What is Goods and services tax (GST) in India?

by Anil T. Consultant

What is Goods and services tax (GST)?

Goods and services tax (GST) is a consumption-based tax that is borne by the end customer of goods or services. GST was passed in Parliament on 29th March 2017, however, the Act implemented in July 2017 in India. In addition, if there is Business to customer supply, then in such cases the business can take input tax credit to set off the GST liability. Along these lines, the GST liability is pushed to the end-buyer using the input tax credit system.

Why GST has been implemented?

Prior, there were numerous sorts of indirect taxes like VAT, Service Tax, Luxury Tax, Central Excise and so forth. Out of these, some taxes like VAT and Luxury tax used to oversee by the State Government through taxes like Service tax or central excise used to administer by the Central Government. In general, several authorities used to levy indirect taxes and the organizations have to record different returns to comply with different provisions. Along these lines, to make it basic and simple, GST has been implemented.

GST has made the indirect tax structure a lot simpler and clear for the organizations as well as for the customers. Moreover, presently the administration will likewise have the option to oversee GST in a superior and smooth manner as a large portion of the tax departments have been united and streamlined into a solitary department under the GST Act.

Who is liable to pay GST?

The end customer of goods and services will pay GST as it is a consumption-based tax. Yet, organizations have been made liable for the collection of GST from consumers and payment to the administration. In this way, in the offer of goods or services, the business will demand a GST and gather the equivalent from the customers notwithstanding the expense of the products. When the GST tax is gathered, the organizations are required to record GST return monthly or quarterly and submit the GST collected.

What are the Components of GST?

There are fundamentally three tax components under the GST tax system:

Central Goods and Services Tax: It is gathered by the Central government whenever there is an intrastate supply.

State Goods and Services Tax: It is gathered by the State government whenever there is an intra-state supply.

Integrated Goods and Services Tax: It is gathered by the Central government for inter-state supply.

How to determine GST?

(i) In the case of Goods

There are 7 different GST slab rates for goods and they are:

0%, 0.25%, 3%, 5%, 12%, 18% and 28%

GST rate for goods is connected to the HSN code which is a universally utilized system for grouping goods to exchange them globally. The CBIC has fixed GST rates for every one of the HSN codes. Thus, the GST rate on a good can be calculated on the basis of the HSN code.

(ii) In the case of services

There are fundamentally 5 different slab rates for services and they are:

0%, 5%, 12%, 18% and 28%

This GST rate for services can be determined to Service Accounting Code (SAC) that is determined by the CBIC again. The value of taxable services can be determined with the help of SAC.