Goods and Service Tax is consumption based tax on goods & services i.e. GST will be received by the state in which goods or services are consumed. GST will be levied from manufacture up to final consumption. The credit of GST paid shall be available for setoff.
Tax levied by centre on intra-State supply of goods and/or services is called Central GST (CGST) and levied by state/UT is called state GST (SGST)/ UTGST. In case of inter state supply of goods and services, tax will be levied by Centre as Integrated GST (IGST).
Major States taxes replaced – Value Added Tax(VAT), Central Sales Tax (CST), Luxury Tax, Entry Tax, Entertainment Tax etc.
Major Centre taxes replaced – Service Tax, Central Excise Duty along with other additional duties on Excise, Additional Duty on Customs etc.
Liability to pay GST – Taxable person will be liable to pay GST under GST regime on the supply of the goods and/or services when the threshold limit of aggregate turnover is crossed as specified under GST law.
Taxable Event Under GST – Taxable event under GST is supply of goods or services or both made for consideration in the course or furtherance of business.
Registration – Every person who is liable to take a Registration would have to get registered separately for each of the state where he has a business operation and is liable to pay GST. Registration under (GST) has various advantages to the business:
- Registration will authorise a taxable person to collect tax from his purchasers and pass on the credit of the taxes paid on the goods or services supplied to purchasers or recipients.
- Accounting of taxes paid on the input goods or services can be utilised for payment of GST.
- Unregistered Person can neither collect GST from his customers nor can claim any input tax credit of GST.
Supply under the GST law – ‘Supply’ includes all forms of supply of goods or services or both that includes sale, Transfer, barter, exchange, licence, rental, disposal, made or agreed to be made for a consideration by a person in the course or furtherance of business. It also includes import of good and service.
Time of supply – The time of supply determines the point when the liability to charge GST arises.
The time of supply for service in case invoice is issued within the prescribed period, shall be the date of issue of invoice by the supplier or the date of receipt of payment.
If the invoice is not issued within the prescribed period, then time of supply shall be earliest of the date of provision of services and date of receipt of payment.
Input tax Credit – Input tax means CGST, SGST, IGST or UTGST charged by vendors on supply of goods or services or both made to a registered person. Input tax credit also Includes tax paid on reverse charge basis and IGST charged on import of goods.
To avail input tax credit, registered person shall pay the consideration along with tax within 180 days from the date of issue of invoice otherwise ITC taken would be added to output tax liability of the person and he would be liable to pay interest.
Payment of GST – Payment can be done by the following methods:
- By utilising the balance of input tax credit available in the credit Ledger of the taxpayer. No cross utilisation of credit shall be allowed between CGST and SGST. The credit of IGST would be allowed for payment of IGST, CGST and SGST in that order.
- In cash by way of E-payment (Internet banking, Credit Card, Debit Card): Real Time Gross Settlement (RTGS)/ National Electronic Fund Transfer (NEFT).
Benefits from the GST –One of the core benefits of GST is that it is standard throughout the country and will simplify indirect taxes. GST is expected to come as a huge relief, making it easy to perform trade and conduct business irrespective of national geography. Implementation of GST would also make products competitive in the domestic and international markets. The Other Key benefits of GST:-
- Remove the Cascading effects: GST would remove the cascading effects to some extent and will provide a common national market. Consumers will be benefited in terms of a reduction in the overall tax burden on goods.
- Transparency: The complexity of the earlier indirect tax structure prevents transparency. GST being a uniform tax system, it would yield the necessary information to the end consumers and help create a transparent environment.
- Overall tax relief & reduced Cost: The earlier system has many complications, which have a cumulative effect on the pricing for the end consumer. Multiple indirect taxes collected at all progressive stages of the value chain in the present system lead to an increase in the prices of all commodities. GST is expected to drop the overall tax burden on many commodities, thus eventually benefiting the end consumer.
A national tax reform of such high enormity that touches millions of consumers and producers is definitely a commendable effort and is expected to be a win-win for all!
Impact of GST on banking services – With the application of GST, the tax bracket has been increased to 18%, which was earlier 15% in service tax regime.