Understanding GST: 15 most Frequently asked questions
We have lots of question about GST. Today I am going to share your comprehensive guide for GST.
What to Expect
What is Goods and Service Tax (GST)?
What do you mean by GST rate slabs?
Which of the existing taxes payable to state and centre are proposed to be submitted under GST?
What is the status of Tobacco and related products under the GST regime?
What type of GST is proposed to be implemented?
How a goods and services transaction taxed under Central GST (CGST) and State GST (SGST) simultaneously?
What are the benefits accrued from GST to the Country?
What is IGST?
How to fill for GST returns?
What would be the role of the GST Council?
What are the extra benefits available to small taxpayers covered by the GST regime?
How will the goods and services be classified under the GST regime? Why is HSN important under GST?
What is GSTN and what is its role?
What is the Composition Scheme Merits? What are the merits of it?
How will imports and exports be taxed under GST?
GST is a buzzword among Indian taxpayers since it was introduced in 2017. The GST Bill was passed in the Lok Sabha and approved by the cabinet, and then four supplementary bills were passed in Rajya Sabha. On 1st July 2017, the GST Law came into force which removed the cascading effect on the sale of goods and services which impacted the prices and supply chains.
- What is Goods and Service Tax (GST)?
The goods and services tax (GST) is a consumption tax imposed on goods and services at every stage of the supply chain where the value of the product has been added. The GST is paid by shoppers, however, it’s remitted to the govt by the companies retailing the products and services. In effect, GST provides revenue for the govt. he Goods and Services Tax (GST) could be a uniform tax levied on commodities and services across the country. GST, as an umbrella tax, replaced central taxes like central excise, service tax, further duties of excise & customs, the special further duty of customs, besides cesses and surcharges, on provide of products and services.
- What do you mean by GST rate slabs?
The GST council has fitted over 1300 products and five hundred services underneath four tax categories of 5%, 12%, 18% and 28% underneath the GST. These GST slabs are kept aside the tax on gold and precious stones which is 3% and 0.25% respectively. Essential products, services and food items have lower tax rates and luxurious services and commodities have been placed in the higher tax bracket. Service tax varies in between 15% to 18%. The services being taxed at lower rates, thanks to the provision of abatement, like train tickets, can fall within the lower slabs.
To manage inflation, essential things together with food, that presently represent roughly half the consumer inflation basket, are going to be taxed at a zero rate. The lowest rate of 5% GST would be for common use things. There would be two reasonable rates of 12 per cent and 18 per cent, which might fall on the majority of the products and services. This includes fast-moving trade goods. The collection from this cess still like that of the clean energy cess would produce a revenue pool which might be used for compensating states for any loss of revenue throughout the primary 5 years of implementation of GST. Finance minister said that the cess would be liable to lapse after five years.
The GST will absorb the most of the currently stated cesses, including the Swachh Bharat Cess, the Krishi Kalyan Cess and the Education Cess.
- Which of the existing taxes payable to state and centre are proposed to be submitted under GST?
Taxes currently levied and collected by the Centre:
State taxes subsumed under the GST
Central Excise dutyState VATDuties of ExciseCentral Sales TaxAdditional Duties of ExciseLuxury TaxTextiles and Textile ProductsEntry Tax (all forms)Additional Duties of Customs-(CVD)Entertainment and Amusement TaxSpecial Additional Duty of Customs -(SAD)Taxes on advertisementsService TaxTaxes on lotteries, betting and gamblingCentral Surcharges and CessesState Surcharges and Cesses
- What is the status of Tobacco and related products under the GST regime?
Tobacco and tobacco products would fall under GST. Moreover, the Centre would have the authority to charge Central Excise duty on these products.
In the 10 years, the excise duty rates have been updated for cigarettes and tobacco-related products. GST on tobacco and tobacco-related products was declared on 18th May by the GST council. A lot of revenue is collected through the sale of tobacco-related products for the Indian government. With the arrival of GST, there will be an extra cess charged on the tobacco-related products, over and above the GST of 28%.
