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New Service Tax – GST Rules, Process & Payments
Service Tax is a tax that is levied on services rendered by a service provider. The provider of services must pay service tax to the government of India. The Service Provider, on the other hand, can collect Service Tax from the Consumer of Service (also known as the Recipient of Service) and deposit it with the Government.Following the new proposal introduced in the 2016 Union Budget, the applicable service tax from June 1, 2016 was "15%," which no longer exists as GST went into effect on July 1, 2017. In layman's terms, GST has replaced Service Tax and its respected updated rate.
GST – Overview
The Goods and Services Tax (GST) is an indirect tax levied on the delivery of goods and services in India. It is a multi-stage, destination-based tax that is expected to be repaid to all parties involved in the manufacturing process, other than the final customer, because, as a destination-based levy, it is collected at the point of consumption rather than the place of origin, as previous taxes were.
The tax went into effect on July 1, 2017 as an outcome of the Indian government's enactment of the 101st Amendment to the Indian Constitution. The GST was introduced to replace the current service tax levied by the central and state governments.
GST – New Structure
The major goal of GST was to consolidate numerous current taxes at the federal and state levels and develop a single taxation structure in the Goods and Services market.
The GST absorbed a number of state-imposed taxes. They are as follows:
- Central Excise Duty
- Services Tax
- Additional Customs Duty
- Surcharges
- State-Level Value Added Tax
- Octroi
Multi-stage GST
GST is levied at many stages of GST, beginning with production and ending with supply.
- Purchasing raw materials
- Manufacturing or production
- Warehousing finished goods
- Selling to wholesalers
- Product distribution to retailers
- Selling to the general public
GST On Value Addition
GST is levied on the value addition made to a raw material in order to turn it into a finished product ready for sale. For example, if we take cotton, it is cleaned and sent to mills where it is woven into yarn, which is then woven into fabric, which is then sold to wholesalers, who sell it to retailers, who then sell it to the final customer. Through different value additions, plain cotton becomes a shirt. These value additions are subject to GST.
Advantages of GST
GST seeks to encapsulate all types of taxes under a single tent. It plays an important role in ensuring that all goods and services are taxed uniformly across the country. Here are a few more benefits of GST:
- Reduced Tax Cascading
- Overall Price Reductions
- Common National Market
- Benefits for Small Taxpayers
- Self-Regulating Tax System
- Electronic Tax System That Isn't Obtrusive
- Tax Regime Simplified
- Reduction in the Number of Taxes
- Abolition of CST
- Exports to be Zero-Rated
- Protection of Domestic Industries – IGST
GST's advantages have resulted in the following economic implications in the Indian economy -
- Inflation has decreased
- The simplicity of doing business in "black" transactions has decreased
- Consumers who are better informed
- Poorer States to Gain Manufacturing in India
Structure of GST
In India, GST replaced several individual taxes with a single taxing structure -
Before GST
| Central Taxes | State Taxes |
|---|---|
|
|
After GST
GST | ||
|---|---|---|
| CGST | SGST/UTGST | IGST |
Goods & Services Still Outside The Ambit Of GST
- The power to tax alcohol for human consumption rests with the state
- Crude oil, diesel, gasoline, natural gas, and ATF are the five petroleum products
- The GST Council will determine the effective date of GST
- Tobacco is included in GST; however, the Central Government has the authority to levy additional excise duties
- Entertainment tax is levied by local governments
- Taxation authority is retained by local governments
Tax Administration – Governed By Both Centre And State
There are 3 types of taxes under the GST; CGST, SGST and the IGST
CGST – Central GST is levied by the Central Government
SGST – State GST is levied by the State Government
IGST – Integrated GST is levied for Inter-state supply of goods and services
| Taxpayers having turnover below Rs.1.5 crores | 90% control with State Government 10% control with Central Government |
| Taxpayers having turnover over Rs.1.5 crores | 50% control with State Government 50% control with Central Government |
| GST in Territorial Waters | Shall be delegated by the Central Government to the State |
Who All Are Required To Register For GST?
The following taxpayers are required to for GST Register -
- Normal Taxpayer
- Composition
- Casual Taxable Person
- Input Service Distributor
- SEZ Developer
- SEZ Unit
- Tax Deducted at Source or Tax Collector at Source
Registering on the GST website consists of two parts, which can be easily done on the GST portal -
1. Submitting the Registration Application
2. Aadhaar card Authentication (E-KYC)FAQs
1. Is there still a service tax in India?
In July 2017, the service tax was replaced with GST. GST has brought a host of central and state taxes under its purview.
2. What are the GST regulations?
The foundations of the Goods and Services Tax are the IGST (Integrated Goods and Services Tax) Act and the CGST (Central Goods and Services Tax) Act, both of which were passed in April 2017.
3. Who collects GST, the federal government or the states?
The GST is divided into two parts: The Central GST and the State GST. The tax is paid to the Centre, which subsequently distributes it to the states.
4. What are the GST tax slab rates?
GST will have four separate tax slabs, namely 5%, 12%, 18%, and 28%.
5. Where can I go to register for GST?
The 'GST Portal' is a one-stop shop for all GST-related information. This portal is used for GST registration, return filing, and refund claims.
6. Who is eligible to apply for GST registration?
Businesses with a revenue of more than Rs. 40 lakhs, Rs. 20 lakhs, or Rs. 10 lakhs are required to register as a regular taxable person under the Goods and Services Tax (GST).
7. Is it necessary to have separate registrations for an entity that engages in both trading and manufacturing?
It is not required. For trading and production, a single GST registration is sufficient.