Goods and Services Tax (GST) has been implemented across the country from July 1. GST is a destination-based tax that replaces the earlier Central taxes and duties such as Excise Duty, Service Tax, Counter Veiling Duty (CVD), Special Additional Duty of Customs (SAD), central charges and cesses and local state taxes. It is a dual levy with State/Union territory GST and Central GST. Moreover, inter–state supplies would attract an Integrated GST, which would be the sum total of CGST and SGST/UTGST.
Petroleum products, i.e., petroleum crude, high speed diesel, motor spirit, aviation turbine fuel, natural gas, will be brought under the ambit of GST from such date as may be notified by the government on recommendation of the Council. Alcohol for human consumption has been kept outside the purview of GST.
A well-designed GST in India is expected to simplify and rationalize the current indirect tax regime, eliminate tax cascading and put the Indian economy on high-growth trajectory. The GST levy may potentially impact both manufacturing and services sector for the entire value chain of operations, namely procurement, manufacturing, distribution, warehousing, sales, and pricing.
Here we are taking a look at some of the basics of GST which everyone should be aware of:
1. What is GST and how does it work?
GST is an indirect tax for the whole nation, aimed at making India a unified common market. It is a single tax on the supply of goods and services, right from the manufacturer to the consumer.
Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
2. What are the benefits of GST?
Benefits for business and industry
# Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.
# Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.
# Removal of cascading: A system of seamless tax-credits throughout the value-chain and across boundaries of States would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.
# Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.
# Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.
Benefits for the consumer
# Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under
GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.
# Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.
3. Which taxes at the Centre and State level have been subsumed into GST?
At the Central level, the following taxes have been subsumed:
a. Central Excise Duty,
b. Additional Excise Duty,
c. Service Tax,
d. Additional Customs Duty commonly known as Countervailing Duty, and
e. Special Additional Duty of Customs.
At the State level, the following taxes have been subsumed:
a. Subsuming of State Value Added Tax/Sales Tax,
b. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
c. Octroi and Entry tax,
d. Purchase Tax,
e. Luxury tax, and
f. Taxes on lottery, betting and gambling.
4. What are the GST rates?
There are four tax rates under GST currently: 5%, 12%, 18% & 28%.
5. How would a particular transaction of goods and services be taxed simultaneously under Central GST (CGST) and State GST (SGST)?
The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services, except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise.
6. What are the major features of the returns filing procedures under GST?
The major features of the returns filing procedures under GST are as follows:
a. Common return would serve the purpose of both Centre and State Government.
b. There are eight forms provided for in the GST business processes for filing for returns. Most of the average tax payers would be using only four forms for filing their returns. These are return for supplies, return for purchases, monthly returns and annual return.
c. Small taxpayers: Small taxpayers who have opted for composition scheme shall have to file return on quarterly basis.
d. Filing of returns shall be completely online. All taxes can also be paid online.
(With inputs from PIB and EY reports)