10 Things You Need To Know About The GST In India
Goods and Services Tax acronym GST is an indirect tax passed by the central government in 2017 which is levied on the people of India in different ways on all the transactions such as manufacture, sale, and consumption of goods or services across India. It has replaced the earlier taxes such as VAT, Excise duty, etc. Except for some of the state taxes it has replaced almost all the indirect taxes. It is the only indirect tax that is uniform throughout the country levied on the goods and services in different slabs.
With the advent of the new tax law, many people have confusion and often find themselves trouble in understanding it. So here we have brought down the list that you should know about the GST. Let’s have a look at the new system here:-
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1. There are different types of GST enforced according to the location
1.Central Goods & Services Tax (CGST)
It is levied on the sale and resale of any product or services within the State; the revenue generated by the tax is shared by central and the state government as the tax includes both CGST and SGST (State Goods & Services Tax). This new tax regime has replaced the older version where you need to pay the Value-added Tax (VAT) by the state government plus Central Excise Tax.
For example, a transaction of goods amount ₹1000 taking place from Amritsar to Ludhiana. Now, since the transaction is taking place within the state, both CGST and SGST will be imposed. That is if both the state and central GST is 10%, ₹50 will be shared by each of them.
- What will happen if the same goods are resold within the state?
Now, if the same product is resold within the state, then again both SGST and CGST are levied. That is 5% by both central and state to the revised amount calculated by the seller.
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2. State Goods & Services Tax
It is similar to the CGST, the only difference is that here the tax is collected by the state government on the transaction of any goods and services within the state that is an intra-state sale. It has replaced the earlier tax such as Value Added Tax (VAT)
- What if the same goods are resold outside the state?
In case of the transaction is outside the state that is the inter-state sale, IGST will be levied which is collected by the union government.
- Integrated Goods & Services Tax (IGST)
It is levied on any transaction of goods or services to another state or inter-state transaction. The tax is collected by the union government. It is also applicable for import and export into India. In the case of export from India, the GST will be 0%.
For example: If any goods moving from Mumbai to Lucknow, since the transaction is out of the state, IGST will be imposed and the tax will be collected by the union government.
Now if the same product is resold within the state like the upper case from Lucknow to Varanasi, CGST and SGST will be imposed where the tax will be shared between both of them.
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2. A separate type of GST for the Union Territories is Union Territory Goods and Services Tax (UTGST/UGST)
It is the special tax that is levied on the union territories on any transaction of goods or services along with CGST if the transaction is within the Territory. It is similar to the SGST in the state, the only difference is that it includes Union Territories where the administration is controlled by the central government and the territory is without legislature. The tax is collected by the Union government. The Union Territories which are included under this act are:-
- Daman & Diu
- Dadra and Nagar Haveli
- Andaman and Nicobar Island
Delhi is not included in this act since it comes under the national capital territory so the CGST is levied in the case of Delhi.
Note: If the goods or services are supplied from one state or Union Territory to another Union Territory that is an Inter-state transaction, IGST will be levied.
For example, a trader from Chandigarh sells the product within his city, now since the transaction here is an Intra-state that is within the Union Territory, CGST and UTGST will be levied.
But, if the same trader sells his product from Chandigarh to Daman and Diu, IGST will be levied since the transaction is to another state or Inter-state transaction.
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3. Tax laws before the advent of GST in India
Before it was introduced, India had a very complex system of indirect taxes in which different kinds of tax are applied indirectly for example:-
- A manufacturer wants to buy any Raw material, he or she had to pay the VAT
- If a Wholesaler buying a final product from the Manufacturer, he or she had to pay VAT and Excise Duty
- Later if the Retailer buys the product from the wholesaler, VAT is levied
- Similarly, when the customer or consumer buys any product or service, he/she had to pay VAT
Apart from this, earlier the tax regime included both the central and state taxes where the state had different sets of rules to acquire taxes such as service tax, sales tax, central excise duty, customs duty, Entertainment tax, luxury tax, advertisement tax, entry tax, tax on lotteries, etc.
If there was any inter-state transaction of goods, apart from Central State Tax (CST) such as central excise duty, VAT was also levied by the state. This led to the tax on tax effect or cascading effect of taxes. With the advent of the GST, this whole system of cascading effect of taxes was removed to a simple form of indirect taxes.
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4. Who are eligible?
- Any individual whose transaction of any goods or services exceeds more than 20 lakh rupees per annum. In this case, an individual must register
- There are some special cases in which the individual need to register on a limit of more than 10 lakh rupees on supplying any services in the northeastern states of India
- Any individual who transact through e-commerce
- Every e-commerce aggregator
- Any individual making inter-state transaction (from one state to another state) of goods or services which are taxable
- Any Non-Resident person who pays tax
- Agents supplying any goods in place of any other taxable person
- Any individual providing online services from another country to the person in India
5. People who are exempted from GST in India
There are 2 types of Exemption
- Absolute Exemption: Such kind of goods is exempted from GST be it an intra-state or inter-state transaction. Here the goods or services are exempted without any terms or condition
- Conditional Exemption: These goods are exempted on some terms and conditions according to the Act. Any service which is supplied within the state or intra-state transaction plus supplied to the unregistered person by the registered individual.
Within this, the exemption can be categorized based on goods or services. Let’s have a look at the different kinds of exemptions.
