GST is India’s most significant circular tax reform introduced in India with a motive of one nation one tax to Remove all taxation walls between countries and produce a single market that will be open to purchase and also selling within the country freely. Eventually, GST works to deliver financial freedom to traders for free trade without much compliance.
GST acts as a type of value-added tax and a proposed comprehensive circular tax tax on manufacture, trade, and consumption of goods as well as services in the public position. It’ll replace all circular taxes on goods and services by the Indian central and state governments.I have done some research on GST & how it works, and I gathered some information; if you want to understand more about it, click here https://www.bankbazaar.com/tax/gst.html.
What is GST?
GST is an indirect tax that replaced many indirect taxes in India. The goods and service tax act was passed in congress on 29th March 2017 and came into effect on 1st July 2017. Gst tax law in India is a comprehensive, multi-stage destination-based tax that is tax on every value addition.
In India, the GST rate for various goods and services is divided into 4 slabs: 5%Gst,12%Gst,18%&28% Gst rates for various products have been revised several times by the GST council since the commencement of the goods and services tax.
Type of Gst:
The type of Gst in India is CGST, SGST, and IGST.
a. SGST or State goods and services tax:
SGST is the tax that the state government tax on intra-state goods and services transactions.GST subsumes earlier taxes such as VAT, entertainment tax, luxury tax, lottery, and purchase tax.
b.CGST or Central goods and services tax:
The central government taxes GST on Intra-State goods and services transactions. The central government collects the revenue generated through the central goods and services tax. The tax is shared between the states and the center along with SGST, and the revenue is divided among them.
c.IGST or Integrated GST :
IGST is the tax tax on inter state goods and services transactions.it applies to imports and exports as well, under GST. The taxes charged are shared by both central and state under the IGST responsible for collecting the taxes is the central government. after the collection of taxes. It is further divided among the respective states by the central government.
How does GST work in India?
The manufacturer:
The manufacturer buys raw material worth INR 100 including a tax of rs 10 then he adds his value of INR 30 then the gross value of the shirt becomes 130. At a rate of 10%the tax on output on the shirt will then be rs 13 but under GST, he can set off tax rs 13 against tax as he has already paid on raw material and input rs 10. The effective GST incident on the manufacturer is only Rs 3 this way 13-10 making GST tax only on the value-added.
The Distributor:
The Distributor buys it for rs 130 and adds on value which is the margin of for assumption say rs 20 then the gross value of goods the wholesaler sells would then become total of rs 150.10%tax on this amount will become Rs 15 but again under GST, one can set off the tax on his output rs 15 against the tax on his purchases good from the manufacturer rs 13. Thus ultimately the effective GST incident on the distributor is only rs 2 (15-13).
The consumers:
Finally, a retailer buys the shirt from the distributor. He adds a margin of rs 10 to his purchases of 150 rs. Therefore the gross value of the shirt he sells goes up to rs 260 (150+10) at this stage tax will be 16. by setting off this tax against the tax on his purchases from the distributor the retailers bring down the effective GST incident on himself to 1(16-15).
By analyzing the value chain, we have determined that the total GST applied from the raw material supplier to the manufacturer, distributor, and retailer amounts to 10% + 3% + 2% + 1% = 16%. Ultimately, this tax burden is carried by the consumers
ADVANTAGES OF GST:
- GST is a transparent tax and also reduces the number of circular tax.
- GST won’t be a cost to registered retailers thus there will be no retired tax and the cost of doing business will be lower.
- Profit people as prices will come down which in turn will help companies as consumption will increase.
- Without a doubt, the use and consumption of services in the production and distribution of goods is decreasing while, on the other hand, the use and consumption of goods is increasing.
- Separate tax for goods and services, which is the present taxation system, requires division of sale values into value of goods and services for taxation, leading to lesser complications, administration, including obediences costs.
- In the GST system, when all the tax are integrated, it would make it possible for the taxation burden to be resolved equitably between manufacturing and services.
- The Goods and Services Tax (GST) will be levied only at the final destination of consumption based on the Handbasket principle, avoiding multiple taxations at various stages. By implementing this principle, GST will eliminate the cascading effect of taxes and simplify the tax system for businesses .
- This will help in removing profitable deformations and bring about the development of a common public request.
GST Disadvantages:
- Some Economists say that GST in India would impact negatively the real estate request. Some Experts say that CGST, and SGST are nothing but new names for Central Excise/ Service Tax, Handbasket, and CST. Hence, there’s no major reduction in the number of tax layers.
- Some retail products presently have only a four percent tax on them. After GST, garments, and alsoclothes could become more precious.
- The impact of the changes in aeronautics assistance will felt. Service tax on airfares presently range from six to nine percent. With GST, this rate will surpass fifteen percent and effectively double the tax rate.
- Relinquishment and migration to the new GST system would involve teething troubles and learn for the entire ecosystem.
Conclusion:
The Government has introduced a GST system to smoothen tax processes and also bring businesses into formal frugality. Being Gst biddable, businesses can experience the merit of having a unified tax system and also easy input credit.
FAQ & RELATED QUESTIONS :
1. Is GST enrollment free?
You can easily enroll for GST online without any cost.
2. Is a bank account obligatory for GST enrollment?
No, The bank account is not obligatory at the time of GST registration.
3. How can I get the GST enrollment number?
To get the GST number, you need to apply for GST enrollment by visiting the GST portal i.e., i.gst.gov.in. To start the process, you will need to have valid dispatch address, mobile number, and also visage for the business.
4. What are the 4 types of GST?
CGST, SGST, IGST and UTGST.
5. What is the GST tax rate?
The government has divided goods and services into 5 different tax slab categories for efficient collection of taxes.
6. What are the new rules of GST?
Pre-packed and labeled food items (except frozen) like meat, fish, curd, paneer, and honey will now attract 5 % GST.