GST

BASICS OF GST

Basics of GST
BASICS OF GST IN INDIA - KANAKKUPILLAI

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  Posted on October 26, 2021

BASICS OF GST

GST which is the short form used for Goods and Services Tax is an indirect tax that was introduced by the Government of India for replacing all other indirect taxes like Sales Tax, Service Tax, Excise Duty, and so on. GST basically shall be levied on the supply of certain goods and services and is applicable all over the country, India.

In the tax regime, we can say that all the players of the market ranging from the manufacturer to the consumer should pay GST when they undertake the supply of goods or services on which the same is applicable. The manufacturer will be paying GST on the raw materials purchased for production and would then be adding value to the product. The wholesaler or distributor or retailer shall pay GST on the goods purchased from the manufacturer on the value of the product arrived at after such value addition by the manufacturer. Finally, the consumer will purchase the goods or avail of the services on which they should be paying the GST as per the applicable rates prescribed by the GST Acts in place.

Say, for example, a textile manufacturer purchases yarns of clothing for making shirts on which he or she pays GST. The manufacturer will then add value to this clothing by stitching it into a shirt, which then is given to a warehousing agent who ads a label to the same which again is a value addition. The warehousing agent then distributes this to the retailer who pays GST to the agent and then sells these shirts in small numbers to the final consumers who will again pay GST to the retailer.

As per the two Parliamentary Acts on GST which includes the IGST (Integrated Goods and Services) Act and CGST (Central Goods and Services) Act, all the above said parties paying GST can set off the same with what they have collected from the other party, enabling them to pay only the net amount rather than the gross amount of tax or GST.

Hence, we can say that GST is a comprehensive, multi-stage, destination-based tax. By taking the same example, say that the manufacturer is in Tamil Nadu, while the retailer and the final consumers are located in Maharashtra, the final sale is taking place in Maharashtra, due to which the entire tax revenue would now be going to the state of Maharashtra and not Tamil Nadu, making the same a destination-based tax.

Components of GST

There are majorly 4 (four) types of GST namely;

  1. CGST, i.e., Central Goods and Services Tax which is charged on the intrastate supply of goods and services.
  2. SGST, i.e., State Goods and Services Tax which is charged along with CGST on the intrastate supply or supply of goods and services within the state.
  3. IGST, i.e., Integrated Goods and Services Tax which is charged on the inter-state supply or the supply of goods and services between two different states.
  4. UTGST, i.e., Union Territory Goods and Services Tax levied along with CGST, on the supply of goods and services within any of the Union Territories, including the following:

Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh.

Registration of GST

Following entities and individuals should take registration for GST or Goods and Services Tax namely:

  • Individuals who have taken registration before the introduction of the GST law,
  • Business entities which are earning turnover over and above the threshold specified by the law,
  • Non-Resident Individuals who are paying tax,
  • Agents of input service distributors and suppliers,
  • Individuals who are liable to pay tax as per the Reverse Charge Mechanism,
  • Individuals who supply through the e-commerce aggregators and
  • E-commerce aggregators.

So, we can say that any assessee corporate or non-corporate eligible under GST must take registration under the GST Law through the GST portal powered by the Government of India. The registered entities will be awarded with unique GST registration number known as the GSTIN (GST Identification Number) and this registration will be based on the PAN of the assessee. Each assessee is eligible for one registration in one state.

Once the registration has been taken by the business houses or any other assessee for that matter, the filing of proper GST Returns as contemplated by the CGST Act and the GST Law along with the availing of ITC and payment of any taxes, fines or penalties should be complied with by the suppliers or any other person registered.

Threshold Limits of Turnover for obtaining GST Registration

Upto Mar31st 2019

For sale of Goods/supply of services

For Normal Category States – Rs.20Laks

For Special Category States – Rs.10Laks

From 01st Apr 2019

For Sale of Goods

For Normal Category States – Rs.40Laks

For Special Category States – Rs.20Laks

For Supply of Services

For Normal Category States – Rs.20Laks

For Special Category States – Rs.10Laks

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