Introduction to GST: The GST is a new tax that was implemented in India on July 1, 2017. As per the new rules, all goods and services under the Indian embrace will be taxed at a uniform rate of 25%. For every rupee you spend on goods and services produced in India, you will have to pay the same amount. It’s like a double taxation free zone. This will lead to an overall reduction in tax revenues as businesses are no longer going to fleece the government by charging exorbitant taxes on imported goods.
However, it also has some negative implications for business owners as they have to navigate several new rules and principles that were not present in the previous system. To help you navigate this new system better, we have outlined everything you need to know about the Goods and Services Tax (GST).
What Is the Goods and Services Tax?
The Goods and Services Tax is a major tax reform that was implemented in India on July 1, 2017. It is an acronym for “Goods and Services Tax,” which is what it’s called in India. The new tax is a tax on goods and services, with the rate being determined by the formula that takes into account the total value of all the items in an individual’s taxable inventory. It is expected to reduce the taxman’s take from an already meagre 21% to a meagre 5% of the GDP.
How Does the GST Work?
The new tax system is a combination of a sales tax, an input tax credit, and a destination-based tax. The goods and services that you list in your taxable inventory are charged an amount based on their market value, which is then apportioned between the Central and the State governments. The sales tax component is the same as in the old system; however, this time, it is called the Goods and Service Tax (GST). Customers who purchase products with a tax-free invoice will pay the lower GST rate. Most of the value-added tax (VAT) and other taxes will remain the same as in the old system. However, the destination-based VAT that is part of the GST system is new.
What Are the Benefits of Using the GST?
Currently, the systems in place in most of the countries that use the unified GST are flawed and unable to function effectively. The implementation of the GST in India has the potential to be a giant leap forward in global taxation. Since the tax applies equally to all sizes of companies and individuals, it is expected to result in a uniformity of taxation across the country. The new system is expected to increase consumer spending; this means that businesses are more likely to invest in the country because they won’t face the same drop in revenue that they did under the old system.
Why Must You Register for the GST?
The GST is a new tax and is only applicable to businesses with annual sales of more than 50,000 units. If a business does not register for the GST by the deadline of July 1, it will face a 10% tax on the number of annual sales above the threshold. Some of the main benefits of registering for the GST include: Creating a customer traceability system, and ensuring that the products you purchase are taxable. Getting a complete inventory control system in place. Getting access to a range of new customer information resources.
How to Pay India’s New Tax?
You can pay the new tax by cash, debit, or credit card. However, you will have to provide the bank account details of the person who will be paying the tax so that the government can validate the payment. You will have to pay the tax within 30 days after the goods or services have reached your registered address. If you fail to do so, the goods or services will be taxable and you will have to pay the taxman.
Should You Implement The GST?
The GST has come in as an improvement over the previous system of indirect taxation. The previous system involved a myriad of taxes, which often caused trouble for businesses and customers. The new system is significantly simplified and is better able to account for both the taxman and market conditions. However, it is essential to remember that the new system is a consumption tax; it does not apply to income, wealth, or assets. As such, it is not the most effective way to tax these things. Therefore, if you are looking to raise tax revenues, look into other options such as increasing the HST, income tax, or capital gains tax. If you are looking to attract more business and make your country more attractive to foreign investors, look into the GST.
What Is the Goods and Services Tax?
The Goods and Services Tax (GST) is a unified tax system that will replace most Central and State taxes in India. The major changes in the GST system include:
- A uniform national rate of 25% applies to all goods and services
- Central and state government taxes are now subsumed under the GST umbrella
- The goods and services tax has issued an advisory to all states asking them to prepare the necessary rules and procedures for the implementation of the new tax system
- This applies to all businesses that sell goods and services in India, both domestic and foreign
- All businesses will have to apply for a new Trade Signalling System (TSS) licence that will be issued in three stages
- The first TSS licence has been issued in February 2018 and is valid for 5 years
- The second TSS licence, which is valid for 10 years, has been issued in March 2019
- The final TSS licence, which will be valid for a lifetime, has been issued in 2020
- The GST is a tax on goods and services and not on individuals
- The goods and services subject to the tax are determined by a central government decision
- The rate of GST on various goods and services will vary from state to state based on the recommendations of the state VAT Council
- The tax rate will be applicable on a nominal base of 25%
- The tax revenue generated will be used to fund the GST.
How Does the GST Work?
The goods and services subject to the GST are determined by a central government decision. The rate of GST on various goods and services will vary from state to state based on the recommendations of the state VAT Council. However, the central government has the flexibility to determine the rate of tax at a national level.
What Are the New Taxes in the GST System?
The goods and services subject to the GST are determined by a central government decision. However, this does not mean that the rate at which the goods and services are charged is fixed. The central government has the flexibility to determine the rate of tax at a national level. Here are some of the new taxes in the GST system:
- The goods and services that do not qualify for the 25% GST rate include motor vehicles, two-wheelers, industrial engines and machines, agricultural and forestry products, food grains and seeds, and other specified items
- The goods and services that qualify for the 25% GST rate are determined by a central government decision. These goods and services include personal equipment, recreational and travel goods, electronic devices, and food and beverages
- The rates of VAT and GST are not the same. The GST is a tax on goods and services while the VAT is a tax on individuals. However, the GST is only the most visible feature of the new tax system.
