Understanding the Goods and Services Tax

by Anil T. Consultant

GST has reformed the indirect tax structure in India and how goods and services are taxed in India. GST has impacted the complete economic system of India from common man to big industries. In this article we will understand the basics of Goods and Services Tax.

Who does it apply to?

GST is applicable to each and every individual whose aggregate turnover is more than 40 Lakhs INR and 20 Lakhs for the North-Eastern States. It is compulsory for the below-mentioned person to obtain GST Registration or GSTIN. Here is the list of individuals on whom GST will be applicable

(i) Any taxpayer carrying out inter-state supply of goods or/and services.

(ii) e-Commerce operator or aggregators

(iii) CTP (Casual Taxable Person)

(iv) NRTP (Non-Resident Taxable Person)

(v) TDS deductor

(vi) TCS Collector

(vii) ISD (Input Service Distributor)

(viii) A person supplying OIDAR (online information and database access or retrieval) services.

(ix) A persAt the inter-state level or supply of goods or services on who needs to pay tax on the basis of the reverse charge mechanism.

(x) An agent supplying goods or/and services on the behalf of principal.

Persons who are excluded from the scope of GST

Here is the list of persons who are excluded from the scope of GST

(i) Agriculturists

(ii) Any person who is engaged exclusively in supplying goods and services or both that are not taxable or wholly exempt under GST.

What is the structure of GST as per the new law?

GST has subsumed the majority of old indirect tax structures such as service tax, VAT, customs duty, entertainment tax, CST, Excise, etc.

Comprehensively there are 2 types of GST in India.

(i) At the inter-state level or supply of goods or services or both between two states.

(ii) At the intra-state level or supply of goods or services or both within a state.

What are the components of GST?

Particularly, there are 3 components of GST and they are:

(i) Integrate Goods and Services Tax (IGST)

IGST is collected on the interstate sale of goods or services or both by the Central Government. For example supply of goods or/and services between Delhi and UP.

(ii) Central Goods and Services Tax (CGST)

CGST is collected on the intra-state sale of goods or services or both by the Central Government. For instance supply of goods within the state borders of Delhi.

(iii) Integrate Goods and Services Tax (SGST)

SGST is collected on the interstate sale of goods or services or both by the State Government. For example supply of services within the state border of UP.

Note:

(i) All imports shall be considered as inter-state supply.

(ii) All exports will be considered as a zero-rated supply.

(iii) All supplies that make SEZ or EOU will be considered a zero-rated supply.

Will the new GST allow tax cascading benefits?

Many of us are aware that service tax and VAT have cascading benefits, which means you can avail credit of tax paid by you on inputs.

Will the new GST permit tax cascading advantage?

Every taxpayer knows that service tax and VAT include cascading benefits which imply you can benefit credit of tax paid by you on inputs. For example in the case of VAT– you levy VAT on goods you sell and while depositing this tax you can take credit of VAT paid by you on goods used as inputs.

It shall be noted that the same advantage will be applicable in the case of GST.