BASIC KNOWLEDGE ABOUT GST (Everyone Need to Know)

Basics About Goods & Service Tax (GST)

    Goods and Services Tax (GST) is a comprehensive indirect tax system implemented in many countries, including India. It was introduced with the aim of simplifying the taxation structure, eliminating cascading effects, and promoting a unified market. Here's a brief overview of GST:

 

1. What is GST?

GST is a value-added tax levied on the supply of goods and services at each stage of the supply chain, from manufacturers to consumers. It replaced multiple indirect taxes such as excise duty, service tax, VAT, and others, streamlining the tax regime.

 

2. GST Structure:

GST is classified into two components: Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). Both are levied by the central and state governments, respectively, on intra-state supplies. For inter-state supplies, Integrated Goods and Services Tax (IGST) is levied by the central government.

 

3. GST Registration:

Businesses with a certain turnover threshold are required to register under GST. This registration provides a unique Goods and Services Tax Identification Number (GSTIN), enabling them to collect and remit GST on their supplies.

 

4. GST Rates and Slabs:

GST is categorized into different tax slabs based on the nature of goods and services. In India, there are primarily four GST slabs: 5%, 12%, 18%, and 28%. Certain goods and services are exempted from GST or taxed at a nil rate.

 

5. Input Tax Credit (ITC):

GST allows businesses to claim input tax credit, which means they can offset the GST paid on purchases against the GST collected on sales. This mechanism eliminates the cascading effect of taxes, ensuring that tax is levied only on the value addition at each stage of the supply chain.

 

6. GST Returns:

Registered businesses are required to file periodic GST returns, providing details of their sales, purchases, and tax payments. The returns help in reconciling the input tax credit claimed by businesses and facilitate compliance.

 

7. E-way Bill:

Under GST, the movement of goods beyond a certain value requires an electronic waybill known as an e-way bill. It ensures the seamless movement of goods across states and assists in effective tax administration.

 

8. Composition Scheme:

Small businesses with a turnover below a specified threshold can opt for the composition scheme. It offers simplified compliance requirements and allows them to pay GST at a lower rate based on their turnover.

 

9. GST Council:

The GST Council is the governing body responsible for making policy decisions related to GST. It comprises representatives from the central and state governments and plays a crucial role in deciding tax rates, exemptions, and procedural changes.

 

10. Advantages of GST:

GST has several benefits, including:

 

   a. Simplicity and Ease of Compliance: GST replaced multiple taxes with a single tax, making the tax structure more straightforward. It streamlined compliance procedures and reduced paperwork.

 

   b. Elimination of Cascading Effect: GST's input tax credit mechanism eliminates the cascading effect of taxes, ensuring tax is levied only on the value addition.

 

   c. Uniform Tax Structure: GST promotes a unified market by ensuring consistency in tax rates and procedures across states, enabling seamless inter-state trade.

 

   d. Boost to Economic Growth: GST simplifies the tax system, encourages formalization of the economy, and reduces tax evasion, which ultimately contributes to economic growth.

 

In conclusion, GST is a significant tax reform that aims to simplify and rationalize the indirect tax structure. Its implementation has transformed the way businesses operate and has brought transparency, efficiency, and uniformity to the tax regime.