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Taxation system in India is categorized under two major categories namely direct taxes and indirect taxes. GST is an indirect form of taxation under the Income Tax Act, 1961. Earlier, the indirect taxes included a variety of taxes like excise duty, VAT, service tax, entertainment tax, entry tax, central sales tax, etc. All these taxes were replaced or clubbed under one single tax GST (Goods and Service Tax). This tax came into effect on 1st July 2017 after it was passed in the Parliament on 29th March 2017.
Goods and Service Tax is the tax that is levied on the manufacture, sale and consumption of goods and services. It is a tax based on value addition and is a comprehensive and destination based tax. India has adopted a dual GST model that is implemented by both States and Centre to levy tax on Goods and Services. The classification of GST is detailed below.
Pattern of tax structure under GST can be explained below,
Sale within the State
CGST + SGST
VAT + Central Excise/Service tax
Revenue in such case will be shared equally between the Centre and the State
Sale to another State
Central Sales Tax + Excise/Service Tax
There will only be one type of tax (central) in case of inter-state sales. The Centre will then share the IGST revenue based on the destination of goods.
About Goods And Services Taxes (GST) In India
The need for GST has been long felt in the country. The integration of various indirect taxes across the country and at State and Central levels is needed for many reasons like,
GST Council was set up to draft, supervise, review and recommend the necessary inputs, regulations and rates that are required to effective and efficient implementation of GST across the country. GST council is made up of the Finance Minister of the Central Government as well as from States Governments. This council is chaired by the Union Finance Minister.
The GST Council has categorized all the goods and services to be taxed under GST in 5 slab rates. These rates are namely, NIL rate, 5%, 12%, 18% and 28%. Goods and services are classified under these rates based on the various factors like basic necessities (classified under Nil rate or lower rate) and high end or luxury products and services (taxed on higher slab rates), products that are specialized or imported, etc.
There are many products that are outside the ambit of GST. Such products like aviation turbine fuel, liquor for human consumption, petroleum products, etc. are governed by state tax laws and are subject to taxes as per state policies.
GST was introduced to consolidate all the indirect taxes in our country and to bring them under one umbrella to ease the process for the government as well as the taxpayers. A single registration under GST is better than getting registered under the various indirect tax laws.
The threshold limits for GST registration have been recently increased. The revised limits and their applicability have been mentioned below.
Previous Limits (For the sale of Goods/Providing Services)
Yes – For Normal Category States
Valid up to 31st March 2019
Yes – For Special Category States
Revised Limits (For Sale of Goods)
Valid from 1st April 2019
Yes – For Special Category States
New Limits – For Providing Services
The threshold limits for Service Providers have not been changed. Therefore, the previous limits will continue to apply for Service Providers
The other key points to be remembered under GST registration are,
The businesses that have been registered under GST are required to file returns on a monthly, quarterly or yearly basis. Also, the nature or type of return to be filed depends on the type of business and its classification.
The qualification for GST returns is to have GST compliant invoices for the sales and purchases of any business. There are many ERP options available in the market that assists in generation of GST compliant invoices. Businesses can choose from among many such options based on their budget and other factors like ease of understanding and operation, employee background handling such invoice generation, etc. The types of GST returns that are available to the businesses are mentioned below.
1. What are the types of GST in India?
The types of GST in India are Central Goods and Service Tax (CGST), State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST) and Integrated Goods and Services Tax (IGST).
2. What is the GST Model adopted b y India?
The GST model adopted by India is known as Dual GST Model where the Central Government and the State Government levy tax simultaneously on taxable goods and services.
3. What are GST HSN and SAC Codes?
HSN is the abbreviation for Harmonized System of Nomenclature. This is a system where 6 digit uniform codes are used to classify the goods in systematic manner to determine the rate at which they should be taxed under GST. HSN is now used under a three tiered system under GST.
4. What is the reverse charge mechanism under GST?
The reverse charge mechanism under GST is where the receiver of the goods or services is liable to pay tax instead of the supplier of the goods and services. This mechanism was introduced in GST with a view to ease the taxability and the compliance procedure in the hands of the supplier and the receiver.
5. What is the GST composite scheme?
GST Composite Scheme was introduced for the benefit of small businesses that have turnover less than Rs. 1,50,00,000 (Rs. 75,00,000 in case of North eastern States and Himachal Pradesh). It was initiated with a view to ease the compliances and reduce the paperwork as well as provide them a chance for lower taxability. Under the Composite scheme, the small businesses have to pay tax at a fixed rate ranging from 1% to 6% of the turnover.
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