9 things you need to know about GST, if you want to ace at your Business

What is GST?

Goods and Services Tax (GST) is a value-added tax at each stage of the way to obtain goods and services precisely on the total amount of value addition achieved. It seeks to eradicate inefficiencies in the tax system that lead to ‘tax on tax ‘, referred to as cascading of taxes. GST is really a destination-based tax on consumption, according to which the state’s share of taxes on interstate commerce goes to the one that is home to the ultimate consumer, rather than to the exporting state. GST has two equal aspects of central and state GST.


What are the benefits of GST?

GST brings transparency on the taxes levied on the supply of goods and services. At present, when something is purchased, the common man sees only their state taxes on the product label, not the various embedded tax components. GST will enhance the ease of doing business entry barriers along state borders will be dismantled. The brand new indirect tax system is expected to boost tax compliance, boost revenue receipts of central and state governments and accelerate GDP growth rate by an estimated 1.5-2 percentage points. Elimination of cascading of taxes can lead to the reduced tax burden on many items.


Who is liable to pay GST?

Businesses and traders with annual sales above Rs20 lakh are liable to pay GST. The threshold for paying GST is Rs10 lakh in the event of northeastern and special category states. GST is applicable on inter-state trade irrespective of this threshold.


What is input tax credit?

To ensure that tax is levied only on the amount of value addition at each stage of the supply chain, credit for the taxes paid at the prior stage is granted. For instance, a garment manufacturer gets credit for the taxes paid on the materials purchased while computing the last indirect tax liability on his product that is collected from the consumer. Similarly, a service provider, say, a telecom company, gets credits for the taxes paid on the goods and services utilized in his business.


What are the existing taxes subsumed into GST?

Taxes on production such as for instance central excise duty and additional excise duty, import duties such as for instance| additional customs duty referred to as countervailing duty and special additional customs duty, service tax, central cesses and surcharges, state taxes like value-added tax (VAT), central sales tax on inter-state trade of goods, luxury tax, entertainment tax except those levied by local bodies, taxes on advertisements, taxes on betting and gambling and state cesses and surcharges on method of getting goods and services are subsumed into GST. Basic customs duty, which includes the tariff barrier on imports, isn’t an element of GST.


What are the products not part of GST?

Crude oil, diesel, petrol, natural gas and jet fuel are temporarily kept out of GST. The GST Council, the federal indirect tax body of state finance ministers chaired by the Union finance minister, will decide when to bring these items into GST. Liquor is kept out of GST as a constitutional provision and hence it’d require an amendment to Constitution if it is to be brought into GST net.


What is integrated GST or IGST?

IGST is the tax on inter-state supply of goods and services with central and state GST components.


How are imports treated?

Imports are treated as inter-state supplies and will attract IGST. Exports do not attract any tax. Taxes paid on raw materials and services utilized in the export of goods and services are refunded to the business.


What is the anti-profiteering mechanism?

To avoid the likelihood of prices rising and to ensure that the reduced tax burden on products and services are handed down to consumers, the government has introduced an anti-profiteering clause in the GST law. The anti-profiteering authority to be put up will act on complaints of profiteering and direct a profiteering supplier to cut price, return the benefit of the reduced tax burden to the customer with 18% interest, or recover such amount if the customer cannot be identified or doesn’t make a claim. A profiteering business could lose its GST registration, too.



Source : livemint

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