1. What is GST?
GST Means Goods and services tax. In simple term GST is an Indirect tax charged on Goods and service tax. Taxable event is supply. Supply may be Interstate or Intra state.
Interstate means when supply is made from One state to another from one union territory to another union territory or to state or supply is made from India to another country.
Intra state supply means supply with in the state.
2. When GST was introduced first time in the India?
The Goods and service tax act was passed in the parliament on 29th May,2017. The said act was passed in the parliament and came into the effect from 1st July,2017.
3. Reason for introducing GST
The main reason to introduce GST was to eliminate cascading effect which was they’re in the previous tax structure.
1. Especially when there was combination goods and services where VAT and Service tax used to charge on the goods and assessee was not able to use credit of one tax with another as state used to control VAT and service tax used to come under control of central government.
2. Tracking dates of for payment of all Indirect taxes and filling monthly/Quarterly / half yearly annual return was tedious process. It was difficult for small businessmen to maintain calendars for payment dates and return dates.
3. It was also difficult for foreign investors who wish to start business in the India but due to process of registering for different taxes and adhering rules for payment and for filling returns were tedious. To attract domestic investors and foreign investors to simplify rules for boosting Indian economy it was necessary to simplified tax rules and to introduce tax laws which are easy to adhere and will cover Goods and service under one law.
Prior to GST there were Multiple taxes. 17 taxes. Now there is single tax.
• Excise duty- Subsumed
• Customs- Still existed
• Service tax-Subsumed
• Entertainment tax
• Purchase tax
• Stamp duty- Still existed
• Property tax.
To start business in India there were lot of compliances which businessmen had to follow. To reduce burden of businessmen’s by reducing compliances for businessmen it is easy for Indian as well as to foreign businessmen to start business in India. To promote Indian as well as foreign businesses in India.
Different types of taxes under GST?
Typically, there are four types of taxes which are covered under GST
1. CGST- Central Goods and services Tax
2. IGST- Integrated Goods and Service Tax
3. SGST- State Goods and Service Tax
4. UGST- Union Territory Goods and Service Tax
1. CGST: CGST (Central GST) is charged by central government. This tax is collected on the transactions made with in state. This tax will replace CST, Service tax, entertainment tax.
Rate of CGST is same as on SGST. For example, if supply of good or service requires to charge total 18% GST than the same divided into equal proportion and 9% of the amount of supply of Goods and services are charged as CGST and rest 9% amount is charged as SGST. When goods/service is supplied with in same state i.e. Intra state than CGST is charged. Transaction made by Mr. X from Uttar Pradesh to Mr. Y who is also located in the Uttar Pradesh than CGST+SGST is charged.
2. IGST: IGST (Integrated GST) is applicable on interstate transactions of goods and service tax. IGST is also charged on the import goods. IGST is controlled by central government. This tax is collected by central government and will distribute between two different states. When Goods or service is supplied from one state to another state than IGST is charged.Mr C located in the Gujrat and Mr. D is in the Maharashatra than IGST+SGST. State who consumes service will get tax benefit irrespective of service supplied by other state.
3. SGST: SGST (State GST) is applicable on the Intrastate supply. For e.g. If A provides service to B and if A and B are located into Maharashtra (i.e in the same state) than SGST is charged on the goods. As we have seen in the example of CGST that if certain supply of service or product requires to charge 18% GST than the this 18% will be bifurcate in the same proportion.
4. UGST: UGST (Union territory GST). In India there are total 9 union territories.
I. Andaman Niko bar
II. Dadra and Nagar Haveli
V. Daman and Diu
VII. Jammu & Kashmir
Hence UGST is charged when transaction is made with in two union territories. If transactions are made with in two union territories than UTGST+CGST are charged in equal proportion. There are two union territories where UTGST+SGST are charged. These states are Delhi and Pondicherry. Since Delhi and Pondicherry have their own legislation, they are charging SGST instead of CGST.
4. What is supply in the GST?
As we have seen above that GST law has made in very lucid manner and less complicated terminologies are used in the GST. If one reviews applicability on the factor on which GST is charged than one can easily identify that GST is charged on the supply. In the previous law regime, there were multiple reasons on which tax used to charged. Tax used to charge on sale of product (CST/VAT), in excise law excise duty used to charged on the manufacturing. Excise law was complicated, and one used to be in dilemma when interpretation of concept manufacture used to come the same confusion assessee used to face in the service tax where tax used to charge on the point of taxation. To bring simplicity in the law, GST law says that GST will be charged on the supply of Goods and Service.
