The Goods and Services Tax (GST) is an indirect tax that went into effect in India on July 1, 2017. The primary goal of enacting this tax is to create a uniform tax system that will reduce the incidence of tax evasion in the country. As a result, GST will increase the government’s total tax collection.
How does the GST work?
- Manufacturer: The manufacturer must pay GST on the raw materials purchased and the value-added to the product.
- Service Provider: In this case, the service provider must pay goods and service tax on the amount paid for the product and the value added to it. On the other hand, the tax manufacturer will be deducted from the total GST paid.
- Retailer: The retailer must pay GST on the product purchased from the distributor and the margin that has been added. On the other hand, the retailer’s tax can be deducted from the total GST that is paid.
- Consumer: GST must be paid by the consumer on the purchased product.
GST Advantages
The following are some advantages of GST in India. Every businessman needs to have a look.
- Regulation of the unorganized sector
- E-commerce operators no longer suffer from differential treatment
- Fewer complications
- Composition scheme
- The registration process and filing of returns are simple
- Higher threshold
- Elimination of the cascading tax effect
Types of GST
The four different types of GST are given below:
- Central Goods and Services Tax: The CGST is levied on intra-state supplies of goods and services.
- State Goods and Services Tax: The SGST, like the CGST, is levied on the sale of goods or services within a state.
- Integrated Goods and Services Tax: The IGST is levied on interstate sales of goods and services.
- Union Territory Goods and Services Tax: UTGST is levied on the supply of goods and services in any Union Territories of the country, including the Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh. UTGST is levied in addition to CGST.
Who is eligible for GST?
The following entities and individuals are required to register for Goods and Services Tax:
- Aggregators of e-commerce
- Individuals who provide goods and services through e-commerce aggregators
- Individuals who pay taxes as per the reverse charge mechanism
- Input service distributors and suppliers’ agents
- Individuals who do not reside in the United States but pay taxes
- Businesses with a greater-than-the-threshold-limit turnover
- Individuals who registered before the implementation of the GST law
Registration of GST
Any company that is GST-eligible must register on the GST portal established by the Government of India. The registered entities will be assigned a unique registration number known as the GSTIN.
Registration is mandatory for all service providers, buyers, and sellers. A business that generates a total income of Rs.20 lakh or more in a fiscal year must register for GST. The processing time ranges between 2 and 6 working days.
Know the GSTIN – GST Identification Number
The GSTIN is a 15-digit unique code assigned to each taxpayer. The GSTIN will be provided based on your state of residence and your PAN. The following are some of the most common applications for GSTIN:
- The number can be used to apply for loans.
- With the GSTIN, refunds can be claimed.
- With the GSTIN, the verification process is simple.
- Corrections are possible.
How do I calculate GST?
Calculating the amount of GST that must be paid when filing your returns can be time-consuming. Several aspects and factors, such as ITC, exempted supplies, reverse charge, and so on, must be considered. Failure to pay the entire GST amount may result in an 18% interest penalty on the shortfall, making it necessary to ensure that you pay the correct amount towards GST India.
