Startup Scratch (Startup Solution Hub) > Business > What is GST (Goods and Service Tax)? Guide for dummies to use in their business

What is GST (Goods and Service Tax)? Guide for dummies to use in their business

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

 

This Post is being Crafted by our Apex Author SAHIBA BIJRAL 

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

GST is a comprehensive tax levied on manufacture, sale , consumption of goods and services at national level.

According to an estimate by Prime minister Modi and finance minister Arun Jaitley , Indian economy will gain by $15 billion a year if GST is implemented. So, GST  will be implemented from 1. July 2017 for two reasons and GST is the answer.With GST goods will flow freely and less compliance .

 

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

At first, it is necessary that  Indian economy should be aligned with best  international practices and secondly there is  a problem in the existing tax structure. In order to understand it, the article is divided into 9 aspects –

1.    Problems under existing tax structure
2.    Need for GST
3.    Benefits of GST
4.    GST – tax structure
5.    Taxable event
6.    Input tax credit
7.    Tax deducted at source ( TDS) and  Tax collected at source(TCS)
8.    Person liable to pay GST
9.    Returns
   10. Import /Export

 

 

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

PROBLEMS UNDER EXISTING TAX STRUCTURE

1.    Multiple taxes on good and services like on goods we have Excise, VAT,Custom duty , CST where as on services we have service tax, SBC, KKC.
2.    The other problem is cascading effect. It means tax on tax . In case of inter state payments, we get CST but we don’t get any credit in CST. Also it is cost and VAT is levied on CST so it becomes cascading effect.
3.    Another major problem is  double taxation -Lets take an example of pizza , when you order pizza not only  VAT but service tax is charged. So, there is taxation twice .
4.    Different rate of VAT at different states also creates problem as there is no uniform price of VAT in India. It can also be seen from the point of view of GST that different  pricing of petrol and petroleum products, alcohol will still be challenging task under GST as it is without the scope of GST.

 

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

Need of GST

The solution of these problems is GST. Now the question arises how will GST solve these  problem .
Well, at present there is multiple tax and multiple tax events . Example there is service provider, manufacturer , dealer, importer, exporter. Under GST there is will be no multiple tax . In short,
1 tax which will be GST .

Also,there will be no discrimination in goods and services in GST.

In addition to this there will be no different pricing in different states like VAT, CST. Only GST will be levied which is a destination based tax where there is a free flow of credit whether consumed in state or not.

Lastly, there will be no double taxation problem which is seen in existing tax structure .

 

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

 

 

 

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

BENEFITS OF  GST

1.    One tax on goods and services.
2.    One taxable event.
3.    Cascading effect will almost be removed.
4.    Double taxation is removed.
5.    Uniform prices in India.
6.    Widening of tax base as there will be new entrants registered in GST.
7.    Revenue of Government will be increased.
8.    Prices will come down .

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

GST TAX STRUCTURE

The structure of GST world wide can be structured into :
1.    National GST  levied by central government.
2.    State GST is levied by state government.
3.    Dual GST levied by both state and central government .

India is a federal country where the structure of GST is Dual , both central and state government has the power to levy .

 

 

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

 

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

By dual GST we mean ,
1.    Central Goods services tax (CGST) levied and collected by central government .
2.    State goods service tax ( SGST) levied and collected by state government .
3.    Integrated goods service tax ( IGST)
4.    Union territory goods service tax (UTGST ) levied and collected by union territory . We have 7 union territory out of which
Two union territory – Delhi and Pondicherry where act is passed by state government And five union territory – act is passed by central government and applicable to 5 states.

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

Analysis of GST rates,
1.    0% GST for  items like milk , eggs, fresh vegetable, Gur, curd, salt, health services, education service.
2.    5% GST  for packaged panner,sugar,tea,LPG domestic use, fabric, life saving drug, coffee except instant ,coal , ghee, almonds, milk food for babies.
3.    12% GST for butter, ghee,fruit juices, computer.
4.    18% GST for hair oil, toothpaste, soup, printer, cornflakes, household personal care .
5.    28% GST for small cars,consumer durables such as fridge, air conditioners, luxury items and sin items like BMW , aerated drinks, cigarettes , entertainment .
6.    Education and healthcare will be exempted.
7.    Service on non-ac restaurants will be 12% .

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

 

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

TAXABLE EVENT

Supply is the taxable event . Supply can be classified as

Interstate supply -location of supplier and place of supply is in different state. Here IGST is applicable.

intra state supply – location of supplier and place of supply is in same state .Here SGST and CGST is applicable.

Further supply can be of different types like composite supply( if natural ), mixed supply ( if artificial )and deemed supply ( only those supply is taxable which is in consideration like branch transfers ).

Note-There has been  35 acts passed to introduce GST.

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

INPUT TAX CREDIT

Under existing tax structure , there is no credit on VAT , it is a cost beared by consumers but under GST credit will be available on Bill, it will be not become part of cost and set off will be available.

