GST filing guide to help you understand Goods and Services Tax (GST). Explore our comprehensive GST regulations and compliance knowledge
With the number of taxes that are being levied doing business in India can get complicated. Taxes like the Central Excise, Service Tax, CST and VAT make it hard for businesses to contain their cost. The number of taxes levied at state and central levels has resulted in a complex web of indirect taxes that only amplify the hidden costs for the trade and industry. To tackle this problem head on a new law has been proposed to reform how people do business and the way in which products and services are being taxed in India.
Under this Act, every person who supplies goods and services of value exceeding Rs. 20 Lakh in a financial year will pay GST. The GST must be paid when the turnover exceeds Rs. 20 Lakh (in some special states the limit is Rs. 10 Lakh).
The tax is also applicable to any person making inter-state supply of goods and services. GST also applies to e-commerce operators and aggregators who supply services under their own brand or business name. GST is also applicable to non-resident taxable individual, input service distributor, agents and casual taxable individual.
With the introduction of the GST Act, the Goods and Services Tax will be charged on the value of supply made. This means that the transaction value would include all the expenses, fees, price and taxes excluding GST in relation to the supply. The transaction value will exclude any discounts before or at the time of supply. In some cases, where the value cannot be ascertain definitely it will be calculated based on the rules framed in the Act.
The tax base would widen with the introduction of the GST and therefore enable seamless flow of input tax credit from one stage to another. Companies and individuals can pay tax after adjusting the eligible credit. The law has laid down conditions to avail GST input tax credit on supply of goods and services.
Order of utilisation shall be as follows:
- IGST to be used for IGST, CGST and SGST in that order
- CGST to be used for CGST and IGST in that order
- SGST to be used for SGST and ISGT in that order
- CGST to SGST and SGST to CGST adjustment not possible
Goods and Services Tax also popularly known as GST is a destination-based indirect tax that is levied on the consumption of goods and services. The proposed tax will be levied at Centre and State levels at all stages right from the manufacturing to its final consumption. The unique aspect of this tax is that credit of taxes will be paid at various stages as setoff. This also inclines that only value added tax will be levied and the burden of the tax is to be borne by the consumer.
Article 246A of Constitution of India governs Goods and Service Tax.
GST will replace all the existing indirect taxes and all of the below mentioned taxes will be subsumed under GST.
At the Central level, the following taxes are being subsumed
1. Central Excise Duty
2. Duties of Excise (Medicinal and Toilet Preparations)
3. Additional Duties of Customs (CVD)
4. Additional Duties of Excise (Goods of Special Importance)
5. Additional Duties of Excise (Textiles and Textile Products)
6. Service Tax
7. Special Additional Duty of Customs (SAD)
8. Central Surcharges and Cesses
At the State Level:
1. Central Sales Tax
2. State VAT
3. Luxury Tax
4. Entry Tax (all forms)
5. Entertainment and Amusement Tax
6. Taxes on Advertisements
7. Purchase Tax
8. Taxes on lotteries, betting and gambling
9. State Surcharges and Cesses
Levy & collection of Central Goods & Service Tax is governed by Central Goods and Service Tax Act, 2017 and Levy & Collection of State Goods & Service Tax is governed by respective State Goods and Service Tax Act, 2017.
The new Goods and Services Tax (GST) will have multiple rates that start from zero per cent to 28 per cent. As per the Act, the GST will be a four-tier tax structure of 5%, 12%, 18% and 28%. The essential items will attract lower rates while the luxury items will attract higher rates and additional cess.
To keep the inflation in check most of the essential food items are exempted and kept under the zero tax rate. Most of the common use items fall under 5% bracket and fast moving consumer goods fall under the 12% and 18% bracket. Luxury items and items like tobacco and aerated drinks are listed in the 28% bracket.
The government has announced a dual GST where Centre and the State will levy a common tax base simultaneously. The Centre will levy intra-state supply of goods and services and would be called as Central GST (CGST). On the other hand, the State will levy GST as well which will be called State GST (SGST). The Centre will also levy Integrated GST (IGST) on all inter-state supply of goods and services.
In India, Centre and State both have the powers to levy and collect taxes through appropriate channels and legislation. Both, Centre and State have their own distinct responsibilities and division of powers that are prescribed in the Constitution. Dual GST is implemented keeping in mind the Constitutional framework and fiscal federalism.
GST is a way to bring together a large number of Central and State taxes under a single tax. This also allows to set-off of prior stages taxes. From the consumer point of view, all the goods and services will be reduced because there is a reduction of tax burden on goods and services. The introduction of GST will also make local products competitive in the local and global markets. GST is technology-based indirect tax which also encourages better transparency and easier to administer.
No, the GST is not applicable beyond the territorial waters of India.
Exported goods will fall under zero tax bracket and therefore no GST is payable on goods and services that are exported. However, credit of input tax credit will be available and can be refunded to the exporters.
Any taxable person who supplies goods and services is liable to pay GST. As per the new turnover limits the GST will apply when turnover of the business exceeds Rs 20 Lakh. The limit for North Eastern states is Rs 10 lakh. This provides a relief to small traders and service providers as many states have VAT threshold of 5 lakhs and 10 lakhs for service tax. Small manufacturers with excise threshold of 1.5 crore is now reduced to 20 lakh under GST regime. Small manufacturers with business threshold of more than 20 lakh will now have to register under GST.
The import of goods and service will be treated as inter-state supplies and therefore IGST will be levied. The state where the goods are consumed will accrue SGST eventually.
The Goods and Service Tax (GST) Act is applicable for whole of India including Jammu & Kashmir. It is applicable to territorial waters, seabed and subsoil underlying the territorial waters, air space above its territory and territorial waters including installations, structures and vessels located in the continental shelf of India and the Exclusive economic zone of India.
No, Supply of goods or services beyond the territorial waters of India is not covered under the Goods and Service Tax (GST) Net. But the Supply of goods or services to installations, structures and vessels located in the continental shelf of India and the Exclusive economic zone of India is covered under Goods and Service Tax (GST) Net.
Section 7 is the charging provision of the CGoods and Service Tax (GST) / SGoods and Service Tax (GST) Act. It provides that all intra- State supplies would be liable to CGoods and Service Tax (GST) / SGoods and Service Tax (GST). It also provides for the rate of tax applicable on such supplies, the manner of collection of tax by the Government and the person who will be liable to pay such tax.
The levy of tax on supply of goods and / or services is in two parts ?
(i) in the hands of the supplier and
(ii) in the hands of the recipient of goods / services under reverse charge mechanism
Normally, the supplier of goods and / or services will be liable to discharge tax on the supplies effected. However, the Central or State Governments upon recommendation of the Goods and Service Tax (GST) Council are empowered to specify by notification the categories of supplies in respect of which the recipient of goods and / or services will be liable to discharge the tax. All other provisions of this Act will apply to the recipient of such goods and / or services, as if the recipient is the supplier of such goods and / or services ? viz., for the limited purpose of such transactions, the recipient would be deemed to be the “supplier.