- What type of GST is proposed to be implemented?
India may be a federal country wherever each the Centre and therefore the States are assigned the powers to levy and collect taxes through applicable legislation. Both the central and state government have distinct responsibilities to perform in step with the division of powers prescribed within the Constitution that they have to boost resources. A dual GST with both state and centre on a common tax base can, therefore, keep with the Constitutional demand of financial relationship. The GST which will be imposed by the Centre on intra-State supply of products and services would be called as Central GST (CGST) and that to be levied by the State governments would be known as the State GST (SGST). Also, Integrated GST (IGST) will be reviewed and imposed and controlled by the Centre on every inter-state supply of essential and non-essential goods and services.
- How a goods and services transaction taxed under Central GST (CGST) and State GST (SGST) simultaneously?
Every transaction within the state or Inter-state sale would be imposed with SGST (state GST) to get the state’s share in GST structure and are in correspondence with all state taxes absorbed in GST and CGST to cover the central governments share in GST and are instead of all central taxes mentioned in GST structure. Both SGST and CGST will be equal. So if the GST rate says 28%, SGST will be 14% and also CGST will be 14%. Inter-state sales shall be charged under IGST (integrated GST) and are in the place of central sales tax, which will guarantee the state for the amount of shortfall recovery in SGST concerning state taxes collected here to by the respective state.
- What are the benefits accrued from GST to the Country?
GST is a notable step towards making India a common market with similar tax rates and procedures to eliminate the economic barriers for making an integrated economy of the entire country. GST comes with benefits to the stakeholders of government, business industries and consumers. This is aimed at giving a major boost to the economy and push India towards competitions in the global marketplace. By combining most of the state and central government taxes under single tax structure and allowing set-off of prior-stage taxes, this will encourage more domestic and global competitions and provide liquidity of the businesses in the entire value chain. GST has a multistage collection mechanism based tax. In simple words, tax is generated at every destination and the credit of tax collected at the previous phase is available as a set-off for the next stage of collection. The biggest advantage for the consumers is in terms of a reduction overtax burden on services and commodities, which is estimated to be at 25%-30% at present. Moreover, GST is widely technology operated, thus it will limit the human intervention to a large extent and this would lead to the fast decision-making procedure.
- What is IGST?
IGST is Integrated Goods and Service Tax, which is a part of GST. IGST is a tax charged on all Inter-State sale of goods or services and will be operated under the IGST Act 2016. IGST will be levied on any transaction of goods and services in both cases of import into India and export from India. For example, if goods are moved from Karnataka to Kerala, IGST is liable to be charged on such supplies. The revenue collected out of IGST is shared by both the state government and central government as per the mentioned guidelines and rates fixed by the authorities.
- How to fill for GST returns?
GST returns is the tax return documents that are required to be filed by a taxpayer with the Income Tax authorities of India. The return document contains the details of income which is used by the authorities to calculate tax liability. In the proposed GST regime, any business owners and dealers who have registered under GST scheme, it is mandatory that the owner has to file two monthly returns and one annual return for smooth flow of credit. This amounts to 37 returns in a year. Any negligence by the owner may lead to penalties and interests, and disallowance of an input tax credit. The returns have been structured in a way that all transactions are synchronized with one another; no transaction is neglected between the buyer and the merchant. Based on the type of GST registration, these returns can be filed directly from the GSTN portal.
- What would be the role of the GST Council?
GST rules and guidelines are controlled by members of the GST Council which includes the Union Finance Minister (the chairman of the Council), the Minister of State (Revenue) and the State Finance or Taxation Ministers. The council has the duties and responsibilities to decide and amend in GST rules. The council has the power to determine the amount of tax charged under the GST model, and tax exemption policies for certain zones, the due month and of filing returns, and tax-related laws. The main aim of this council is to design an integrated national trade of goods and services.
