GST is going to be implemented from 1st July 2017 onwards. The outbreak of GST has led to many questions among all people. Let’s have a look on some basic things that one should know about GST.
Till now every business has to deposit many taxes not only income tax such as excise duty, service tax, CST & VAT and in some cases custom duty. These all taxes are known as indirect taxes in whole. GST will be the replacement of all these taxes including the local tax imposed by the local bodies such as octroi duty etc.
GST is the biggest tax reform ever in the economy. It is not just the transformation of law but also it will change the levy of the tax. Presently, levy is excise duty is on the manufacture of the goods and VAT is levied on the sale of goods within the state and CST is levied on the sale of goods between the states. So, we can say that a good has excise, VAT or CST in its cost. These all are levied at different point of time.
#1. When is GST levied?
The first question among the people is that what will be the point of levy of GST. As the GST, the levy of tax will the pointy of supply. The term supply has been explained in the GST Act. Sale of goods and services is the supply as per the Act. Sale does not only consist of actual sale of goods and services but also barter, transfer, rental, exchange, supply made to an agent and lease. Further government may notify some services and goods in respect of supply should not considered and therefore GST will not be levied. In case a business is involved in supply of goods and services GST will be attracted and all other taxes paid by the you will be replaced with it. So, it is necessary for every business to check if they are making supply or not.
#2. What are types of GST?
Once you are confirmed that your business is making supply, find if the supply is an inter-state supply (supply between different states) or intra-state supply (supply within the state i.e. origin of goods is different from the destination of goods). GST is known as destination-based tax. The business which are involves in inter-state sale have to get register under GST mandatorily. Supply will be taxed at the rate fixed under GST. One supplying goods outside India has also get to registered under GST but these supplies will not attract GST. There three different types of GST i.e. CGST, SGST and IGST. The inter-state supply will attract IGST and intra-state supply will attract CGST and SGST. IGST will the sum of CGST and SGST. The levy of IGST will also be on Imports.
#3. Who should prepare for GST?
The persons already registered under service tax, excise duty or VAT should enroll under GST. The business whose turnover is less than Rs.20 lakh (Rs.10 lakh in case of North east states) need not to get register under GST but GST registration is mandatory for the business involved in inter-state supply. There is no limit for those businesses.
Also, GST registration is compulsory in case of business of a website from where goods and services are supplied. GST applies to input service distributor and its registration is also mandatory. ISD means head office which distributes the input credit to the branch offices. For complete list click here.
#4. Applicability of GST for different businesses?
In the current tax regime traders must be registered under VAT, these need to get register under GST. As discussed above GST will be levied on the supply credit of tax paid at earlier stages could be set off against the GST output. Similarly, the manufacturers could have benefit of tax paid on input against the GST output. GST will be levied by state and center government both on the services. Service providers could also have tax benefit by setting off the tax paid on inputs against the GST output which was restricted earlier to input services. Some of the services which were exempt under service tax will be exempt under GST also such as doctors and educational services.
#5. One should go for voluntarily GST registration?
Registration under GST can be done voluntarily as well. The businesses which has turnover less than the prescribed limit and have no inter-state supply can register under GST voluntarily. In case your buyers comply with GST, your buyer can also have the input tax credit of the taxes paid by you. Under GST in case the registered buyer purchases from the unregistered sellers, the compliances of unregistered seller for tax payment and return filing should be done by registered buyer. GST aims at bringing every seller and buyer under its clutches. GST has its own benefits for set off input tax but has its own cost too of compliances and use of technology for businesses.