GST-known as Goods & Services tax came into effect on 1st July 2017 in India. If you are new to GST or maybe this whole system then this article is for you. We’ll go section wise starting with the basics and then diving in deeper to the vast level. We may even discuss some practical part so make sure to stick till the end.
So let’s start with a very basic question. What are taxes? What’s the purpose for it?
Taxes are basically mandatory contributions levied on to individuals or corporations by the government. Tax revenues are used by the government to finance activities including as public work and services such as Medicare, infrastructure, social welfare etc.
To help fund these public work and services and to build and maintain infrastructure government impose taxes on individuals and corporate residents. It is a destination-based tax, which means that it is collected at the point of consumption rather than at the point of origin.
GST subsumed various indirect taxes like excise duty, service tax, value-added tax (VAT), central sales tax, and octroi, among others, into a single tax regime. This simplification of the tax structure aimed to eliminate tax cascading and promote a more efficient tax system.
Below are the GST Rates being imposed on several different commodities-
GST is structured into four broad tax slabs: 5%, 12%, 18%, and 28%. Additionally, certain essential items are taxed at 0%, and there is a Cess on items like tobacco and luxury cars. The rates may be revised by the GST Council to accommodate economic changes and revenue requirements.
A few fundamentals of GST-
- CGST (Central Goods and Services Tax): Collected by the Central Government on intra-state supplies (transactions within a state).
- SGST (State Goods and Services Tax): Collected by the State Government on intra-state supplies.
- IGST (Integrated Goods and Services Tax): Applicable on inter-state supplies (transactions between different states).
- UTGST (Union Territory Goods and Services Tax): Levied on intra-Union Territory supplies.
- GST Compensation Cess: Imposed on certain goods to compensate states for any revenue loss due to the GST implementation.
Who should register for a GST Number?
Check your eligibility for GST registration based on your annual turnover.. The threshold for GST registration was Rs. 20 lakhs (Rs. 10 lakhs for special category states) for most states in India. However, these thresholds may have changed, so do verify the current limits with the GST authorities.
Lets now explore how India’s GST has become a game changer for businesses and compliance:
The GST system eliminates the cascading effect by allowing businesses to claim input tax credit (ITC) on taxes paid on their inputs. This means that the tax paid at each stage of the supply chain is offset against the tax collected at the next stage. This eliminates the cascading effect of taxes, resulting in cost savings for businesses.
The above tax also improvises compliance through a robust technology infrastructure, including the GSTN (Goods and Services Tax Network). This facilitates seamless tax filing and compliance. Their concerned portal enables businesses to file returns online, making the process more efficient and less prone to errors.
Moreover it has provided a significant boost to the e-commerce sector. It has simplified tax collection for online marketplaces and helped small sellers become GST-compliant, thereby expanding the digital economy.
GST has incentivized businesses to operate within the formal economy thereby encouraging formalization. Many previously unregistered businesses have opted for GST registration to avail of input tax credit benefits, leading to greater tax compliance.
GST has removed entry taxes and checkpoints, facilitating smoother movement of goods across the country. This has resulted in significant savings & streamlining of logistics and distribution costs for businesses.
Further, it has particularly been beneficial for SMEs. It has simplified their tax compliance process and reduced the burden of multiple tax filings, allowing them to focus on their core business operations.
Lastly , the framework relies on digital platforms for filing returns and making payments. This shift towards technology has reduced manual intervention, minimized the scope for evasion, and enhanced transparency in the tax system.
Overall, GST has created a more conducive environment for businesses to thrive in India. Embracing and mastering the nuances of GST has transitioned from being a choice to a necessity for businesses aiming to succeed in the Indian market. As India continues to refine and adapt its GST framework, businesses can anticipate further improvements in tax administration, compliance, and overall economic growth. In this ever-evolving landscape, GST remains a powerful tool for businesses to navigate the complexities of taxation while fostering growth and compliance in the Indian business ecosystem.
Do share your thoughts on this in the comment section below. Refer to the links attached for more such interesting articles.
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