What are the Benefits of Using the GST?
The benefits of the goods and services tax are:
Simplicity: The goods and services subject to the GST are going to be subjected to a single tax rate. This will lead to a simpler tax system.
Universal Application: The GST is expected to be applied equally to all parts of the economy. This will help ease the social and economic tensions between different parts of the country.
Revenue Generation: The tax revenues generated by the GST will be used to fund government services. This will help in increasing the overall revenue of the government.
Lower Rates: The lower rates of GST are expected to encourage investments and consumption in a way that will help in economic growth.
Why Must You Register for the GST?
The GST registration process is simple and straightforward. You will have to pay a registration fee of 50 US dollars to start the registration process. This fee will be charged every year and will help in the smooth running of the system. However, if you are a business that plans to sell goods or services in India, you will have to register for the GST.
How to Pay India’s New Tax?
You will have to pay the tax at the time of purchase of the goods or services. This can be done online or through a paper trail. If you choose to go with the paper trail, make sure you keep a record of all the transactions.
You can either pay Central GST or State GST at the time of purchase. Both taxpayers will make an entry in their respective books. If you’re a business owner, you will have to pay both the Central and State GST. If the value of the goods and services you purchase does not exceed the basic tax rate, you can simply pay the relevant percentage under the head “GST”. However, if the value of the goods and services exceeds the basic tax rate, you will have to pay the amount over and above the basic tax rate.
Should You Implement the GST?
The goods and services tax is an important step in the right direction towards a more transparent and fair taxation system in India. The GST is a common tax among nations that have been in existence for many years. The goods and services tax will help in revenue generation and lower rates of taxation. On the other hand, there will be a transition period after the implementation of the new tax system. It will take some time for the business to adjust to the new rules and principles. The benefits of the goods and services tax are great, but you have to register for it.
Is the Goods and Services Tax (GST) the right tax reform? Many believe it is – especially if you’re a loyal recipient of our favourite drink, beer. The GST is a major overhaul of the archaic Goods and Service Tax (GST) regime. If you’re looking to get started with the new system, read this article to know what GST is, its pillars, its types and its impact on your business.
Types of GST in India
The main types of GST in India are:
SGST – SGST is a state-level tax imposed by state governments on intra-state commerce and services or trade within the state (State-GST). Because the transaction took place within the state, the earnings were earned by the state government. For example, if items are manufactured and sold within the state of Haryana, the state of Haryana will collect SGST.
UGST — In Union territories such as Chandigarh, the GST is collected by the Central administration rather than the State government, and is referred to as UGST (Union-GST).
CGST — The Central government levies CGST (Central-GST) on intra-State transactions of goods and services. It is collected in conjunction with the SGST or UGST, and the revenues are split between the state and the federal government. For example, if the goods or services are given within the state of Haryana, CGST will be collected in addition to SGST or UGST. IGST – Integrated GST is levied on interstate transactions of goods and services. It can also be used to describe the imports and exports of products and services. The state, which is the consumer of the goods or services, receives the SGST portion of the tax paid. After that, the IGST is split between the state and the federal government.
Is GST Right for Your Business?
The GST is a major tax overhaul that came into effect in India on July 1, 2017. The GST is a key policy to promote e-commerce and increase competition in the Indian market. A key benefit of the GST is that it will make it easier for small businesses to start up. However, if you’re a business with a large volume of sales, you should probably stay away from the new tax regime. As a country, India has a large number of small and medium-sized businesses (SMBs). The overwhelming majority of them are owner-operated and don’t have a big volume of sales. For them, the new GST will make it even more complicated to navigate. The larger the business, the easier it will be for the owner to understand the new tax rules and navigate the process of the new system.
FAQs – GST Registration in India
What are the benefits of registering for GST?
A business’s registration under the Goods and Service Tax (GST) regime will provide the following benefits:
- Recognised as a legal seller of products or services.
- Accounting of taxes paid on input products or services that can be used to pay GST owing on the business’s provision of goods or services, or both.
- Legally permitted to collect tax from his customers and credit the taxes paid on the goods or services provided to customers or beneficiaries.
- Become eligible for a variety of other perks and privileges provided by the GST laws.
Can someone who isn’t registered for GST claim ITC and collect tax?
No, a person who is not registered for GST cannot collect GST from his clients or claim any GST paid as an input tax credit.
When will the registration become effective?
The effective date of registration is the date on which the person becomes liable for registration if the application for registration is submitted within thirty days of the date on which the person becomes liable for registration.
The effective date of registration is the date of grant of registration if an application for registration is received after thirty days from the date of the applicant’s becoming liable to registration.
The effective date of registration shall be the date of order of registration if a person registers voluntarily while being within the threshold exemption limit for paying tax.
What is the deadline for obtaining a GST registration?
A person should register within thirty days of the day on which he becomes liable to registration, in the manner and under the conditions stipulated by the Registration Rules. Casual taxable persons and non-resident taxable persons, on the other hand, should apply for registration at least 5 days before they begin doing business.
Can a person who operates in multiple states with the same PAN number operate under a single registration?
No, the answer is no. According to Sub-section (1) of Section 22 of the CGST/SGST Act, every person who is required to register must do so separately for each state in which he or she has a commercial operation and is due to pay GST.