The goods and services tax also known as GST is all ready to start from 1st July 2017. GST is basically imposed to revolutionize our way of paying taxes. GST PDF Law Explained.
What is GST?
GST is a comprehensive, multi-stage destination-based tax. It will be levied on every value addition such as clothes and so on. It is completely going to reform our current tax structure which is going to benefit our country. The question is, why does our country India need such a huge overhaul in its taxation policies? Well, it is a very broad concept and will be explained in this article.
The multi-stage basically refers to the steps an item goes through. From the production of the item to the final scale, it goes through many stages.
The first stage is the buying of raw materials. Without the raw materials, the production of the item cannot continue. Hence, it is a very important step. The second step is, however, the whole production process or manufacturing process. After the production is complete and the product is ready, we have to warehouse. It is the third stage which is as important as any other. The fourth stage is selling the products which are stored, to the retailers. Then, in the final stage, the retailers send it to the end consumers who are going to use the product. That completes the whole life cycle of any product.
GST is Good and Simple Tax. India has ushered GST at a historic midnight Parliament session. https://t.co/UkVaHO8p19
— Narendra Modi (@narendramodi) 30 June 2017
What is value addition?
Let’s assume that we are producing a shirt. For producing a shirt, the raw materials we need is yarn. The yarn is then used to produce the shirt. Basically, this means that the yarn is getting some value added to it after being transformed into a shirt.
After the manufacturing process is completed, the producers sell it to the warehousing agents. These warehousing agents attach labels and tags to every shirt which is received by them. This is yet another valuable addition to the shirt just because of the brand value.
After 2 addition of values is already done, the next addition of value is by the retailer. The warehousing agent sells it to the retailer who packages each shirt separately and invests in the marketing of them. This increases the value of the shirt even more, which is termed as the last value addition.
Now coming to the point, GST will be applied on all of these value additions. The monetary worth added to any product at each stage is termed as value addition.
After GST comes into action, it is going to be the only tax charged on all transactions happening during the manufacture. Earlier, what used to happen was that the center levied Excise duty on the manufacturer which was followed by the state adding VAT during the next sale. VAT was then applied for each stage till it reaches the end customer. Now, GST will be levied at every point of sale.
Let us assume one more thing. Suppose the entire manufacturing process is being done in Rajasthan. The final point of sale is in Karnataka. Since the GST will be levied at the consumption point, the revenue will go to Karnataka. When the product moves out from Rajasthan to Karnataka and reaches the end consumer, the GST levied will basically be called a destination-based tax. The revenue will be collected at the final point of sale which will be happening in Karnataka. This was the whole concept of the destination-based tax.
Why is GST so important?
Now that we completely know about GST, it is high time to know its importance. It will surely play a very major role in transforming the whole tax structure of the country. As the tax structure changes, the economy will also change, and it will be a positive bend.
Currently, before 1st July 2017, the tax structure of India is divided into two. One being the direct taxes and the other is the indirect taxes. The direct taxes are the one which cannot be transferred to anybody else. One example of such direct tax is income tax. It is you who is going to pay the income tax and you cannot put it on anybody else. The indirect taxes, however, can be transferred to someone else. This happens when we have to pay the VAT for buying any product. The tax is basically imposed to be paid by the shopkeepers but they transfer it to us. This means that we do not only have to pay the price of the product, but also the VAT.
The shopkeepers impose VAT on us just because they have to pay some tax while buying from the wholesaler. For making up that expense, we had to pay VAT. There is absolutely no other way that a shopkeeper can recover the amount he has paid as tax during other transactions.
This is the reason why GST is implemented. The goods and services tax will address this issue which will decrease the final liability on the end customer. The GST is going to have an input tax credit which will allow the sellers to claim back all the taxes he has paid.
How will the GST work?
There are three kinds of GST:
The revenue of this type of goods and services tax will be collected by the central government.
The revenue of this will be collected by the state governments. This will be charged for intrastate sales.
The revenue of this will be collected by the central government. This will be charged when you perform any inter-state sales.
In most cases, the tax structure under the new regime will be as follows:
|Transaction||New Regime||Old Regime||Comments|
|Sale within the state||CGST + SGST||VAT + Central Excise/Service tax||Revenue will now be shared between the Centre and the State|
|Sale to another State||IGST||Central Sales Tax + Excise/Service Tax||There will only be one type of tax (central) now in case of inter-state sales.|
Explain how will the GST work
let us take an example
Suppose, a dealer of Maharashtra is selling goods to a consumer in Maharashtra worth Rs. 10000. The total GST will be 18% which will comprise both the CGST and SGST rate of 9% each. In such a case, the consumer will be paying 18% of Rs. 10000 to the dealer. Rs. 1800 will be collected by the dealer which will be given to the central government and the Maharashtra government (state government). Rs. 900 each will be paid to both the governments by the dealers. It is definitely not the loss of the dealer because after all the consumer is paying 18% GST.
If the same transaction is happening from state to state, the taxes levied will be CGST and IGST. The rate will be completely same and consumers will have to pay the same amount. The difference is that the dealer will be distributing Rs. 1800 differently. In the first case, the dealer had to give two governments Rs. 900 each. In this case, as the deal is from one state to another, only the IGST will be charged in the same percentage. This means that Rs. 1800 will directly go to the center and will not be distributed to any other government body.
|Buys Raw Material @ 100||100||10||110|
|Manufactures @ 40||150||15||165|
|Adds value @ 30||195||19.5||214.5|
The GST is going to be a seamless flow of Input Tax Credit (ITC). The input tax credit is basically the tax paid on inputs used in the manufacturing process. Suppose, there is a 10% tax which one must pay to the government, he can subtract the amount he has paid as tax at the time of purchase. After subtraction, it will be the balance amount which will be paid to the government. It is definitely going to help every retailer.
जीएसटी के खास बिंदु…
-वस्तुओं और सेवाओं पर पूरे देश में एक समान टैक्स
-5%, 12%, 18%, 28% की चार बड़ी श्रेणियां
-अल्कोहल जीएसटी के दायरे से बाहर
-तेल से जुड़े उत्पाद भी जीएसटी के दायरे से बाहर
-उत्पादन से बिक्री तक हर चरण पर टैक्स
-लेकिन हर चरण में घटता जाएगा पिछला टैक्स
-ग्राहकों पर कुल टैक्स के बोझ में कमी
-केंद्रीय जीएसटी, राज्य जीएसटी और समग्र जीएसटी- कुल तीन स्तर
-कारोबारियों को हर महीने भरना होगा रिटर्न
-20 लाख तक के सालाना कारोबार पर जीएसटी नहीं
जीएसटी की तैयारी
-80 लाख करदाता नई व्यवस्था से जुड़ेंगे
-जीएसटी से जुड़े 66 लाख करदाता
-64,000 अधिकारियों को अब तक ट्रेनिंग
-सारी फ़ाइलिंग ऑनलाइन ही होगी
-25 बैंकपोर्टल से जुड़े
- It will help the country’s businesses gain a level playing field
- It will put us on par with foreign nations who have a more structured tax system
- It will also translate into gains for the end consumer who not have to pay cascading taxes anymore
- There will now be a single tax on goods and services