List of some most common goods which are exempted:-
- Live animals and meat such as sheep, poultry, goat, fish, etc
- Vegetables, Fruits, and Dry Fruits such as Tomatoes, Bananas, walnuts, etc.
- Natural products such as Milk, Eggs, etc
- Grains such as Wheat, barley, rice, etc
- Spices, Tea, and coffee
- Plants and seeds such as oilseeds, flowers, etc
- Fossil fuels
- Some Drugs and Pharmaceuticals
- Pottery or hand tools, etc
Services in which the GST is exempted:-
- Any agriculture services such as cultivation, renting agricultural machinery, nor do GST applied to agriculturists.
- Transportation services to a certain amount
- Government and judicial services such as postal service, etc.
- Educational services such as students transportation, mid-day meal, examination, etc
- Medical services
- Some NGOs services
6. Nil Rated, Zero Rated, Exempt and Non-GST
- Nil Rated – any supply which has 0% GST such as bread, salt, books, newspaper, etc
- Zero Rated – Export of any good or services from India and any supplies to special economic zone or SEZ will be zero-rated
- Exempt – supplies where GST doesn’t apply
- Non- GST- These are some of the supplies where taxes are not covered under GST law but are taxable to some other law for example electricity, alcohol, and petrol are not covered under GST but are taxed as per earlier tax system.
7. Registration and GST Identification Number (GSTIN)
Any provider who is eligible for GST can register by visiting the GST Portal. After that, you need to select the ‘Administration’ tab on the menu. Later on, go to Registration select the ‘New Registration’ tab, and fill in the respective details. It can take up to 6 days to finally get your Identification number.
The Identification Number (GSTIN) is a distinctive number given to every provider according to the state registered for GST. It is of 15 digits and will be allotted if a PAN card is available.
On the successful registration, the provider is eligible for GST Return. It is the document that carries all the provider transaction information regarding the purchase and supply. All Businesses are required to fill returns 2 times a month plus an annual return.
8. Different Slabs of GST
Apart from alcohol, petroleum and electricity almost all the goods and services are levied under GST into different tax slabs. While the goods or services which are essential are placed under the lowest tax slab. On the under hand luxury items are placed with higher tax slabs. Let us have a look at each of the following:
- 0% – These are the exempted list under which almost 7% items are placed such as food grains, milk, curd, fruits, fresh vegetables, books, salt, newspaper, healthcare services, flour, educational services, and hotels with below Rupees 1,000 tariff.
- 5% – Under this slab, the items which are placed are frozen vegetables, branded paneer, agarbatti, cashew nuts, spices, skimmed milk powder, coffee, medicines, and transportation services.
- 12% – Under this, the items which are placed are frozen meat products, cheese, butter, ghee, fruit juices, sewing machine, umbrella, cellphones, work contracts, restaurant services, packaged dry fruits, business class air tickets.
- 18% – It’s the slab where most of the items fall approx 42% of the items fall under this slab such as pastries, cakes, cornflakes, ice cream, sauces, branded garments, jams, mineral water, envelopes, camera, computer, or computer products, mobile phone, sanitizers, cinema tickets, tractors, licensed Air condition restaurants offering liquor services, telecom, and broadband services, IT services.
- 28% – over 200 items are placed under this tax slab such as chewing gum, shampoo, pan masala, vacuum cleaner, shavers, automobiles, motorcycles, water heater, tobacco, five-star hotels, racing, movie tickets, betting, and lottery.
- Other than these there are some items that are not placed under any of these slabs like jewelry items such as Gold or rough diamonds which are taxed 3%. While the stones which are semi-precious are taxed 0.25%.
9. E-way Bills
It is the system in which the trader can generate bills digitally in case of an intra-state supply of goods. An online document is generated that shows the movement of the goods. By 1 June 2018, it has become mandatory for any inter-state supply of goods worth more than 50,000 rupees and goes beyond 10 kilometers of the state to approve e-way Bill.
10. Advantages of GST in India
- Elimination of the cascading effect of tax – earlier as we had seen that there lot of indirect taxes which is implemented one another or ‘Tax on Tax’ system which was not only sometimes higher but also complex. But with the implementation of GST, it has brought down all the indirect tax under one regime throughout India.
- Less compliance – Now, there is no need to fill a number of returns under different indirect taxes as it was earlier. With the implementation of GST which replaced all the indirect taxes, you need to file only some returns.
- Possible price reduction and procedural cost – Earlier because of cascading effect sometimes the tax were extended beyond the limit but with the introduction of GST, clear slabs are defined so there is no manipulation of adding another variant of tax.
- More efficiency with online facilities – Now you no longer need to visit personally for registration or file a return. The government brought down various online facilities such as GST portal, e-Way Bill, etc through which one can access the work digitally. You can also get in contact with the authority through a Toll-Free Number and helpdesk mail ID. You can also get help from GST App available in Google Play Store.
|· Toll-Free Number||· 1800 1200 232|
|· Helpdesk ID||· [email protected]|
With the advent of new tax law, it seemed to many people as more complex until we get to know about it. Earlier, we have to face a lot of indirect taxes, many of which were not even known to common people but with the implementation of GST in India, now all the taxes are replaced with one single tax system (except some of the cases) throughout the country with specific tax slabs. So, you no longer need to worry about the charges which are levied on you. As we move further, we will get more habitual with the tax and will appreciate it.