The Basics Of GST

“GST stands for ‘Good and Simple Tax. GST will not only ease the process of doing business but will also improve the way of doing business. GST will play an important role in achieving the goal of New India.” – Narendra Modi, Prime Minister on the GST launch

The Goods and Services Tax (GST) Act replaces a myriad of indirect taxes such as VAT, customs duty, Excise, CST, Service Tax, Entertainment Tax with a single tax called the Goods and Services Tax. GST

has been in force for over 7 months now and has fairly settled down. However, if you are tuning in just now, a basic idea about GST is given below:

Who does GST apply to?

  • Any person whose aggregate turnover exceeds Rs 20 lakhs (Rs 10 lakhs for special category states) in any financial year needs to be compulsorily registered. GST must be paid from the time turnover exceeded Rs 20 lakhs (or Rs 10 lakhs for special category states)
  • Any person making inter-state supply of goods and services
  • Every e-commerce operator
  • Every person who supplies goods or services through an e-commerce operator
  • Aggregators who supply services under their brand name
  • A casual taxable person (someone who occasionally undertakes transactions involving supply of goods or services in a state or a union territory where he has no fixed place of business. He may work in such state or union territory as a principal, agent or in any other capacity.
  • A ‘non-resident taxable person’ who occasionally undertakes transactions involving the supply of goods or services, or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India.
  • Input Service Distributor
  • Person supplying online information and database access or retrieval services from a place outside India to a person in india, other than a registered taxable person.
  • Person required to pay tax under Reverse Charge
  • Person supplying the goods on behalf of other taxable person (eg. Agent)

Who does GST not apply to?

  • GST does not apply to Agriculturists
  • GST does not apply to any person engaged exclusively in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax under the GST Act

How is GST levied?

For taxable transactions, GST is levied when goods or services are supplied within the state (intra-state), across states (inter-state), when goods are imported and exported. This is explained in more detail below:

  • For intra-state transactions, a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) is levied at the specified rates
  • For inter-state transactions, an Integrated Goods and Services Tax (IGST) is levied
  • Imports are treated as inter-state transactions
  • Exports and supplies to Special Economic Zones are treated as zero rated supplies
  • A number of goods have also been classified as exempt or not liable to tax on which GST shall not be levied

Is input credit available for GST paid?

The cascading effect, or credit on tax paid on inputs is available as follows:

  • IGGST payments can be set off against – IGST, CGST, SGST on inputs in that order
  • CGST payments can be set off against – IGST and CGST on inputs in that order
  • SGST payments can be set off against – IGST and SGST on inputs in that order

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