The service tax was one of the indirect taxes levied by the Government of India on service providers. This service tax was paid by the service receiver and collected by the service provider, and paid to the government. The service tax was first announced under the Finance Act, 1994. Since then, the service tax has been one of the most significant sources of revenue for the government.
However, on 1st July 2017, the service tax was subsumed in the new Goods and Service Tax (GST) which makes the need to understand ‘what is service tax’ redundant. Along with service tax, some of the other taxes that are subsumed in the GST include Central Excise Duty, Value Added Tax, Luxury Tax, Entry Tax, and many more state and central taxes.
The need for Goods and Service Tax:
The GST integrates all the different taxes into a comprehensive, uniform, and destination-based tax which removes the problem of double taxation, the multiplicity of taxes, confusion regarding where to tax the goods or service. It builds a single national market, ensures uniform tax laws, and increase the transparency of the process.
There are three types of Goods and Service Tax- State GST, collected by the state government; Central GST which is received by the Centre; Integrated GST which is again received by the Centre. The revenue generated from the Goods and Service Tax is divided between the Centre and state.
Different Goods and Service Tax slabs:
GST is different for different products and services. They can fall under one of four tax slabs- 5 percent, 12 percent, 18 percent, and 28 percent. Products such as electricity, petroleum, and alcoholic drinks are not covered under the Goods and Service Tax. They are taxed separately by the concerned State government. Many products and services are exempted from the Goods and Service Tax. These include but are not limited to fresh milk, grains, tea leaves, fresh fish, eggs, and agricultural services.
The Goods and Service Tax is one of the most significant tax reforms of independent India. It is aimed at making India self-sufficient and to bolster economic growth.
Get a better idea of how the Goods and Service Tax affects you and your business by seeking help from a professional.