GST DUNIYA. (Part- 1, Basics)Aayushi Bansal
A warm welcome to the GST Duniya series. We will try to cover each and every part of GST with examples so that everyone can easily understand the concept irrespective of his/her working field.
Let’s begin with the Basics:
GST is a comprehensive tax levy on manufacture,sale and consumption of goods and services at national level. Goods & Service Tax or GST is a value added tax which will subsume and replace all the current indirect taxes levied in India. Hailed as one of the biggest fiscal reforms in the country, GST will be applicable to all businesses, small and large. With GST, there will be no scope for variable taxation anymore and the entire nation will follow a unified tax structure.
GST will be levied on both goods and services. India will follow a dual system of GST to keep the Centre and State fiscally independent of each other. The GST Council, consisting of the Union Finance Minister and various State Finance Ministers, has devised a four-tiered tax structure for the country with tax slabs of
for different categories of products.
GST would replace the following taxes currently levied and collected by the Centre:
a) Central Excise Duty;
b) Duties of Excise (Medicinal and Toilet Preparations);
c) Additional Duties of Excise (Goods of Special Importance);
d) Additional Duties of Excise (Textiles and Textile Products);
e) Additional Duties of Customs (commonly known as CVD);
f) Special Additional Duty of Customs(SAD);
h) Cesses and surcharges insofar as they relate to supply of goods or services.
Goods and Services covered under 0%tax slab are exempted goods and services
Examples of goods exempt under GST law: milk,buttermilk,curd,natural honey, flour, besan, bread, Prasad, salt,bindi,sindoor,etc
Examples of services exempt under GST law: services by Reserve Bank of India, services by Foreign Diplomatic mission located in India,services by way of access to a road or bridge on payment of toll charges, services by way of renting of residential dwelling for use as residence,etc.
Exempted goods/services will be discussed in the further parts in detail.
Who are the persons liable to pay GST?
A ‘taxable person’ under GST, is a person who carries on any business at any place in India and who is registered or required to be registered under the GST Act.
GST registration is mandatory for (amongst others)-
- Any business whose turnover in a financial year exceeds Rs 20 lakhs (Rs 10 lakhs for North Eastern and hill states).
- Every person who is registered under an earlier law (i.e., Excise, VAT, Service Tax etc.) needs to register under GST, too.
- When a business which is registered has been transferred to someone/demerged, the transferee shall take registration with effect from date of transfer.
- Anyone who drives inter-state supply of goods
- every e-commerce operator ( e-commerce has been identified as supply of goods and/or services over digital or electronic network e.g.sales through flipkart and amazon.)or aggregator (note 1)
- Every person who supplies goods and/or services, other than branded services, through e-commerce operator
- Casual Taxable Person
- Non-Resident Taxable Person
- Person required to deduct/collect tax (TDS/TCS)
- Input Service Distributor
- Person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person.
- Person required to pay tax under Reverse Charge
- Person supplying the goods on behalf of other taxable person (eg. Agent)
- GST does NOT apply to Agriculturists
- GST does not apply to any person engaged exclusively in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax under this Act.
Note : The main difference between aggregator and e commerce operator is that while an aggregator(ola,oyo rooms) only connects customers with the supplier or service provider , an e commerce operator( flipkart,amazon) facilitates the entire process of supply of goods/provision of services.so Flipkart or amazon or any e commerce operator not only connects the customers with their suppliers but also gives all relevant information and even provide after sale services, handles refund process.
CASUAL TAXABLE PERSON :A person who occasionally supplies goods and/or services in a territory where GST is applicable but he does not have a fixed place of business. Such a person will be treated as a casual taxable person as per GST.
Example: A person who has a place of business in Chandigarh supplies taxable consulting services in Karnal where he has no place of business would be treated as a casual taxable person in Karnal.
What is GSTIN?
So far, for any dealer registered under state VAT law, a unique TIN number is issued by the respective state tax authorities. Similarly, a service provider is assigned a service tax registration number by the Central Board of Excise and Customs (CBEC).
Going forward, in the new GST regime, all these taxpayers will get consolidated into one single platform for compliance and administration purposes and will be assigned registration under a single authority. The government has set up GSTN–a special purpose vehicle to provide the IT infrastructure necessary to support GST digitally. It is expected that 8 million taxpayers will be migrated from various platforms into GST. All of these businesses will be assigned a unique Goods and Services Tax Identification Number (GSTIN).
GST is expected to replace indirect taxes such as VAT, customs duty, Excise, CST, Service Tax, Entertainment Tax with a single tax called the Goods and Services Tax.
Broadly there will be two forms of GST in INDIA i.e. At the Intra state level and at Inter state level. Intra State Level means when goods travel within a state and inter state level means when goods travel between states.
At the intra-state level two types of GST shall be levied:
- CGST(Central Goods and Services Tax) and
- SGST(State Goods and Services Tax).
At the inter-state level, IGST (Or Integrated Goods and Services Tax) shall be levied.
For example: – A dealer Vikrant Sharma in Gujrat sold goods to the consumer Adityagupta in Gujrat worth Rs. 10,000. The GST Rate is 18% comprising of CGST rate of 9% and SGST rate of 9%, in such case the dealer collects Rs. 1800 and Rs. 900 will go to the central government and Rs. 900 will go to the Maharashtra government.
Now, if the dealer in Gujrat had sold goods to a dealer in Maharashtra worth Rs. 1,00,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%. In such case the dealer has to charge Rs. 18,000 as IGST. This IGST will go to the Centre.
A normal question prevailing In our minds: Can GST allow tax cascading benefits?
Answer is YES
(Cascading benefit means availing benfit of credit of tax paid on inputs. For example in case of service tax – you levy service tax on services you sell and while depositing this tax you can take credit of service tax paid by you on services used as inputs.)
Here is how set off works in case of GST –
- IGST payments can be set off against – IGST, CGST, SGST on inputs
- CGST payments can be set off against – IGST and CGST on inputs
- SGST payments can be set off against – IGST and SGST on inputs.
- Imports shall be considered as inter-state supply and IGST will be applicable. However, basic customs duty will apply on imports
- Exports shall be zero-rated.
- Supplies to SEZ will be zero-rated
Benefits of GST
An important benefit of the introduction of GST will be the removal of the cascading tax effect. In simple words “cascading tax effect” means tax on tax.
Under the earlier scenario, one cannot claim the credit of tax paid on input services i.e.service tax against output VAT payable. But Now Under GST, input tax credit can be availed smoothly across goods and services thus reducing the tax burden and removing cascading effect.
Another important benefit is that in earlier scenario of indirect taxation,there are numerous taxes likeit has excise, VAT and service tax, each of which has their own returns and compliances. GST will unify all these reducing the number of returns and compliances.
Hope you find this article knowledgeable. Now,I will explain further concepts about GST in next part of GST DUNIYA series. Stay connected with us.
Have a Good Day !
In case of any query related to above article, the questions can be asked by commenting in the comment box or the author can be contacted personally at bansalaayushi1992gmail.com or firstname.lastname@example.org
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