Goods and Service Tax is a consumption based tax on goods and 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).
Rate of GST – There are five rates of GST on supply of goods/ services namely 0%, 5%, 12%, 18%, and 28%. (For GST rates on goods and service please refer to the link http://www.cbec.gov.in/htdocs-cbec/gst/index#)
Major States taxes to be subsumed – Value Added Tax (VAT), Central Sales Tax (CST), Luxury Tax, Entry Tax, Entertainment tax etc.
Major Centre taxes to be subsumed – 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 goods and/or services when the threshold limit of turnover crosses Rs.20 lakhs (Rs. 10 lakhs for NE & Special Category States).
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 States where he has a business operations and is liable to pay GST. Registration under (GST) has various advantages to the business:
- Registration will authorized 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 utilized 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, license, rental, lease or 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 services 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 whichever is earliest.
If Invoice is not issued within the prescribed period, then time of supply shall be earliest of the date of provision of service 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 utilizing the balance of Input tax credit available in the Credit Ledger of the taxpayer. No cross utilization 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).
Return in GST regime - Every person who is registered under GST shall file return either on monthly basis or on quarterly basis (composition scheme).
Benefits from GST - GST would remove cascading effects and will provide a common national market. Consumers will be benefited in terms of a reduction in the overall tax burden on goods. Implementation of GST would also make products competitive in the domestic and international markets.
Impact of GST on Banking services- GST rate on Banking Services is 18%, this will result into increasing the cost of the banking and financial services by 3%.