Who needs to register Under GST?

Everything You Need to Know About the Goods and Service Tax

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GST is a tax levied indirectly on the supply of goods and services paid in part by the consumer.

Under the "one nation, one tax" reform, the Government of India introduced the GST in 2017. Essentially, it replaces multiple indirect taxes by levying a single tax on the supply of goods and services from the manufacturer to the consumer. As part of the reform, separate tax systems were unified under a single tax system.

How Does GST Work?

GST is a destination-based tax since it is levied in the state where the good or service is consumed (in contrast to where it is produced). Each time a consumer purchases a product, this fee is added to the price.

  • GST is an indirect tax that replaces several indirect taxes imposed by the central and state governments, making India a unified market.
  • The GST does not apply to certain goods and services, and they are subject to a state's other taxes, such as the value-added tax (VAT) - a tax applied at every point of value addition in the supply chain. Each of these fees is charged by the consumer at each step of the manufacturing process.
  • The Centre has postponed the implementation of GST on petroleum crude, high-speed diesel, motor spirit, natural gas, and aviation turbine fuel, which are currently exempt from GST.
  • Taxes on goods and services offer national and international benefits:
    • In addition, the legislation simplifies the task for manufacturers by combining multiple taxes into one while boosting the economy at the same time.
    • Following a universally-accepted tax, regime brings India up to speed with the global market.
  • After completing the requirements, GST offers certain relaxations and exemptions that can be taken advantage of.

Who Can Levy GST?

Taxes such as GST are destination-based, so both the federal and state governments can impose them. Consequently, it consists of several elements:

  • A central GST (CGST) is a tax imposed by the government.
  • SGST (state GST)/UTGST (Union Territory GST): The state GST is charged by states, and the union territory GST is imposed by union territories.
  • The Integrated GST (IGST) is a tax on interstate supplies of goods. Interstate supplies include imported goods. Therefore, customs duties will also apply to imports in addition to IGST.

Exceptions:

  • The Centre and the states are entitled to levy the GST simultaneously on goods and services under GST.
  • CGST and IGST are levied and administered by the Centre, while SGST/UGST is set and issued by the state or union territory.
  • Special Economic Zones do not have to pay GST on goods exported or supplied (zero-rated supply). Therefore, exporters who find themselves in particular scenarios such as these may be able to claim an IGST refund or export goods under a bond without paying the IGST.
  • For determining the nature of a supply, separate provisions under GST law have been incorporated for goods and services. Consequently, where the goods or services were supplied determines whether it is an intrastate or interstate transaction.
  • A few revisions have been made to the GST rates since its introduction in 2017. There is a four-tier structure for the GST rates, as mentioned above.

Indian taxation system has undergone significant reforms due to GST. GST has been a challenging feat to move away from the existing tax regime, but its success will ease the woes of many stakeholders.