GST Basics (Good & Services Tax)

GST Basics (Good & Services Tax)

                                                                                                         

1)What is GST?

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based taxthat is levied on every value addition.

In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India.GST is one indirect tax for the entire country.

2) Journey of GST in India

The GST journey began in the year 2000 when a committee was set up to draft law. It took 17 years from then for the Law to evolve. In 2017 the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July 2017 the GST Law came into force.

3) Advantages Of GST

GST has mainly removed the Cascading effect on the sale of goods and services. Removal of cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on tax, the cost of goods decreases. GST is also mainly technologically driven. All activities like registration, return filing, application for refund and response to notice needs to be done online on the GST Portal; 

4) What are the components of GST?

There are 3 taxes applicable under this system: CGST, SGST & IGST.

• CGST: Collected by the Central Government on an intra-state sale 

• SGST: Collected by the State Government on an intra-state sale 

• IGST: Collected by the Central Government for inter-state sale 

➢ Illustration: 

⏩ Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs. 50,000. The tax rate is 18% comprising of only IGST.

In such case, the dealer has to charge Rs. 9,000 as IGST. This revenue will go to the Central Government.⏩ The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate on the good is 12%. This rate comprises of  CGST at 6% and SGST at 6%.The dealer has to collect Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will go to the Central Government and Rs. 3,000 will go to the Gujarat government as the sale is within the state.

5) Who is liable to pay taxes under GST?

A taxable person is liable to pay tax under GST.

6) Who is a taxable person in GST?

A person is registered or is liable to be registered under the law A person is registered or is liable to bewould be a taxable person in GST. A person would be liable to be registered under the law under two categories:

➢      Person liable to be registered mandatorily.

➢ Person liable to be registered provided aggregate turnover of supply of goods or services or both exceeds threshold limit.

Generally, a person is liable to pay tax on the supply of goods or services made by him. Whether in any case, a person is liable to pay tax on these supplies received by him?

The tax is generally paid by the person on the supply of goods or services made by him. This is called Forward charge of Tax.

7) Conclusion

GST will bring in transparent and corruption-free tax administration, removing the current shortcomings in indirect tax structure. GST is business friendly as well as consumer friendly.GST in India is poised to drastically improve the positions of each of these stakeholders.We need a change in the taxation system which is better than earlier taxation. This need for change leads us to ‘need for GST’.
GST will allow India to better negotiate its terms in the international trade forums.GST aimed at increasing the taxpayer base by bringing SMEs and the unorganized sector under its compliance. This will make the Indian market more stable than before and Indian companies can compete with foreign companies.

AUTHOR BY:- Adv.Maitry Ketankumar Kansara