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GST is a tax charged on the sale, manufacture, and consumption of goods & services. Goods & Service Tax (GST) has replaced various indirect taxes in India like excise duty, sales tax, VAT, Service tax, etc. It was introduced to simplify the complex maze of indirect taxes applied by Centre and State governments under the old system.
Goods & Services Tax (GST) is charged on the supply of goods & services in India including the state of Jammu and Kashmir. It is charged at all stages from production to final consumption with the credit of taxes paid at all the previous stages available for set off.
GST is a tax that is charged on every value addition from the manufacturer to the final consumer. Apart from that Input Tax Credit ( ITC) is available at all the previous stages to avoid cascading effect that is double taxation.
Goods & Services Tax (GST) is a destination-based tax on the consumption of goods & services. So the ultimate burden of tax is to be borne by the final consumer. Since GST is levied only on value addition, it prevents the cascading effect of tax i.e. tax on tax. GST does not differentiate between goods and services and thus, the two are taxed at a single rate.
The introduction of Goods and Services Tax (GST) brought the concept of One Nation One Tax. GST has replaced almost all the existing state and central indirect taxes such as central excise duty, Central sales Tax, Surcharges & Cess, VAT, luxury taxes, Entry taxes, Taxes on lotteries and betting, entertainment taxes, service taxes, etc.
The earlier tax system suffered from various issues. A producer or manufacturer of goods is charged both excise duty on goods manufactured and value-added tax (VAT) on the sale of goods. Further, service tax was payable on all 'services except services in the Negative list of exempted services.
For example, when the Goods are manufactured & sold, both the central level Excise Duty and state-level VAT are levied. Though both were indirect taxes, setting off one tax against the credit of another tax was not possible; as Excise Duty was a central tax and VAT was a state-level tax. Moreover, Excise Duty was applicable only at the manufacturing level but not at a stage of distribution levels.
Also Read: GST Bill: India's Biggest Tax Reform
The Goods and Service Tax (GST) systems solve these problems. Concepts of manufacture or sale of goods or rendering of services are no longer applicable since the tax is now levied on the supply of Goods and Services.
India has adopted a dual Goods & Service Tax (GST) model. GST imposed by both Centre and States government on inter-state supply of goods and services is called the Central Goods & Services Tax (CGST).
GST levied by the States / Union territory are called the State Goods & Services Tax (SGST)/ Union Territory Goods & Services Tax (UTGST). Similarly, Integrated Goods & Service Tax (IGST) is charged by the Centre on every inter-state supply of goods and services. IGST is a sum of CGST & SGST/UTGST.
The GST website - www. gst.gov.in - was set up by the government to establish a single website for the taxpayer. It also provides a common and shared IT infrastructure between the Centre and the State government. This website is managed by GSTN.
The Goods are classified on the HSN (Harmonized System of Nomenclature) code under the Goods and Service Tax (GST) system. The Services are classified under the Services Accounting Codes (SAC).
GST shall be levied on all supplies of Goods and/or services except alcoholic liquor for human consumption. On the following Products, GST shall not be levied, till a government notification has been issued.
The Central Government retains the power to levy duties of excise on the above products, tobacco and tobacco products manufactured or produced in India.
The Composition Tax is available to provide relief to small businesses. It is a simple and easy method of paying taxes. This scheme can be opted by any taxpayer if the aggregate turnover is less than Rs. 1.5 crore. The Goods and Service Tax (GST) can be charged at a fixed rate of turnover.
The composition dealer has to pay tax under Reverse Charge wherever applicable. Central and state governments also provide certain provisions for granting exemption from payment of taxes on certain goods or services
Input tax credit (ITC) of CGST & SGST / UTGST is available throughout the production process, but cross setting off of input credit is not possible, i.e. CGST credit cannot be used for payment of SGST. Also, SGST credit cannot be used for the payment of CGST.
But cross-utilization is allowed between CGST/SGST /IGST, i.e. credit of IGST can be used for the payment of CGST /SGST / UTGST and vice versa.
As per the present agreement, GST will be applicable in 4 main slabs from 5% to 28%. GST shall cover every goods and service sold in India.
In conclusion, we can say that the introduction of GST is one of the best decisions taken by the Government. With the introduction of GST revenue is smoothly flowing towards the Government. Also, goods and services are supplied at a cheaper cost to the final consumer with credit of tax paid at all the previous stages.
1. What is GST?
GST stands for Goods & Services Tax. GST is a single consumption-based tax levied on sale, manufacture, & consumption of goods and services, which has replaced various existing taxes, including CENVAT, Octroi, VAT, Sales Tax, and Excise Duty, etc.
2. What is the meaning of supply?
The Supply means the sale, transfer, exchange, license, rental, lease, or disposal of goods & services.
3. What are the types of Goods & Services Tax under GST?
GST is of the following 3 types:-
1. CGST: Central Goods and Services Tax, managed by the Center
2. SGST: State Goods and Services Tax, managed by the States
3. IGST: Integrated Goods and Services Tax, paid on all inter-state transactions, managed by the Center
4. When did GST come into effect?
The GST came into effect on July 1, 2017.
5. How can I pay GST?
GST will be managed through the GSTN Network, GSTN – http://gstn.org/. All taxes will be paid online and there will be no manual filing of returns. Post generation of challan online, you can pay GST by one of the following modes – Axis Debit/credit card, Axis Internet Banking, or cash/cheque at any Axis Bank branch.
6. What does Input Tax Credit (ITC) stand for?
The taxes you pay on input goods/services can be used as an Input Tax Credit (ITC) against output tax liabilities.
7. How can Input Tax Credits be applied?
Input tax credits ITC can be used as follows:
1. CGST input tax credits can be utilised to pay CGST and IGST
2. SGST input tax credits can be utilised to pay SGST and IGST
3. IGST input tax credits can be utilised to pay CGST, SGST, and IGST
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