Explanation and Details of Goods and Sales Tax change


Brief Explanation and Details of Goods and Sales Tax change in Tax Syatem

 

Definition for ‘Goods’

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Products that are purchased for consumption by the average consumer. Alternatively called final goods, consumer goods are the end result of production and manufacturing and are what a consumer will see on the store shelf. Clothing, food, automobiles and jewelry are all examples of consumer goods. Basic materials such as copper are not considered consumer goods because they must be transformed into usable products.

Different Types of Goods

Inferior Good

 2 Normal Good

3 Luxury Good

Inferior Good:

An inferior good means an increase in income causes a fall in demand. It has a negative YED. An example, of an inferior good is Tesco value bread. When your income rises you buy less Tesco value bread and more high quality, organic bread.

Normal Good:

This means an increase in income causes an increase in demand. It has a positive YED. Note a normal good can be income elastic or income inelastic.

Luxury Good:

A luxury good means an increase in income causes a bigger % increase in demand. It means that the YED is greater than one. For example, high Definition TV’s would be luxury. When income rises, people spend a higher % of their income on the luxury good. (Note: a luxury good is also a normal good, but a normal good isn’t necessarily a luxury good)

Other Types of Goods

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Complementary Goods: Goods which are used together, e.g. TV and DVD player.

Substitute Goods: Goods which are alternatives, e.g. Pepsi and coca-cola.

Giffen Good: A rare type of good, where an increase in price causes an increase in demand. The reason is that the income effect of a rise in the price causes you to buy more of this cheap good because you can’t afford more expensive goods. For example, if the price of wheat rises, a poor peasant may not be able to afford meat any more, so has to buy more wheat.

Veblen / Snob Good: A good where an increase in price encourages people to buy more of it. This is because they think more expensive goods are better.

 

Sales Tax change in Tax System

Sales tax is levied on the sale of a commodity, which is produced or imported and sold for the first time. If the product is sold subsequently without being processed further, it is exempt from sales tax.

Sales Tax is a levy on purchase and sale of goods in India and is levied under the authority of both Central Legislation (Central Sales Tax) and State Governments Legislations (Sales Tax). The government levies Sales Tax principally on intra-state sale of goods. States also levy tax on transactions which are “deemed sales” like works contracts and leases.

In addition to Sales Tax, some states also levy additional tax, surcharge, turnover tax and the like. Ordinarily, Sales tax is recovered from the buyer as a part of consideration for sale of goods.

Sales tax is paid by every dealer on the sale of any goods made by him in the course of inter-state trade or commerce, despite the fact that no liability to tax is raised on the sale of goods under the tax laws of the appropriate state.

Sales Tax ID number

A state Sales Tax ID number is essentially a business version of your Social Security number, under which you collect and pay tax for any service or product you sell, which in turn, qualifies for taxation in your state.

The rule of thumb for Sales Tax is that most services are exempt and most products are taxable except for food and drugs, though recent history reflects that states have been gradually adding to the list of services that are taxable.

Indian Income Tax payers:

 https://finotax.com/income-tax/slabs-1617

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