The Goods and Services Tax, or GST, has caught people’s attention. Indians are set to benefit from a new law that is set to reform how businesses and goods are taxed. There is no way of knowing whether this would make goods cheaper for you and I, the common man. However, this will have a significant impact on the overall economy, our jobs, and our businesses. Reason enough for us to learn something about it!
Who does it apply to?
- In the course of a financial year, each person who supplies goods or services that exceed Rs 20 lakh must pay this tax. Some special category states have a limit of Rs 10 lakh. There is a requirement to register for these. When a state’s turnover reaches Rs 20 lakh (or Rs 10 lakh in special category states), GST must be paid.
- Providing goods or services interstate that are taxable
- Every operator of an e-commerce business
- Providing goods and/or services through an e-commerce operator, except for branded services
- Services provided by aggregators under their own brands
- Persons who are casually taxable
- Those who are taxed but do not reside in the United States
- Tax deducting/collecting person (TDS/TCS)
- A distributor of input services
- Other than a registered taxable person, an individual providing online information and database access or retrieval services from outside India.
- Taxpayer subject to reverse GST registration charges
- (e.g. an agent) A person who supplies goods on behalf of another taxable person (e.g. a manufacturer)
- Agriculturists do not have to pay GST
- A person engaged exclusively in supplying non-taxable goods and/or services who is wholly exempt from tax under this Act does not have to pay GST.
What is the GST framework as per the new law?
A single tax called the Goods and Services Tax will replace indirect taxes like VAT, customs duty, excise tax, CST, service tax, and entertainment tax.
- Generally, India will have two types of GST.
- Goods travel within states and across states (when they travel between states).
- GST (Goods and Services Tax) will be levied at the intra-state level in two forms: CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax).
- Taxes on interstate sales and services are collected under IGST (or Integrated Goods and Services Tax).
- The importation of goods is considered an interstate supply.
- There will be no export tax on exports.
- Zero-rating will apply to supplies to SEZs
Will the new GST allow tax cascading benefits?
Service tax and VAT have cascading benefits, which means you can take advantage of tax credits by paying tax on inputs. The service tax, for instance, can be deducted from your deposit when you deduct the service tax you paid on input services. GST will also be able to benefit from this cascading benefit.
Here is how set off works in case of GST
Our readers may find this information about GST helpful; IGST payments may be offset by IGST, CGST, SGST on inputs, and CGST payments may be offset by IGST and CGST on inputs. Detailed information about the draft law will be provided to you so that you can understand its business impact better.
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