GST stands for Goods and Services Tax. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect from 1st July 2017. It is an indirect tax which replaces many other indirect taxes like service tax, purchase tax, VAT, excise duty etc. This tax is used in India on the supply of Goods and Services. The Goods and Services Tax (GST) is included in the final value and received from the recipient at the time of supply, then passed to the government by the supplier.
The percentage on GST is fixed by GST council. These rates are revised periodically by GST council. Usually, GST rates are high for luxury supplies and low for daily needs.
EXAMPLE: Here we can take an example of ABC Textiles (apparel manufacturer). Textile Supplier purchased raw material worth INR 5000 for manufacturing, this amount is inclusive of GST. If, GST rate is 10%, then manufacturer adds INR 500 as GST. Then the GST amount of INR 500 will be added during manufacturing process. Later on, this will bring the final value of INR 5500.
Many of Goods and Services are exempted. Goods which are under Non – GST category are eggs, fresh milk, grapes, ginger, unroasted coffee beans and many more. Services under Non- GST category include Renting or Leasing of Agricultural Vacant Land, AES (Agricultural Extension Services) and many more.
GST Registration Number: After Getting Registered Under GST, person will get GSTIN (Goods and Services Tax Identification Number). GSTIN is a unique 15- digit number to every taxpayer, either taxpayer is dealer or supplier or any business entity. It follows a format i.e., the first two digits of GSTIN represent state code (EVERY STATE HAS DIFFERENT CODE), the next 10 digits are the Permanent Account Number (PAN) of the entity, the 13th – digit is based on the number of registrations done by the firm within a state under the same Permanent Account Number (PAN), 14th – digit is constantly used character in GSTIN and last digit is a check code.
EXAMPLE OF GSTIN : If GSTIN is 03XXXXXXXXXX9Z6 then, 03 is the state code of Punjab, is XXXXXXXXXX PAN, 9 is the registered number, Z is constantly used character in GSTIN and 6 is the check code.
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Submitted by : Megha Gupta
(AIR 25 in CS Foundation)