1. A complete guide on goods and services tax
GST or goods and services tax is a single tax that helps the government to simplify the taxation system. GST or goods & services tax is adopted by many countries majorly. It is paid by the consumers included in the final price of the product and passed to the government by the seller. GST was announced several times by many governments but was actually implemented in the year 2017 on the 1st of July. GST which means Goods and Service Tax. It is indirect taxation levied on the goods and services used by the consumers. The goods & services tax was introduced in 2017 by the Indian government under the “one nation, one tax” reform. It is the only tax that is levied on the supply of goods and services right from the manufacturer to the consumer and essentially replaces multiple indirect taxes. The main purpose of the GST reform was to merge different types of taxes in the context of single-tax taxation and to make one tax one nation.
2. Types of (GST) goods and services tax in India
There are three types of (GST) goods & services tax affirmed till now for the taxpayers. These GST audits are discussed below:- CGST- CGST stands for the central goods and services tax. This tax is levied on the movement of products within the state. Let's take an example-If a manufacturer produces a product/service in Punjab and markets it within the state then both SGST and CGST will be assessed. The former will be delivered to the Punjab state Government, and the latter will be given to the Central Government. SGST- SGST stands for the State goods & services tax. It is levied like CGST by the state government on the movement of goods/services within the state. SGST is a single tax assessed on intrastate (within the state) supplies of goods/services, except for alcoholic liquor/intoxicants. SGST can be assessed solely on a product’s transactional amount which is to be paid by the buyer. UTGST- UTGST stands for the Union Territory Goods and Services Tax. It is applicable to the Intra Union territory supply of goods and services. The main purpose to impose (UTGST) the Union Territory Goods and Services Tax is to apply a collection of the tax to provide benefits same as SGST. The UTGST is applicable to five Union Territories namely Daman and Diu, Lakshadweep, Dadra and Nagar Haveli, and Chandigarh and Andaman and the Nicobar Islands.
3. Structure of GST
All goods and services are mainly divided into a four-stage rate design of 5%, 12%, 18%, and 28% till now. The government is also seeking to change the four-slab design to either three or two stages to make the taxation process easy, quick, and simple. Goods and services (GST) goods and services tax is yet in its budding stage and is susceptible to violations, and conflicts of interest rates. In order to avoid this, the authorities released an advanced ruling mechanism on matters of the supply of (GST) goods and services. Taxpayers can go with this mechanism for issues like registration, classification, tax rate, taxability, etc.
4. How does GST work?
The GST is charged in the state where goods and services are consumed by the consumers (not in the manufactured place), which falls in the category of a taxable place. It is charged on every sale of the products and is incorporated with the final price that a consumer pays when purchasing a product. Let’s assume that a Producer produces jeans and s/he buys the raw material to produce jeans worth Rs. 1000 along with the Rs. 60 tax. The Producer affixed a value of Rs. 300 to the jeans. Now the total value of the jeans became 1300 (1000+300). If we assume that the GST rate on jeans is 5%, then that will be Rs. 65 added tax. The Producer can decide this applicable GST amount (Rs. 65) against the tax he paid rs.60 on the raw material. Accordingly, the appropriate GST rate will be only Rs.5 (65-60). This taxation system makes GST a value-added tax. Distributor/Service Provider- In the next step, the product is given to the distributor/service provider. The distributor buys the same jeans for Rs. 1300 and affixes the value to that jeans by around Rs. 200. Now the value of the jeans will be increased to (1,500), that is (1300+200). Under GST, they will need to pay a tax of approximately Rs. 75 (5%), which is set against the tax on the purchased jeans from the producer, which is Rs. 65. The distributor's gross tax incidence GST will be 75-65= Rs. 10. Retailer- In the second last phase where the retailer receives the manufactured jeans from the wholesaler/service provider. Moreover, the retailer affixes a margin of Rs. 100 on bought jeans. The net price of the product will become now Rs. 1600 (1500 + 100). As per the GST laws, he/she will now require to pay tax (bearing a 5% rate of GST) that will evolve Rs. 80 that he can set off against Rs. 75 tax paid by the wholesaler. The tax incidence GST on the vendor will be Rs. 5 (80-75). End Consumer- This portion of Rs. 1600 is handled by the end customer buying these jeans. We can see that GST goods and services are a value-added tax that gives the benefits of a single tax at every stage, excluding the end consumer stage. Therefore, we can say that GST is “one nation, one tax”.
