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Overview of Goods and Service Tax

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.

Comparison:

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)
  • CVD
  • Cesses
  • Surcharges
  • 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
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.

Check Latest GST rate List here

This is the small overview of GST System. Stay Connected for more Updates 

For SAQIB & ASSOCIATES

MOHD SAQIB

Company Secretary

 

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