Goods and Services Tax (GST) is an indirect tax applicable to the supply of goods and services in India. The Goods and Service Tax Act was passed in Parliament on 29th March 2017. The GST in India Act took effect on 1 July 2017, It is a comprehensive, multi-stage, destination-based tax.
Comprehensive because it has abolished almost all indirect taxes, with the exception of a few state taxes. Multi-stage, because the GST is levied at any stage of the manufacturing process, but is supposed to be refunded to all parties at different stages of production, rather than the final customer. GST called as a destination-based tax because, It is collected from the point of consumption and not from the point of origin, as in the case of previous taxes.
In simple words, Goods and Service Tax (GST) is an indirect tax imposed on the supply of goods and services. Now, you have get knowledge about what is GST in India and now continue to discuss more about GST.
Different Rates In GST
Goods and services are classified into five different tax slabs – 0%, 5%, 12%, 18% and 28%. However, petroleum goods, alcoholic beverages, and electricity are not levied on the basis of GST and are instead taxed separately by individual state governments, as per the previous tax regime.
There is a special rate of 0.25% on rough precious & semi-precious stones and 3% on gold. In addition, a cess rate of 22% or more than 28% of GST applicable on few items such as aerated beverages, luxury vehicles and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%, post-GST, most goods are estimated to be in the 18% tax range.
Different Types of GST in india
There are 3 types of taxes applicable under GST system in India :
CGST, SGST & IGST
•CGST: It is Collected by the Central Government on an intra-state sale (for eg: transactions made within the same states like sale and purchase take place within Delhi to Delhi).
•SGST: It is Collected by the State Government on an intra-state sale (for eg: transactions made within the state like sales and purchase take place within Delhi to Delhi).
•IGST: It is Collected by the Central Government for inter-state sale (for eg: transactions made outside the state like sale and purchase take place from Delhi to Tamil Nadu).
EXAMPLE:
•Let take an example that a dealer Mr.A sold goods in Rajasthan to another dealer Mr.B in Delhi worth Rs. 30,000. The tax rate is 18% of IGST.
In such a case, Mr.A has to charge Rs. 5,400 as IGST. This revenue will go to the Central Government.
•The same Mr. A sells goods to a consumer in Rajasthan worth Rs. 30,000. The GST rate on the good is 18%. This rate comprises of CGST at 9% and SGST at 9%.
Mr.A has to collect Rs. 5,400 as Goods and Service Tax. Rs. 2,700 will go to the Central Government and Rs. 2,700 will go to the Rajasthan government as the sale is within the state. There are different state code for every different state. You can check out the GST State Code List from our blog.
Benefit Of Implementing The GST
GST has removed cascading effect as the tax is calculated only on the value-addition at each stage of the transfer of ownership.
We can also say GST is a “cascading tax effect” which means a tax on tax.
history of GST in india
The tax entered into force on 1 July 2017 through the adoption by the Government of India of the One Hundred and First Amendment of the Constitution. The GST replaced existing multiple taxes levied by the central and state governments. The tax rates, rules, and regulations are governed by the GST Council which consists of the finance ministers of the central government and all the states.
The GST is intended to replace plenty of indirect taxes with a federated tax and is thus supposed to reshape the country’s 2.4 trillion dollar economy, but its adoption attracted criticism. Positive outcomes of the GST includes the travel time in interstate movement, which dropped by 20%, because of disbanding of interstate check posts.
Whether GST Registration Is Compulsory Or Not In India?
| States | If exclusively engaged in supply of goods | If engaged in supply of services, or goods or services or both |
| Manipur, Mizoram, Nagaland, Tripura | 10 lakhs | 10 lakhs |
| Arunachal Pradesh, Meghalaya, Puducherry, Sikkim, Telangana, Uttarakhand | 20 lakhs | 20 lakhs |
| All other states | 40 lakhs | 20 lakhs |
The GST registration is compulsory/mandatory if the “aggregate turnover” during a financial year exceeds the following prescribed limits:
The limit of Rs. 40 lakhs is available only if a person is exclusively engaged in the supply of goods. Relaxation has been given that if an individual or person dealing with goods has any interest income on loans or advances, he or she is not considered to be engaged solely in the supply of goods.
*Aggregate Turnover means The aggregate value of all taxable supplies (except the value of inward supplies on which tax is payable by an individual or person on a reverse charge basis), exempt supplies, exports of goods or services or both, and inter-state supplies of persons with the same permanent account number, to be calculated throughout India but except central tax, state tax, Union territory tax, integrated tax and cess.
GST Registration Is Compulsory In Some Special Cases
As per the GST law, GST Registration is Compulsory in certain cases irrespective of turnover limit.
The situations are as follows :
- Every person who is registered under an earlier law (i.e., Excise, VAT, Service Tax, etc.) needs to register under GST, too.
- Person engaged in inter-state supply of goods ( not services ).
- Person who is required to make payment of tax under Reverse Charge.
- Casual Taxable person making taxable supply.
- Non – resident Taxable person making taxable supply.
- Person who make taxable supply of goods or services or both on behalf of another taxable person whether as agent or otherwise.
- Person who is required to deduct TDS.
- Electronic Commerce Operator who is required to collect TCS.
- Person supplying goods ( not services ) through Electronic commerce operator who is required to collect TCS.
- Those paying tax under the reverse charge mechanism.
- Input Service Distributor.
- Person supplying Online Information Database Access and Retrieval Services from outside India to un-registered person in India.
Therefore, in all these above cases GST registration is compulsory.
Who Is A Casual Taxable Person Under GST?
A person who occasionally supplies goods and/or services in a territory where GST is applicable but he does not have a fixed place of business. Such a citizen shall be treated as a casual taxable person in compliance with the GST.
Example: A person who has a place of business in Delhi supplies taxable consulting services in Jaipur where he has no place of business would be treated as a casual taxable person in Jaipur.
Who Is A Non-Resident Taxable Person Under GST?
When a non-resident sometimes supplies goods/services in a territory where GST applies, but does not have a fixed place of business in India. As per GST in india, it will be considered as non-resident taxable person. It is similar to above except the non-resident has no place of business in India.
Who Is An Input Service Distributor?
‘Input Service Distributor’ means an office of the supplier of goods/services which receives tax invoices on receipt of input services and issues tax invoices for the purpose of distributing the credit of CGST/SGST/IGST paid on the said services to your branch with same PAN. (It must be a supplier of taxable goods /services having the same PAN as that of the office referred to above).
Thus, only credit on ‘input services’ may be distributed, not on input goods or capital goods.
This will be a new concept for assessees that are not yet registered as an input service distributor. However, this facility is of an optional kind.
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Disclaimer – Author has exercised utmost care while writing this article, but still this article may contain some error or mistake and no part of this article/writing should be construed or considered as any advice or consultancy whether professional or otherwise. The contents of this article are solely for information and knowledge.