GST TAX
Goods and Services Tax (GST) was introduced in India on July 1, 2017, as a comprehensive indirect tax reform that aimed to replace a complex web of existing indirect taxes with a single unified tax system.
The key feature of GST is that it is levied at every stage of the supply chain, from the manufacturer to the consumer, with credit for taxes paid at previous stages being available for offset against the tax liability at subsequent stages.
Here are the key points about GST in India:
Single Tax Regime: GST replaced a multitude of indirect taxes such as Central Excise Duty, Service Tax, Value Added Tax (VAT), Central Sales Tax, and more, with a single tax system.
Dual GST Structure: India’s GST has a dual structure consisting of Central GST (CGST) levied by the central government and State GST (SGST) levied by individual states and union territories. Additionally, an Integrated GST (IGST) is levied on inter-state transactions and is collected by the central government.
Input Tax Credit: One of the core principles of GST in India is the input tax credit mechanism. Businesses can claim credit for taxes paid on inputs against their output tax liability. This eliminates the cascading effect of taxes and promotes efficiency in the supply chain.
Tax Rates: GST in India has multiple tax rates to categorize goods and services into different slabs. The main tax rate categories are 5%, 12%, 18%, and 28%. There are also special rates for certain goods and services, as well as exemptions for essential items.
Composition Scheme: Small businesses with a turnover below a specified threshold can opt for the composition scheme. Under this scheme, they pay a fixed percentage of turnover as GST instead of the regular GST rates. This scheme reduces compliance burdens for small businesses.
Threshold Limits: Businesses with a turnover below a certain threshold are not required to register for GST. This threshold varies for different states and categories of businesses.
E-Way Bill: For the movement of goods across state borders, an electronic waybill (e-way bill) is required. It ensures proper documentation and tracking of goods in transit.
Online Portal: The GST Network (GSTN) is a technology platform that facilitates online registration, filing of returns, payment of taxes, and other compliance-related activities.
Filing of Returns: GST returns need to be filed regularly by registered businesses to report their sales, purchases, and tax payments. There are various types of returns based on the nature of the business.
Reverse Charge Mechanism: Under this mechanism, the liability to pay GST is shifted from the supplier to the recipient of goods or services in specific cases.
Anti-Profiteering: To ensure that the benefits of reduced taxes are passed on to consumers, an anti-profiteering authority monitors price changes and investigates cases of unjust enrichment.
Goods and Services: GST applies to both goods and services, creating a comprehensive tax base. Certain items like petroleum, alcohol, and real estate are kept outside the purview of GST.
Digital Infrastructure: GST relies heavily on digital platforms for registration, filing of returns, and other compliance activities.
Regular Updates: The GST structure and rates are periodically reviewed and updated based on economic and administrative considerations.
Positive and Negative Lists: GST has categorized goods and services into positive and negative lists, indicating whether they are taxable or exempt.