Some Rules for set off of input tax credit –
There are 3 credits available –

1.    Central goods service tax ( CGST )- Credit for this shall be used for CGST and if there is any balance left, it shall be utilised for Integrated goods service tax .
2.    Integrated goods service tax ( IGST)- Credit shall be utilised for IGST, if balance is still left out it shall be used for Central goods service tax (CGST) and  for State goods service tax (SGST) if any balance is left.
3.    State goods service tax (SGST)- credit shall be utilised for State goods service tax and integrated service tax( IGST) .

Note – in the existing tax structure there is detailed definition of capital goods but under GST , capital goods is the goods appearing in balance sheet and no such detailed definition is given .

Earlier,  document to claim credit was invoice and there was tax evasion in terms of issue of  fake invoice but now government has   changed it to (GST R2).

TAX DEDUCTED AT SOURCE (TDS) AND TAX COLLECTED AT SOURCE (TCS)

In GST, there are these 2 concepts explained as under.

Under TDS there are 2 person-
Deductee who is payee and Deductor who is payee which is government/government undertaking mainly undertakes work contracts.

Now work contract is regarded as supply of service in schedule III and GST will be applicable. In order to claim 1% TDS everyone is required to get themselves registered even if the turnover is less than Rs 20 lakhs. This will increase the tax base and clients.

TDS will be deducted by government/ government undertaking in those circumstance where payment is more than Rs250000/-.
TDS will be deducted @ 1% and will be deposited by 10th of next month to government .

Under Tax collected at source( TCS)  tax will be collected by payee I.e receiver who will be e- commerce operator like flip kart , Amazon etc @1% of net value of taxable supplies and will be deposited by 10th of next month to the government.

Here,Net value of taxable supply means total gross supply – sale return.

 

 

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

PERSONS LIABLE TO REGISTER FOR GST

It is important to know that the following person will be required to get registered in GST without any threshold limit.
1.    A person making inter state taxable supply .

2.    Casual taxable supply – one registration in one state. It means if same work is carried in multiple place from same state then one registration is required but if different states, then two registration is required .
*There will be matter of dispute under GST and this will be challenging task as frequent registration will be required.

3.    Person liable to pay under reverse charge.

4.    Non resident.

5.    Person liable to deduct TDS.

6.    E-commerce operator.

7.    Input service distributor.

8.    Person supplying goods through e-commerce operator.

 

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

 

 

 

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

RETURNS

One of the important aspect is returns . Law will be easy as there will be one tax in GST. As per GST , there will be 3 returns for every person to be filled every month ,

1.    GST R1 – outward supply’s for Business to business transactions, filled by 10th of the month.
2.    GST R2- inward auto pop up , filled by 15th of month .
3.    GST R3- provisional credit which is the  effect of 1 and 2, filled by 20th of the month.

So, in one year there will be 36 returns.
In addition to this one annual return to be filled by 31st December in form GST R9.
Total 37 returns .

There are certain other   GST additional returns applicable for certain person listed below-

1.    GST R5- Non resident return filed by 20th of the month.
2.    GST R6 – input service distributor filled by 13th of the month of succeeding quarter .
3.    GST R 7 – Tax deducted at source filed by 10 the of next month.
4.    GST R8- Commerce  operator filled by 10th of next month .
5.    GST R4- person under composition scheme. Filled quarterly until 18th of the month.
6.    GST 10- final return Filled before cancellation.

 

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

 

 

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

IMPORT AND EXPORT –

1.    Under Constitution of India it is stated that import shall be taken at par with inter state supply . If a person imports , one GST will be charged.

In existing scenario – Basic custom duty , countervailing duty , education cess, special additional duty is charged.Now under GST , there will be no Countervailing duty(CVD)  and special additional duty(SAD) and instead basic custom duty (BCD)and integrated goods service tax is charged(IGST).

Moreover IGST will be charged on Assessable value(AV) and Basic custom Duty(BCD). Compensation cess will be charged in import which will be again on AV and BCD.

Hence under GST, custom duty will be same and Excise, VAT ,CST, service tax will all be not applicable

2.    Under existing scenario there is no credit on import and sale but under GST, tax paid during import shall be available as credit.

3.    Modern GST has borrowed the concept of current custom law for  Transaction value based valuation principle for charging GST. It will subsumed CVD which is charged on transaction value . This may require working capital restricting which  will reveal margin of service provider which is not the current case

4.    Withdrawal of current exemption which will be withdrawn, reviewed or converted into refund mechanism. It could kill the attractiveness like EOU , STP, advance authorisation.

It can be concluded  that all the problems will be solved. Not only this there is a change in tax rate like food which was earlier 12.5% now 5 %, entertainment from 30% to 28%, household personal care 18% to 15%
“Change is never easy” . Once GST is implemented India will become single market where goods can move freely and with less compliance. The key is to be GST ready.

 

GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com
GST (goods and service tax implementation, query solving and migration helpline from professional way 9971504105 or drop us mail on startupscratch@gmail.com

 

 

For any Gst need call us on 9971504105 or drop us email on startupscratch@gmail.com

Comments

Startup Scratch team
https://www.facebook.com/startupscratch/

Leave a Reply