record. The collection of GST amount is 23,598 crore. The next on the high taxpayer list is Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh West Bengal, Delhi Telangana, and Haryana. The states with less collection are Goa, Diu, Manipur, Lakshadweep, Manipur, Andaman, and the centre jurisdiction. India is the sixth-biggest importer and ninth-largest exporter. India is a consumer market. So consumption tax creates good revenue in India. India is among the top ten manufacturing countries and the ninth largest exporter. The production capacity of India is high with 1.3 billion population and an efficient workforce.
The collection of GST shows the economic recovery after Corona wave. The GST collections interpret the consumption pattern and future price rates. The finance ministry says that the data from April carry the year 2024 as a good beginning. The inflation and related risk is an alarming one. GST says the purchasing power and inflation rate in the country. Every company has the responsibility to understand consumer behaviour. GST and taxation systems impact consumer behaviour. GST reduced economic activity in the initial stage. Now GST is showing growth signs.
Changes in the prices:
GST council is the constitutional body. The difference between statutory and constitutional bodies is providing recommendations and executing the legal powers. The finance commission of India and the GST Council are the two constitutional bodies regulating tax operations. The changes in the GST rates as per the recommendation of the GST Council are as follows:
- The uncooked food and unfired snack pellets get a reduction of 5 per cent. The previous year these above-mentioned items are charged with a 15 per cent GST rate.
- The council exempted the tax on imported medicines used for special medical purposes.
- The council exempted the food items used for medical purposes.
- There is a reduction in the rates of LD slag.
- The rates of Yarn and fish soluble paste also come down from 12 to 5 per cent of tax payment.
- The GST council encourages satellite launch services. GST council encourage start-up companies through tax exemption. The list of companies are Antrix Corporation Limited, ISRO, and new space India Limited.
- The race courses, casinos and online gaming services are charged a rate of 28 per cent. Earlier the rate of tax was 18 per cent.
- The GST council reduced the tax on food and beverages available in cinema halls. The rate has come down from 18 per cent to 5 per cent.
- RBI and ICBC bank is joining the list of banks receiving specialised services. The GST council made this announcement. It takes care of the import of silver, gold, and platinum.
GST rates imply the consumption and issues raised by the consumer. The reduction of tax rates for food and beverages in cinema theatres is a long-held desire of consumers. GST tax improves the consumer market and brings the tax payment in technological terms. Unifying the tax and creating a better consumer market makes India a better place to live. The blog highlights the story of consumer, consumption, and production in financial terms. The responsibility of the GST council is as follows: the collection of central excise duties, SGST, CGST, IGST, registration, compliance of taxpayers, and prevention of tax evasion. As responsible citizens of India, the students learning CA, CMA and ACS courses should understand the tax and legal system.