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What is the structure of GST in India?

The Goods and Services Tax (GST) structure in India is determined by the GST Council and consists of a four-tier system. This framework is designed to categorize essential goods and some edibles into the lower tax brackets, while placing high-value goods and services in the higher tax brackets. The four GST tax rates are 0%, 5%, 12%, 18%, and 28%.

Importance of Understanding GST Structure

Understanding the GST structure in India is crucial for compliance, reducing tax liabilities, and conducting business ethically and responsibly. This knowledge helps you make informed decisions, avoid potential penalties, and protect your financial well-being.

Structure of GST

There are different taxes levied under the structure of GST in India. To help you understand what these mean, we will explain each one of them here:
Structure of GST | Goods and Services Tax (GST) - B Com

Introduction to Zero Rate in GST

A zero rate in GST means that no tax is levied on certain goods and services, effectively granting them a tax exemption. The government determines which goods and services qualify for this zero-tax rate. Examples include fresh fruits, bread, milk, and curd. Additionally, supplies made to Special Economic Zone (SEZ) developers or for overseas export are also subject to a zero-rate tax.

Lower Rate (5%)

The lower rate of GST, set at 5%, applies to certain commodities and services. Examples include footwear priced under Rs. 500, clothing under Rs. 1000, packaged food items, branded paneer, cream, and skimmed milk powder.

Standard Rate (12-18%)

The standard GST rate ranges from 12% to 18%. A 12% GST applies to items such as butter, cheese, frozen meat products, ghee, animal fat, sausages, packaged dry fruits, snacks, fruit juices, ketchup, and sauces. An 18% GST rate is imposed on items such as pastries, pasta, cakes, hairdryers, panels, vacuum cleaners, wires, telecom services, and IT services.

Higher Rate (28%)

The highest GST rate of 28% is reserved for luxury items. This rate applies to goods such as paint, washing machines, cement, automobiles, shampoo, aerated water, sunscreen, and motorcycles. Additionally, some items in the 28% bracket may also incur an extra cess as determined by the government.

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FAQs on Structure of GST - Goods and Services Tax (GST) - B Com

1. What is the overall structure of GST in India?
Ans. The Goods and Services Tax (GST) in India is a comprehensive, destination-based tax that is levied on the supply of goods and services. It is a multi-stage tax system where tax is levied at each stage of the supply chain, with the credit of taxes paid at the previous stages being available as a set-off for further stages.
2. What are the different components of GST in India?
Ans. The GST structure in India comprises Central GST (CGST), State GST (SGST), and Integrated GST (IGST). CGST is levied by the central government on intra-state supplies, SGST is levied by the state government on intra-state supplies, and IGST is levied by the central government on inter-state supplies.
3. How does the input tax credit system work under the GST structure in India?
Ans. Under the GST structure in India, registered businesses can claim input tax credit for the tax paid on their purchases. This input tax credit can be utilized to set off the tax liability on the output supplies made by the business, thereby avoiding cascading of taxes.
4. Can you explain the concept of Zero Rate in GST?
Ans. Zero rate in GST refers to the tax rate of 0% applied to certain goods and services. This means that no tax is levied on the supply of these goods and services, but businesses can still claim input tax credit for the taxes paid on their inputs.
5. How does understanding the structure of GST in India benefit businesses and consumers?
Ans. Understanding the structure of GST in India helps businesses comply with the tax regulations, claim input tax credit, and optimize their tax liabilities. For consumers, it ensures transparency in taxation, leading to a more efficient and seamless tax system.
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