- What are the extra benefits available to small taxpayers covered by the GST regime?
Small taxpayers with the aggregate turnover over a financial year up to 20 lakhs are exempted from tax. The aggregate turnover must include the aggregate value of both taxable and non-taxable supplies. But will exclude exports and supplies of goods and services and exempt GST taxes.
The aggregate turnover will be determined based on all over India. For North-East states (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura) and special category states (Jammu and Kashmir, Himachal Pradesh, Uttarakhand, and NE states) the threshold shall be computed as 10Lakhs. Additionally, with input tax credit (ITC) benefits, each taxpayer is eligible for the threshold exemption. Though those taxpayers, who are dealing with inter-state supplies and paying tax on the reverse charge basis are not eligible for the threshold exemption. For a person, whose turnover over the financial year is less than 50 Lakhs may pay tax at c concessional rate on the total turnover by opting a simplified composition scheme, in a state.
- How will the goods and services be classified under the GST regime? Why is HSN important under GST?
The goods and services under the GST scheme are classified by using the Harmonised System of Nomenclature (HSN) code.
As the code classifies;
- Taxpayer whose total turnover over a financial year is below INR 1.5 Lakhs is not required to maintain any HSN code in their GST invoice and GST return. The service of theirs will be classified as Services Accounting Code (SAC).
- Taxpayer whose total turnover over a financial year is above INR 1.5 Lakhs but below INR 5 lakhs are classifies to use 2 digit code in their GST invoice and return.
- Taxpayer whose total turnover over a financial year is above INR 5 are classified to use 4 digit code in their GST invoice and return.
All 8 digits of HSN code is compulsory in case of any export and imports under the GST.
To make GST more systematic and accepted world-wise, HSN code is used. With this code, there is no need to upload the complete description of any goods and services. So, as the GST returns are automated, the use of this code will save time.
- What is GSTN and what is its role?
GSTN stands for Goods and Service Tax Network, it is a non-government, non-profit organization. This is a complex IT initiative that establishes consistency for the taxpayer by creating a common and shared infrastructure of IT between the States and Centre and provide services to maintain all the tax details. The government used the portal to track all financial transaction of registered taxpayers.
Salient features of GSTN:
- Trusted National Information Utility
- Handles Complex Transactions
- All Information Will Be Secure
- Expenses Will Be Shared
- What is the Composition Scheme Merits? What are the merits of it?
The scheme, Composition Scheme Merits allows small taxpayers (having turnover over the financial turnover less than 50 lakhs) to enjoy the flexibility while paying the taxes. This scheme is extremely beneficial for small businesses, as, with this scheme, one has to pay the tax as the percentage of financial turnover over the year.
- How will imports and exports be taxed under GST?
Imports of Goods and Services treated as inter-state supplies and IGST imposes on import of goods and services into the country. However, exports treated as zero-rated supplies, so one has to pay zero tax on exports of goods or services.
With the implementation of GST in the country since 1st July 2017, every business needs to need to comply with the structure. As GST is the destination-based tax structure, these rules will apply to every invoicing, receives, challan and other transactions. Today, you will find various GST-compliant accounting software that will help you through the GST structure starting from creating the invoice, to filing GST return.
- What is the HSN and SAC code?
HSN Code Stands for Harmonized System Nomenclature and SAC code stands for Service Accounting Code. There is an internationally adopted system developed by the World Customs Organization (WCO) for product nomenclature and commodity description system.
- What is UQC?
UQC it is a unit of measurement and stands for Unique Quantity Code. such as 1 kilogramme of rice, 1 litre of milk, 100 meters of fabrics etc.
- Is Royalty subject to GST?
Yes, it’s applied under the reverse charge mechanism.
- Is GST applicable to publications?
- Who pays GST tax?
The GST is paid by consumers only, but businesses have to send it to the government while selling the goods and services.
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