5. Benefits of GST
Easy Compliance: A strong and comprehensive IT system will be the foundation of the GST taxation system in India. All tax-payer services like registrations, returns, and payment would be available online. It will help to make compliance easy and transparent. Uniformity Tax Rates & Structures/Development of Common National Market: GST (goods and services tax) ensures that rates of indirect tax and structures are common all over the country. It would enrich the process of business. Competitiveness: Depletion in transaction cost of business will ultimately lead to an improved competitiveness for the business and industry. Better Control of leakages: GST will be better for tax compliance due to a strong IT infrastructure. Having a smooth transfer of input tax credit from one place to another in the chain of value addition, there is an included mechanism in the (GST) goods and services tax structure that would incentivize tax compliance by businessmen or traders. 3) Higher Revenue Efficiency: Goods and services tax (GST) is predicted to decrease the cost of collection of generated tax revenues of the Government and will hence lead to higher revenue. Single and Clear Tax proportionate to the value of goods/services: Having multiple taxes that are levied by the Central/State government with incomplete or available progressive value addition, as per the (GST) goods and services tax act, there would be only one tax from the manufacturer to the consumer. Avoid the excess burden of tax: Because of efficiency growth and prevention of leakage, the excess tax burden on diverse commodities will eventually come down which provide advantages to the consumers.
6. GST rates in India
GST rates are basically considered on four slabs categorized based on goods and services, announced by the Government. These GST rates are as follows- 5%: As per this slab rate, household items are encircled such as sweets, sugar, spices, coffee, cola, tea, edible oil, etc. 12%: As per this slab rate, computers, laptops, and processed foods including cheese, ghee, ayurvedic medicines, smartphones, fertilizers, etc. However, services like work contracts, business-class air tickets, and non-ac hotels are also included. 18%: This slab contains items like toothpaste, hair oil, and shampoo, along with capital goods and industrial intermediaries. 28%: This GST goods and services tax slab encircles luxurious and expensive items such as premium cars, bikes, and consumer durables like AC, Refrigerators, etc.
Frequently Asked Questions
What is IGST?
IGST is represented as an integrated Goods and Service Tax which is a part of the concept of “one nation one tax.” IGST is taxed on the supply of goods and services from one state to another.
How can I pay GST?
Probe the website https://www.gst.gov.in/ and log in with valid information then access the generated challan. Select the CPIN link for which you want to make the payment and lastly select the mode of payment. Press on the payment options tab and here you are done.
What is the GST Inclusive amount?
The final price that comes after adding the GST goods and services tax value to the actual price of the product is called GST inclusive amount.
What is the GST-exclusive amount?
The final value that comes after the subtraction of the GST amount to the real price of the product is known as the GST exclusive amount.
What are the three types of GST?
There are three types of goods and tax services which are as follows- CGST, SGST, and IGST.
Who is required to register for the GST registration?
According to the act of Goods and Tax services, 2017, any business which is having a turnover more than of 40 lakh in a financial year, is mandatorily liable for GST registration.
Is GST registration free of cost?
No. There is no fee for GST registration. GST registration is free of cost so you do not need to pay anything.
How long does it take to process a GST application?
The process of a GST application often takes 2 to 6 working days.
How do I get about my GST approval?
To check the status of your GST application, Explore the website of (GST) goods and services tax. Go to the menu section and click on the services where you will see an option of Track application status, click on this, and enter the ARM along with the captcha in provided columns.
What is GSTIN?
GSTIN is an identification number that is sued by all registered suppliers. Main- goods and services tax goods & services tax GST registration