GST is considered as an indirect tax for the whole nation that would make India one unified common market. It is a tax which is imposed on the sale, manufacturing and the usage of the goods and services. It is a single tax that is imposed on the supply of the goods and services, right from the manufacturer to the customer. The credits of the input taxes that are paid at each stage will be available in the subsequent stage of value addition which makes GST essentially a tax only on the value addition on each stage. The final consumers will bear only the tax charged by the last dealer in the supply chain with the set of benefits that are at all the previous stages.
It is charged at the national and state level at similar rates for the same products and it also replaces almost all the current indirect taxes that are imposed separately by the Centre and the States. Goods & Services Tax is a destination based tax which means that the tax is paid at the place of supply.
Some of the State taxes that will be subsumed under GST are –
Benefits of GST
- Eliminating the cascading effects of taxes
- Tax rates would be comparatively lower
- Reduce tax evasion and increase the revenue and GDP by widening the tax base
- There would be seamless flow of the input tax credit
- Price of the goods and the services would fall
- There would efficient supply chain management
- It would promote the shift from unorganized sector to organized sector.
- It would eliminate 17 indirect taxes and therefore the compliance cost would fall
Its eligibility would primarily be decided on the basis of turnover. Small taxpayers may thus either be exempt (turnover < Rs. 20 lakh) or they may opt for the Composition Scheme (turnover < Rs. 75 lakhs). The medium and large taxpayers will have to file all GST Returns. The diagram below would help us to get the concept of working of GST in a better way.
- All the taxpayers that are eligible for exemption will have the option of paying tax with Input Tax Credit benefits through Voluntary Registration.
- The list of the exempted goods and services would be common for the Centre and the States/U.T.s.
The tax cycles for the Mid-Size & Large Taxpayers are different –
- Firstly, the seller files GSTR 1 (before the 10th of the following month) by recording all the sales
- Then the buyer reviews the sales in GSTR 2A
- The buyer would then approve whether the sales are legitimate or not and file in GSTR 2 (before the 15th of the following month)
- If the buyer modifies the sales that were earlier filed, then the seller can see such kind of modifications in GSTR 1A and can approve or disapprove
And thus finally when, both the buyer as well as the seller approve, GSTR 3 (before the 20th of the following month) is generated with the payment of taxes.
Types of Taxes
The various types of taxes that are under GST are –
- If the supply of the goods and the services are made within the state, then the two types of taxes which are applicable are, the Central Goods and Services Tax (CGST) and the State Goods and Services Tax (SGST).
- If the supply is made across the state, then Integrated Goods and Services Tax (IGST) is applicable.
Cess will be chargeable on the Value of Supply for 5 years on the taxes on certain specified goods and services. But in the case of import of goods into India, cess would be levied but then collected on customs duties under the Customs Tariff Act, 1975. The only exception is that no cess would be levied by a taxpayer who opts for the composition scheme.
Import & Export
In case you are confused about GST as a business owner, feel free to consult the GST experts at LegalRaasta. You can get comprehensive assistance on GST Registration and GST Return Filing. You can also use our GST Software for doing end-to-end GST compliance.