Now let us see what the term supply in the GST is.
Supply includes Sale, transfer, barter, license, rental, lease, exchange and disposal. Now will deeply study each term.
1. Sale: Transfer of ownership of goods or product.
2. Transfer: Transfer of goods/product without title
3. Barter: Exchange of one goods or service in lieu another goods or service.
4. License: If one person grants permission to use his/her product to another person.
5. Rental: If Person rents his/her asset against receiving periodical payment from another person.
6. Lease: When contract is made between two persons to use assets without transferring title of asset for certain period.
7. Exchange: Swap or transfer for equivalent money against.
8. Disposal: In simple terms scrapping of goods or sending one goods from one branch to another branch will cover under this.
Supply has two key elements.
• Supply is made towards consideration
• Supply is made in the furtherance of business.
5. Taxable person under GST?
Person who carries business in the India and turnover of business which he is carrying is more than Rs. 20 and Rs.40 Lakhs yearly (in case of supply of goods) and Rs. 10 Lakhs (In case of Person carrying business in the North-East states) and 20 Lakhs are required to register for GST(in case of supply of goods who is carrying business in the north-east states)
Person who are registered under Excise, Service, VAT and CST are required to register under GST. To registered under GST, person needs to hold PAN.
If Person has multiple branches in the different states than person is required to register in all states in which company holds business. Company is required register within 30 days from the date of starting business. Any person who is selling goods or providing inter-state services are required to register for GST compulsorily. In such a case threshold limit towards GST will not be considered.
6. List of the services/ Goods which are out of purview of GST?
Following services are exempt from the GST
I. Service provided by employee to an employer
II. Duties performed by MP/MLA/State leister/Panchayat/ Municipalities and other local authorities. Any person who holds position under constitutions
III. Services provided by the court and tribunal.
IV. Services provided at the time of funeral/ mortuary. Even Ambulance service provided to carry dead body at cremation place will be out of coverage of GST.
V. Actionable claim (Excluding Betting/Gambling and lottery). Actionable claim in the simple word can describe as claims can be enforced only by legal/suit action.
VI. Sale of immovable property. (Except GST will be charged on the property which are under construction)
VII. Sale from Non-taxable territory to another non taxable territory: Condition is that goods should not enter the India.
VIII. GST is also not applicable on the petroleum products and on the alcohol.
7. How GST is recovered from an assessee?
GST is basically consumption-based tax. For example if Maharashtra states supplies goods/service to the Rajasthan state then dealer from Maharashtra will charge GST to Rajasthan and to the central government in the equal proportion and Rajasthan state will be eligible to take credit against the GST charged by Maharashtra state and not the Maharashtra state. Hence
8.What is Input tax credit?
GST is payable on the goods purchased and services availed. Company also charges GST on the goods or service supplied to another person. As we have seen in the CGST, IGST, SGST and in the UGST that taxes are charged according to the destination from which person has supplied goods and service. While purchasing or availing services from the vendor/ service provider, company parks entry to GST receivable account (Except in the case reverse charge mechanism GST is payable by person who receives services.) while at the time of supplying goods/ services it is accounted for GST payable account.
Input tax credit is used while paying tax liability. If person supplies good or service than he charged GST to the customer. When her charges
GST to another person term output tax is used. This is to avoid cascading effect of tax. While at the time of purchase of raw material or any business-related goods and service than the same is termed as Input tax.
9. What is Reverse charge Mechanism?
Reverse charge Mechanism (RCM) means service receiver is required to pay GST and service provider. In the normal scenario one who provides service needs to charge GST to the service provider and he is required to deposit GST to the government but under reverse charge mechanism service receiver must pay GST.
Following are example of RCM:
• LIC Agent, Indian post service by way of speed post
• Fees paid to advocate
• Sitting fees paid to an Independent director
• Sponsorship services
• Renting immovable properties
10.What is E-way bill?
When transporters carry/moves goods from one place to another, transporter is required to generate E-way bill. Registered GST person cannot move goods without generating E-will goods, if goods value supplied is greater than Rs. 50,000/- E-way bill can be generated through SMS, Android App. When E-way bill is generated unique E-way bill number is generated. Unregistered person is also required to generate E-way bill. If transporter does not generate E-way bill than GST authority can charge penalty of Rs. 10,000/-