Understand GST and Its Impacts in 5 Simple Points

GST - India's Biggest Tax Reform

Goods and Service Tax or GST is an indirect tax that will subsume 17 different taxes and ultimately we will be left with One Nation, One Tax. Even though on surface GST may look like a complex web of newly minted tax reform, we will help you understand GST in 5 simple ways listed below.

Understand GST and Its Impacts in 5 Simple Points

Impacts of Goods and Services Tax 

  1. Variance Between Present Tax Regime and GST
    Currently, goods and services are taxed differently. Excise duty is levied on goods at the time of manufacturing and VAT is levied at the time of sale of goods. While services attract levy of service tax only.
    On the other hand, GST does not make any differentiation between goods and services. Under the GST regime, all activities pertaining to the supply side of transaction including sale, transfer, lease, and import of goods and/or services would attract GST.
    Moreover, the line of distinction between the manufacturer and trader would lose its significance under GST as both goods and services will be treated at par from the viewpoint of taxation.
  2. One Nation, One Tax – The Reality
    Though GST is being touted as a single tax mechanism throughout the country, in truth dual GST is being implemented. Intra-state transaction of goods and services will have two concurrent components i.e. Central GST (CGST) and State GST (SGST) whereas an inter-state supply transaction would attract levy of Integrated GST (IGST). Let us study an example to better explain the concept. