GST – Basic Concepts
Understanding the Basic Concepts of GST
GST applicable from 1st July 2017
Basic concept: GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
Applicability of GST
- To every person who supplies goods and/or services of value exceeding Rs 20 lakh in a financial year. (Limit is Rs 10 lakh for some special category states).
- Compulsory registration for these. And GST must be paid when turnover exceeds Rs 20 lakh (Rs 10 lakh for some special category states).
- To any person making inter-state taxable supply of goods and/or services
- Every e-commerce operator
- Supplier of goods and/or services, other than branded services, through e-commerce operator
- Aggregators who supply services under their own brand name
- Casual Taxable Person
- Non-Resident Taxable Person
- Person required to deduct/collect tax (TDS/TCS)
- Input Service Distributor
- Supplier of online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person.
- Person required to pay tax under Reverse Charge
- Person supplying the goods on behalf of other taxable person (eg. Agent)
- GST does NOT apply to Agriculturists.
- It does not apply to any person engaged exclusively in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax under this Act.
GST framework as per the new law
GST is expected to replace a myriad of indirect taxes such as VAT, customs duty, Excise, CST, Service Tax, Entertainment Tax with a single tax called the Goods and Services Tax.
- Broadly there will be 2 forms of GST in India.
- intra-state level (when goods travel within a state)
- inter-state level (when goods travel between states)
- At the intra-state level two types of GST shall be levied
- CGST (Central Goods and Services Tax)
- SGST (State Goods and Services Tax).
- At the inter-state level IGST (Or Integrated Goods and Services Tax) shall be levied.
- Imports shall be considered as inter-state supply.
- Exports shall be zero rated.
- Supplies to SEZ will be Zero-rated
EXPECTED MODEL OF GST IN INDIA- DUAL GST
- In India, the GST model will be “dual GST” having both Central and State GST component levied on the same base.
- Importantly, there will be no distinction between goods and services for the purpose of the tax with common legislations applicable to both.
- For Example, if a product has tax levied at a base price of Rs. 100 and rate of CGST and SGST are 8% then in such case both CGST and SGST will be charged on Rs 100 i.e. CGST will be Rs 8 and SGST will be Rs.8.
EXCEPTIONS to GST
- Certain components of petroleum, liquor and tobacco are likely to be outside the GST structure.
- Furthermore, State Excise on liquor may also be kept outside the GST.
- Taxes collected by Local Bodies would not get subsumed in the proposed GST system.
RECONCILIATION OF VARIOUS TAXES TO GST
State GST may subsume following State taxes:
- Value Added Tax· Purchase Tax· State Excise Duty (except on liquor)· Entertainment Tax (unless it is levied by the local bodies)· Luxury Tax·
- Octroi Entry Tax in lieu of Octroi· Taxes on Lottery, Betting and Gambling·
Taxable event in case of goods would be ‘sale’ instead of ‘manufacture’.
The proposed GST will have two components – Central GST and State GST – the rates of which will be prescribed.
ZERO-RATED and EXEMPTED GOODS
Exports will be zero rated and will be relieved of all embedded taxes and levies at both Central and State level.
Exempted goods includes items, such as, life saving drugs, fertilizers, agricultural implements, books and several food items.
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