Life of a Storyteller
GST INDIA
All You Need to Know About GST
The Goods and Services Tax (GST) is a one indirect tax for the whole nation, which will make India unified common market.
Current Scenario of taxation in India:
The Indian constitution divides taxation powers between Centre and States. Centre and state levels of government have some exclusive areas where they can impose the taxes. Income tax, which includes tax company profits, more fees such as corporation tax, wealth tax, etc. there taxes referred to as direct taxes, and these are the exclusive domain of central government.
Indirect Taxes are levied on goods and services, provision of services, and consumption, not on income or profits. Indirect taxes imposed the manufacture of products or provision on services is the exclusive domain of central government, but the taxes on consumption is the exclusive domain of state government. Indirect Taxes include Central Excise Duty, Service Tax, Surcharges & Cesses, Central Sales Tax, Entertainment Tax, Luxury Tax, Purchase Tax, and Octroi & Entry Tax, etc.
The present tax system is not enough to tackle inflation, tax evasion & cascading effect.
Let’s take the example of a manufacturer who pays excise duties, and a retailer who pays sales taxes, and explain taxation under the given system.
In this example, the cost of the raw material is 1000. The manufacturer and retailer add Rs. 200 value each. The tax rate is assumed to be 10% for all taxes.
Both Excise and Sales tax are a VAT system, but the set off for taxes. Therefore, Sales tax applies to the excise duty paid. Thus, the fee paid is 120 (excise) plus 152 (sales tax). Note the “tax on tax” effect where the final selling price not only has two taxes but also has a tax on tax.
There are some problems with this system:
Some goods, such as a shoe has to be first manufactured before it is consumed. The central government, therefore, impose its indirect taxes called central excise at a factory gate. Afterward, a pair of shoes reach a retail outlet and is bought by the consumer. At this stage, the state government imposes a tax on consumption dubbed Value Added Tax (VAT).
Since the state government has its domain on consumption tax within their border, they treat goods coming from other states as “Imports.” i.e., if a shoemaker in Chennai buys leather in Kolkata, he would have paid central excise and Kolkata’s state taxes on the product. On this cost, the Chennai government would have levied its tax if the shoe is sold in the state. If the shoe is sent across Chennai’s border and sold Delhi, an “Export” tax called central sales tax is collected in Chennai.
What is GST and how will GST help?
The Government of India is planning to impose an indirect tax on all goods and services apart from those who exempted by the GST law. It’s a single tax on supply of all goods and services, right from the manufacturer to the consumer.
The Goods and Services Tax (GST) will replace multiple taxes such as Central Excise Duty, Duties on Excise, Special Addition duties of customs, services tax, Cesses & charges, state VAT, central sales tax, state-level sales tax, purchase tax, luxury tax, entry tax, Entertainment tax which are not levied by local bodies, taxes on advertisement, lotteries, and gambling.
GST may not replace taxes like Basic Custom Duty, export duty, road & passenger tax, toll tax, property tax, stamp duty, etc. It will also stop discrimination a good from service and will tax both equally. It’s a dual taxation system which includes:
State GST or SGST – collected by State Government
Central GST or CGST – collected by Central Government
Integrated GST or IGST – collected by Central Government
State GST -
Under State Goods and Service Tax Act 2016, taxes collected under SGST will be the Revenue of State Government
Entertainment Tax, Value Added Tax, Luxury Tax, Entry Tax, etc. will be merged under SGST. For example, if services are provided, or goods are sold within the State, then SGST will be collected on such transactions.
Central GST-
Under Central Goods and Service Tax Act 2016, taxes collected under CGST will be the Revenue of the central Government.
Central Goods and Service Tax subsumed all Present Central taxes like Central excise duty, Special Excise Duty, Additional Excise duty, Service Tax, Central Sales Tax, etc.
Integrated GST -
Central Government and State Government will divide the Revenue collected from IGST between them.
IGST will be charged on the transfer of services and goods from one state to another state. Import of Goods and Services. Transactions will attract IGST if Goods or services are transferred from Punjab to Goa.
Let’s take the same example, which we discuss above with the GST Scenario.
Let’s take the example of a manufacturer who pays excise duties, and a retailer who pays the sales tax, and explains taxation under the GST system.
In the GST Regime, there is a single tax with input credit. This means that each person pays tax only on the value-added by him. Consequently, the total fee is less. GST will make goods and services cheaper, not in the short term or immediately, but in the long run. GST will reduce the price of goods and services due to no tax on tax and will improve productivity.
The following type of businesses needs to register under GST:
Any Business crossing the threshold limits
Any Existing businesses registered with Central (Excise) or State (VAT)
Any taxable person carrying on interstate supply
Companies liable under reverse charge in GST
Salient Features of GST:
Businesses operating in multiple states would need various registrations.
United Nations bodies would be issued a unique Identification code or UID.
Multiple Registrations are permitted for those operating in various business verticals within the state.
Unique department identification numbers will also be issued for Government departments.
Registration Process for the existing dealer:
Dealers registered with the center, or state tax would be migrated to GST by default and allotted Goods and Services Tax Identification Number (GSTIN). All dealers below the GST threshold may continue to be registered and get benefits of the GST credit chain.
GSTIN - 15 digits PAN-based number with state code business vertical details.
State code will be based on India Census 2011. EX. 29 for Karnataka and 27 For Maharashtra. Entity code is based on Alphanumeric 1 to 9 and A to Z based on number of business verticals in a state for the same PAN.
Blank is for Future use. All registrations to be done through the GST common portal, it would be integrated with Central and state systems. Registration can be revised, surrendered or closed by pre-defined process.
Benefits of GST:
GST benefits for the Centre and States:
According to experts, India will gain $15 billion a year by implementing the GST because it will promote exports, create more employment opportunities, and boost growth. It will divide the burden of tax between manufacturing and services.
GST benefits for companies and individuals:
In the GST system, fees for both state and Centre will be collected at the point of sale. Centre and state will be charged on the manufacturing cost. Individuals will get the benefit from this as the price will come down, and lower price means more consumption. More consumption will help in the growth of the company because more consumption means more production.