India is famous for its perplexing assessment framework i.e tax system. For new organizations and new businesses, it winds up noticeably difficult to explore through different immediate and circuitous assessments. Consistent changes to duties like Service Tax are making things even most exceedingly terrible. Be that as it may, now, the things are set to change with new Goods and administration assess – commonly known as GST – Goods & Service Taxes.
Lets understand what is GST, how it is different from other taxes, GST applicability, GST rates, its impact on your business and latest updates about GST bill.
What is GST ?
Goods and Services Tax (GST) is an upcoming system of taxation in India which will merge many individually applied taxes into a single tax. GST is a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India to replace taxes levied by the central and state governments.
To make things easy to understand, Let Me Help You.
Suppose i want to start a business. For this i need different types of raw materials which i have to import from different place and brought to my factory place, may be by road through different states. Now once i drill down on the process of estimating the cost it’s troublesome.
First, i need to pay a customs duty for importing the materials on top of the shipping charges. This is fine but there are a lot of other taxes which i am unable to comprehend. Also i find out that when i have my final product ready i will have paid the Central and State Governments at least 10 different taxes not all of which are exclusive of each other. On diving deeper many cases are found cases where a tax is also taxed by the government.
PRESENT INDIRECT TAX SYSTEM
CVD* – Countervailing Duty;
SAD* – Special Additional Duty
DUAL GST MODEL
We begin by stating the dual GST model and the taxes levied on each kind of transaction. See these abbreviations before we understand them-
- SGST – State GST, collected by the State Govt.
- CGST – Central GST, collected by the Central Govt.
- IGST – Integrated GST, collected by the Central Govt.
Now look at the chart that follows:
HOW GST OPERATES?
In the example illustrated below, goods are moving from Mumbai to Pune. Since it is a sale within a state, CGST and SGST will be levied. The collection goes to the Central Government and the State Government as pointed out in the diagram. Then the goods are resold from Pune to Nagpur. This is again a sale within a state, so CGST and SGST will be levied. Sale price is increased so tax liability will also increase. In the case of resale, the credit of input CGST and input SGST (Rs. 8) is claimed as shown; and the remaining taxes go to the respective governments.
Case 2: Sale in one state, resale in another state
In this case, goods are moving from Indore to Bhopal. Since it is a sale within a state, CGST and SGST will be levied. The collection goes to the Central Government and the State Government as pointed out in the diagram. Later the goods are resold from Bhopal to Lucknow (outside the state). Therefore, IGST will be levied. Whole IGST goes to the central government.
Against IGST, both the input taxes are taken as credit. But we see that SGST never went to the central government, still the credit is claimed. This is the crux of GST. Since this amounts to a loss to the Central Government, the state government compensates the central government by transferring the credit to the central government.
Case 3: Sale outside the state, resale in that state
In this case, goods are moving from Delhi to Jaipur. Since it is an interstate sale, IGST will be levied. The collection goes to the Central Government. Later the goods are resold from Jaipur to Jodhpur (within the state). Therefore, CGST and SGST will be levied.
Against CGST and SGST, 50% of the IGST, that is Rs. 8 is taken as a credit. But we see that IGST never went to the state government, still the credit is claimed against SGST. Since this amounts to a loss to the State Government, the Central government compensates the State government by transferring the credit to the State government.
Let’s check out 10 Things related to GST
- GST rollout will start only after 1 July 2017
- Unlike aother countries where GST has already been implemented, India opted for dual GST – SGST and CGST, administered by State and Centre respectively.
- There will be four tax slabs of 5%, 12%, 18% and 28%. Luxury and demerit goods will be taxed at 28% plus cess.
- CGST, SGST & IGST
- The Central GST or CGST is the areas where the center has the powers
- State GST where the State has taxation capabilities.
- The IGST or Integrated GST is for movement of goods within the states of the Indian union
- Taxes that GST replaces
- Central Excise Duty
- Service Tax
- Countervailing Duty
- Special Countervailing Duty
- Value Added Tax
- Central Sales Tax
- Entertainment Tax
- Entry Tax
- Purchase Tax
- Luxury Tax
- Advertisement Tax
- Taxes Applicable in lotteries
- Officially, the Constitution (One Hundred and Twenty-Second Amendment) Bill 2014.
- The Centre will levy an additional one per cent tax on the supply of goods in the course of inter-State trade, which will go to the States for two years or till when the GST Council decides.
- The Tax Collection at source (TCS) guidelines may increase administrative and documentation workload for companies in the e-commerce sector.
- Luxury cars, consumer durables, electronics items and readymade garments are expected to become cheaper with GST roll out but mobile phones, banking and insurance services, telephone bills and air travel are expected to get more expensive.
- The federal government favors 18% GST rate but states are lobbying for more
GST TAX SLAB & ITEMS UNDER THE SLAB