Amount (in Rs)
Service charge (10%)
Service tax [5.6% on (sub-total + service charge)]
Swachh Bharat Cess [0.2% on (sub-total + service charge)]
Krishi Kalyan Cess [0.2% on (sub-total + service charge)]
VAT (12.5% of food bill)
VAT (20% of alcohol bill)
Total % of bill and charges on the bill (31.6%)
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Tuesday, 22 November 2016
You will agree when I say “Everybody needs a relief in Tax”.
If you go in a cafe or a restaurant and order something you will find that there is a service tax of 5.6% on food in addition to this VAT is also charged. VAT stands for “Value Added Tax” which is levied on items that are sold in an improved form, where before the item is sold to you value is added to it. In restaurants, VAT is chargeable on food and items that are prepared in their kitchens not on the packed items such as water bottles, chips etc. Also VAT varies from state to state, it could be anywhere between 5% and 20%. For instance in Delhi, VAT on food is charged at 12.5% whereas in Gujarat it is 15%. VAT on alcohol served in Delhi restaurants and café is 20%. Also, many restaurant do charge an additional service charge of 10%, Swachh Bharat cess i.e. 0.2%, Krishi Kalyan Cess i.e. 0.2% and some of the restaurants also charge VAT on service charge.
Consider an example:
From an above example you must have understood that how post charges and taxes increases the bill.
Note: This is just an example. GST will affect the current taxation system in a lot more ways.
So to standardize and simplify the current system of taxation GST bill was proposed.
GST stands for “Goods and Services Tax”. GST bill is India’s biggest tax reform that replaces all the indirect taxes with one single tax converting the country into a unified market.
This is the tax imposed when a consumer buys a good or service. This bill will eliminate the chances of cheating of taxes such as tax on tax on production and distribution prices of goods and services.
There would be no multi stage tax structure due to this tax structure that is a significant rise in the prices of goods and services in the market. GST will be unifying all the commercial activities of traders and merchant across India.
The four tier structure rate is under discussion ranging from 5% to 28%.
4 Slabs of GST that has been decided are 5%, 12%, 18% and 28% for different items or services.
First Slab (5%)
Most of the food items will be taxed at the zero rate as to control the inflation rate and lowest rate of 5% would apply to commonly use items such as species, tea, mustard oil etc.
Second and Third Slab (12-18%)
Most of the consumer goods will fall under this category. Most services are expected to be costlier, as many services are more likely to be put under the 18% slab that are currently charged at the rate of 15%. Also many of them would get a benefit to be likely put in the category of second slab i.e. 12%
Fourth Slab (28%)
The fourth slab is the highest one and it will include white goods and services that currently lies between the ranges of 28-31%. The highest rate i.e. 28% will be charge on luxury items, tobacco products, pan masala, aerated drinks etc. Along with it cess will be levied on these item including clean energy cess.
Going forward the Consumer goods consumed by the aam aadmi may become cheaper as they will be placed in second or third slab. Further, it would impact the businesses positively with the removal of multi-level tax system which is currently in place in the Country.
Source : Indiatimes
About Rohan Hazrati
Rohan is the Founder of the Peer-to-Peer lending platform Rupaiyaexchange.
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