What is GST?
Goods and Services Tax (GST) is a value-added tax at each stage of the supply of goods and services accurately focused on the amount of value addition achieved. It aims to eliminate the inefficiencies in tax system that result in ‘tax on tax’ which is known as cascading of taxes. GST is a destination-based tax on consumption. Which means the state’s share of taxes on inter-state commerce will go to the state that is home to the final consumer, rather than to the state that is exporting. GST contains two equal components of central and state GST named as CGST and SGST.
What is input tax credit?
To make sure that the tax is levied only on the amount of value addition that happens at each stage of the supply chain, and credit for the taxes paid at the previous stage are granted. For example, a garment manufacturer will get credit for the taxes he paid on the materials that he purchased while computing the final indirect tax liability on his product that is collected from the consumer. Similarly, a service provider will get credits for taxes paid on the services and goods used in his business.
Who is liable to pay GST?
Businesses and traders with an annual sales amount of above Rs.20 lakh are required to pay GST. The threshold for paying GST is Rs.10 lakh in the case of North-Eastern and Special Category states. GST is applicable to all inter-state trades irrespective of the provided threshold.
What are the existing taxes subsumed into GST?
Many of the existing Taxes are subsumed into GST such as taxes on production such as central excise duty ,additional excise duty, import duties such as additional customs duty which is also known as countervailing duty & special additional customs duty, service tax, central cesses and surcharges, state taxes like VAT, central sales tax on inter-state trade of goods, entertainment tax except those levied by local bodies, luxury tax, taxes on advertisements, on betting and gambling and state cesses and surcharges on supply of goods and services are subsumed into GST. Basic customs duty, which includes the tariff barrier on imports, is not part of GST.
What are the benefits of GST?
GST brings transparency on taxes levied on supply of services and goods. Presently, when an item is purchased the common man sees only the state taxes on the product label and not the different included tax components. GST will improve the ease of doing business as the entry barriers along state borders will be removed. The new tax system is expected to improve the tax compliance, boost the revenue receipts of central and state governments and then accelerate the GDP growth rate by 1.5-2 percentage points. Such elimination of the cascading effect of taxes will reduce the tax burden on many items.
What are the products not part of GST?
Some of the products that are temporarily kept out of GST are crude oil, petrol, diesel, natural gas and jet fuel. The GST Council will decide when to bring these items into GST net. Another item that is kept out of GST net as a constitutional provision is Liquor, therefore it would require an amendment to the Constitution in order to bring it into the GST.
What is integrated GST or IGST?
IGST is the tax levied on supply of goods and services which happens between different states. It has both the central and state GST components.
How are imports treated?
Imports are treated as same as inter-state supplies, which will attract IGST. Meanwhile exports won’t attract any such taxes. The taxes paid on services and raw materials used in the export of goods or services are refunded to the business.
What is the anti-profiteering mechanism?
In order to prevent the rising of prices and to make sure that the lowered tax burden on services and products are passed on to the consumers, the government has brought an anti-profiteering clause in the GST law. The anti-profiteering authority to be set up will act on complaints of profiteering and direct a profiteering supplier to reduce price, return the benefit of reduced tax burden to the buyer with an interest rate of 18%, or recover such amount if the buyer cannot be identified or doesn’t make a claim. A profiteering business could lose its GST registration as well.
How are decisions taken at the GST Council?
A decision can’t be made in the Council without the concurrence of both the Union and the State governments. Decisions will be taken by a 75% majority of the weighted votes of members present and voting. The Union government’s vote has a weightage of 1/3rds of the votes cast, while all states together will have a weightage of 2/3rd of the votes cast.