GST – A General Overview
GST – A General Overview
GST, or the Goods and Services Tax is the new indirect tax structure to be implemented in India. Govt has stated 1st of July as the appointed date for its rollout. As the country prepares itself for the biggest tax change since independence with barely 10 days remaining, here is a quick bird’s eye view for our citizens.
Only 1 Tax – Currently, excise is applicable on the manufacture of goods. VAT is applicable on intra-state sale of goods. CST is applicable on inter-state sale and so on. There are a number of taxes which are levied.
GST will change this practice of levying various taxes at successive stages. Under GST, there will be just 1 tax i.e. Goods and Services Tax.
Tax on Supply – Currently excise duty is paid for manufacture of goods, VAT is paid for intra-state sale of goods, CST is for inter-state sale, service tax is for provision of services and so on.
Under GST, the tax will be levied on ‘SUPPLY’ of goods or services done for furtherance of business, even if such supply is without consideration.
Thus, supply includes all forms of supply. And specifically includes:
· Sale
· Transfer
· Barter
· Exchange
· Rental
· License
· Lease
· Disposal
This means, if you are supplying goods or services in course of business or for its promotion even if you are not charging any price, it will be ‘Supply’ for levy of GST.
Three components : CGST, SGST and IGST – GST has been devided into 3 parts. CGST is Central Goods and Services Tax, SGST is State Goods and Services Tax and IGST is Integrated Goods and Services Tax.
All intra-state supplies will attract CGST and SGST in equal proportion, while inter-state supplies will attract IGST at the rates mentioned in this behalf.
Since GST in consumption based tax, the state where consumption of goods/services takes place will get its share of tax.
Reverse Charge Mechanism – When the liability to pay tax is on the recipient of goods/services, it is called Reverse Charge Mechanism.
Following are the instances where RCM would be applicable under the GST –
· When an unregistered person makes supply to a registered person, the recipient will be liable to pay taxes in such supply.
· When a person imports goods/services into taxable territory, he will be liable to pay tax even though he is a recipient.
Composition Scheme – Businesses whose turnover in the previous year did not exceed Rs 75 Lakh(increased from Rs 50 Lakh) can opt for composition scheme subject to certain condtions. Such a business has option to pay tax at lower rates and have less procedural compliance to follow.
These are some of the basic concepts which will help you to understand about the working of GST. For regular updates and more info, keep looking at this space.
