Since 2017, GST has been a hotly contested issue among accountants. Since the Indian government implemented GST, numerous products’ indirect tax rates have changed. Furthermore, it has done away with a number of additional taxes that were formerly applied to everything.
An indirect tax on a wide range of consumer items and services is known as the Goods and Services Tax (GST). The GST is now being paid by customers for a wide range of goods and services. Due to the implementation of GST filing, a uniform tax structure now exists throughout the country of India. In some places, GST is known as VAT. Both GST and VAT are taxes that share the same characteristics but have different names.
There are several facets of GST Registration and obtaining a GST number that you may be unaware of. In order to better grasp GST, we shall cover several crucial topics below.
What is GST?
Understanding GST requires first understanding what GST is not. One kind of indirect taxation, the Goods and Services Tax (GST) is applied to a wide range of consumer items and services. Once the GST is fully implemented, there will be a single tax on all products and services. It is being implemented to create a unified tax structure by doing away with all other forms of indirect taxation.
Types of GST
You need to be familiar with the many GSTs available. In the next part, I’d like to talk about the many GST types:
1. IGSC
The Integrated Goods and Service Tax (IGSC) is a tax levied on transactions between two states on a variety of products and services. Integrated goods and services are governed by the IGST Act, which is a different piece of legislation altogether. The federal government has a pivotal role in levying tariffs on interstate trade.
Taxes collected by the federal government are redistributed to the individual states according to the IGSC formula. IGSC is a major source of funding for both the federal government and individual states for building and improving their infrastructure.
2. Central Goods and Services Tax (CGST)
Central Goods and Services Tax is an abbreviation for the full name. Essentially, it’s a kind of GST system whereby the tax is levied only on purchases made inside the state. The Federal Treasury receives the proceeds from this levy. The tax revenue is distributed to the individual states after first going to the federal government.
3. Union Territory Goods and Services Tax (UTGST)
The sales tax collected in the Union Territory is a subset of the statewide sales tax (SGST). In India’s main Union Territories, this tax is applied to the exchange of commodities and services. Union Territories like Daman Diu, Andaman and Nicobar Islands, Lakshadweep, Chandigarh, Dadra, and Nagar Haveli all have to pay this tax.
UTGST Act is the basic law regulating UTGST. The tax revenue is collected by the government of Union Territory. All of India’s Union Territories also collect an additional tax known as UTGST in addition to the Central Goods and Services Tax (CGST).
4. SGST or State Goods and Service Tax
A subset of IGSC, SGST may be found in certain IGSCs. When a product or service is sold within the same state, only sales tax is collected. The state levies this tax on all wares and services sold inside its borders. The State Goods and Services Tax is primarily regulated by the SGST Act. The Federal Government and the State Government share equally in the revenue collected via this kind of taxation. Discover more Debt Covenant Analysis.
Things You Should Know About GST
The Goods and Services Tax (GST) is complex and requires extensive knowledge. As promised, we’ll now go into further detail on all the many GST-related topics.
Who Should Pay GST?
It is a legal requirement for all company owners to submit income tax to the government. Before the introduction of GST, various companies, items, and products were subject to separate taxes. The Goods and Services Tax (GST) is a unified indirect tax on commercial transactions. Those businesses who produce or distribute goods and services and have yearly sales of more than INR 20 lakh are required to collect and remit GST. However, GST is not required to be paid on some purchases.
Those doing business in the Northeast and in the Special Category who have a yearly gross receipts total of more than INR 10 Lakhs are required to submit a GST Return. All sales between states, regardless of total yearly revenue, are subject to GST.
6 Things You Should Know About GST (Goods and Service Tax)
Business owners and merchants may reap various rewards from GST. Let’s take a look at some of GST’s most appealing features, including:
1. Eliminates Different Types of Indirect Taxes
Before the introduction of GST, businesses and their suppliers were subject to a variety of indirect taxes. The cost of products and services rose due to many indirect taxes. After GST is implemented, consumers will no longer be required to pay any other indirect taxes on the purchases they make.
2. Grows Revenue of Central and State Government
Continuous sales of goods and services are subject to GST taxation. For the sake of the nation’s progress and prosperity, it contributes to a rise in federal and state tax revenues. Plus, it helps the country’s GDP expand at a faster pace.
3. No Tax on Tax
Cascading tax impacts are done away with by the Goods and Services Tax. Now, company owners are exempt from paying taxes on taxes and other indirect levies.
4. Goods and Services Exempt From GST
The GST is not included in all of the offerings. GST is not charged on all goods and services. Fuels such as crude oil, gasoline, diesel, and natural gas are all in the list. In addition, alcoholic beverages are excluded from GST. However, many other items, including fresh produce and other natural goods like dairy, honey, and eggs, are exempt from GST. The GST does not apply to the plants, trees, and flowers.
5. Input–Tax Credit
A crucial part of understanding GST is the idea of input-tax credit. Its how you may get a refund for the GST you have paid on various products and services. It’s a huge boon for startups and small companies looking to expand.
6. Rates of GST
Filing a GST Annual Return is a good move for every company owner to do. All purchases, whether physical or digital, must include this indirect tax. GST rates range from 5% to 12% to 18% to 28%. In the future, this building may have two or three levels.
