What is Goods and Service Tax ?
It’s a destination based tax on Consumption of Goods and availing/rendering of Services. It is levied at all stages right from the manufacture to the final consumption. The tax paid at the previous stage will be eligible for set off. In short, only the value added shall be taxed and the burden of the tax is to be borne by the final consumer.
|Present Tax System||GST System|
|Product sold from Delhi to Delhi||Product sold from Delhi to Delhi|
|Price = 1000||Price = 1000|
|Vat @ 10% =100||CGST @ 5% = 50 |
SGST @ 5 % = 50
|Product sold from Delhi to Haryana||Product sold from Delhi to Haryana|
|Cost = 1100||Cost = 1100|
|Profit = 1000||Profit = 1000|
|Sell Price = 2100||Sell Price = 2100|
|CST @ 10 % = 210||IGST @ 10% = 110 |
210 – CGST – SGST paid on Input
210-50-50 = 110
|Total cost of product = 2310||Total cost of product = 2210|
You can note that the tax paid under GST on Input is set off against the tax paid on sale outside state.
Destination Based Tax.
The tax would accrue to the taxing authority which has jurisdiction over place of consumption and place of supply. (Here accrue means Received or collected)
Existing taxes proposed to be covered under GST.
The GST will replace the following taxes:
- Excise Duty
- Medicinal Excise Duty
- Service Tax
- SAD (Special Additional Duty)
- Luxury Tax
- Vat/ Sales Tax
- Entertainment Tax
- Purchase Tax
- Taxes on Lottery and Gambling
- Entry Tax/Octroi/LBT
Things kept outside the purview of GST
As of now following are outside the purview of GST
- Alcoholic Liquor for Human Consumption
- Petroleum products like:
- Petroleum crude
- Motor spirit (patrol)
- High speed diesel
- Natural gas
- Aviation turbine fuel.
(For the time being existing Vat and Central Excise will govern the above commodities)
Type of GST
Under GST Act, 2016 there will be taxes as follows:
|CGST (Central Goods and Service Tax||To be levied in case of Intra-state supply of goods and services|
|SGST (State Goods and Service Tax|
|IGST (Integrated Goods and Service Tax||To be levied in case of Inter-state supply of goods and services|
|UTGST (Union Territory Goods and Service Tax)|
Revenue will ultimately be received by the state in which goods are finally consumed.
Authority to levy and administer GST.
|CGST||Central govt. will levy and administer CGST and IGST|
|IGST / UTGST||State & UTs will levy and administer the SGST / UTGST|
Rates of GST
The rates of GST would be jointly decide by the Centre and State and the Rates would be notified on the recommendation of GST Council.
Liability to Pay GST
Tax is payable by the taxable person on Supply of Goods and/or Services. The Liability to pay tax arises whenever the turnover of taxable person crosses the threshold limit of Rs. 20 lakhs. (Rs. 10 Lakhs for North East & Special Category States)
However, there are certain cases where taxable persons have to pay tax even if they have crossed the threshold limit.
Benefits from GST
Introduction of the GST will play a crucial role under Indirect Taxes regime. As large number of Central and State taxes are being amalgamated into single taxes and allowance of set-off with the previous stage taxes which will remove the cascading effects. The biggest gain is that it will reduce the overall tax burden of the consumer which is currently 25% to 30% overall.
This is the small overview of GST System. Stay Connected for more Updates
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