There were about 17 types of taxes in India before the implementation of GST(Goods and Services Tax). Taxes such as VAT (Value Added Tax), sales tax, octroi, excise duties, entertainment tax, cess, etc. burdened businesses with additional costs and efforts. It was tedious to maintain records of taxation due to overlapping tax types, multiple registrations, and the clash of return filing timelines.
Implementation of GST on 1 July 2017 ushered a new wave of relief for the Indian industries. GST replaced most of the taxes and rolled out a unified taxation mechanism. A single registration for a business unit and filing returns through a GST software are just some of the benefits of GST.
Instead of the multiple taxes levied at different rates in different States, businesses now pay GST under the three heads.
- CGST (Central Goods and Services Tax) – CGST is Central government’s share in the tax collected on intra-state sale of goods or services
- SGST (State Goods and Services Tax) – SGST is State government’s share in the tax collected on intra-state sale of goods or services. For instance, when 12% is collected as CGST+SGST, 6% goes to the Centre, and 6% goes to the State.
- IGST (Integrated Goods and Services Tax) – For the inter-state sale of goods or services, IGST is collected as a consolidated tax.
Unlike the earlier tax collection system which collected tax where the item was manufactured, GST is a destination-based tax collected at the place where the sale is made. Similarly, instead of levying taxes at different rates on different types of products or services, GST classifies goods under one of the four tax slabs. Currently, four tax slabs of 5%, 12%, 18%, and 28% are prescribed under the GST law. Some essential items of regular use are entirely exempt from GST.
5 Highest GST Paying Industries In India
Since GST aims to unburden businesses and consumers, items are scrutinized closely by the GST council before assigning a certain tax. At present, there are a total of 1300 goods and 500 services that are taxable under various GST tax slabs. More than 80% of all the taxable goods and services fall under the first three slabs or are entirely exempt from GST. The highest tax slab of 28% is reserved for luxury items and services.
As the name suggests, a 28% tax is levied on products and services considered for use as luxury or sin items. Industries that pay the highest GST under the current tax regime are as follows:
Luxury and high-end hotels with more than Rs 7500 per day tariff have to collect and pay GST at the rate of 28%. Similarly, serving food and drinks in a 5-star hotel will also attract the highest GST rate. The hospitality industry that contributes significantly to the GDP of the country also pays the highest GST.
The automobile industry also pays the highest tax under the GST law. Petrol and diesel-driven cars for personal use, high-end and regular motorcycles, spares and accessories of vehicles and motorcycles, motor vehicles for the transport of goods and more than ten passengers and spare parts or accessories of these vehicles are under the highest tax slab of 28%.
Electric and White Goods Industry
The highest tax rate is levied on electric appliances and white goods for domestic consumption, making it yet another industry that pays the highest GST in the Indian market. Refrigerators, ACs, washing machines, television, dishwashers, vacuum cleaners, electric heaters, hot plates, etc. are under 28% tax slab. Similarly, printers, monitors (more than 32 inches), photocopiers, and fax machines are also in the highest tax rate bracket.
FMCG (fast-moving consumer goods) industry in India is one of the largest in the world. Although many FMCG products are entirely exempt or under the lower tax brackets of 5% to 18%, certain products are considered luxury goods and charged GST of 28%. For instance, caffeinated drinks, aerated beverages, tobacco products, shampoos, hair care items, shaving creams and aftershave lotions, perfumes, and deodorants, etc. have to bear 28% GST. The sheer magnitude of the consumption in the Indian market makes FMCG one of the top GST paying industries.
Entertainment in India is considered a luxury and comes under the highest tax slab. Movies, entertainment and amusement parks, casinos, race-courses, sporting events, cinema festivals, and concerts are levied 28% GST. Thus, making the entertainment industry pay the highest taxes in the country.