Goods and Service Tax (GST) is a ‘uniform’ ‘value added’ ‘indirect tax’ levied on the supply of goods and services across the country. GST is a “destination-based tax” that is levied only on value addition at each stage because credits of input taxes paid at the time of procurement of goods or services are available and could be set off with output tax liability. Thus, in this system, the final consumer bears GST charged by the last dealer in the supply chain. For instance, if a product is manufactured in Delhi and is sold to a dealer in Haryana, which is ultimately sold to an end consumer in Karnataka, then GST will be levied and collected by the Government of Karnataka, and the tax burden is borne by the final consumer in Karnataka.
India has adopted a dual GST model, which means that the GST is administered by both the Central and State Governments. The various kinds of tax levied under the dual GST model on each kind of transaction can be understood as below:
Any sale or supply of goods or services within the state will be liable to charge of GST in form of CGST & SGST/UTGST. That means the revenue collected from supply made by a registered person is shared equally between the center and the state/union territory. Similarly, IGST collected from any interstate transaction is collected by the Centre and then shared on the basis of destination of goods to the respective state. The rate of IGST is aggregate of CGST and SGST/UTGST.
GST is levied on the supply of all goods and services except the supply of Petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel, and alcohol for human consumption. These products and services are taxed by the individual State Governments, as per their respective tax laws. GST consists mainly of the following tax slabs – 0%, 5%, 12%, 18% and 28%.
The input tax credit mechanism allows GST registered businesses to receive refunds/credit of GST paid for the purchase of such inputs (goods or services) to prevent the cascading taxation effect. Input tax credit claims can be made by the GST registered business/individuals only on tax paid for the purchase of any business relevant inputs.
The mandatory registration criteria under GST are based on the Turnover of the business. Currently, registration is mandatorily required if annual turnover exceeds Rs 40 Lacs for businesses other than specified states (Northeast and hill states) and Rs 20 Lacs for service providers. Such registration shall be taken within 30 days of becoming liable to registration. Get your business registered under GST GST HSN and SAC Codes HSN stands for Harmonized System of Nomenclature and is used classification of goods in a systemized manner. It was developed by the World Customs Organization (WCO) and is considered the global standard when it comes to naming goods. This 6-digit uniform code can be used to classify more than 5,000 products and is also used for the classification of goods for tax purposes. In India 8-digit uniform HSN codes are used for classification.
In a regular circumstance, any supplier of goods and services is liable to pay the Goods and Services Tax (GST). However, when the reverse charge mechanism is applied, the receiver of the goods/services becomes liable to pay tax.
E-Way Bill is an electronic document for transportation of goods worth Rs. 50,000 or more (single Invoice/bill/delivery challan) in a vehicle from one place to another within the country. A registered person cannot transport goods valuing more than Rs. 50,000 in a vehicle under an interstate supply unless he or she has an e-Way bill. This rule, which has been mandated under the current GST regime, came into effect on April 1, 2018. Part A of the e-Way bill contains details like GSTIN, the reason for the movement of goods, place of delivery, the value of goods, HSN code, transport document number, and the purpose for transportation, while Part B mentions details of the transporter like the vehicle number. The bill can be generated on the e-Way Bill Portal, SMS or Android app. On generating the bill, a unique e-way bill number (EBN) will be assigned. The transporter and the receiver of the consignment shall be given access to the EBN.
Under GST, a registered dealer has to file various periodical GST returns, which include details of purchases, sales, Output GST (On sales), Input tax credit (GST paid on purchases). The type of returns that need to be filed varies from business to business.
A composition scheme under GST is an alternative method to tax small taxpayers with the objective of simplifying compliances and reducing compliance costs. The composition scheme under GST is currently applicable to businesses with an aggregated turnover of Rs. 1.5 crores or less (lower limit is applicable in case of special category states). The reduced tax rate of 1%, 2%, 5%, or 6% is required to be paid by a person opting for the composition scheme subject to conditions including no input credit to be availed.
Every registered person whose turnover during a financial year exceeds the prescribed limit (currently Rs. 2 crores) shall get his accounts audited by a chartered accountant or a cost accountant and submit a prescribed return (GSTR-9C) before the due date (31st December of the subsequent year).
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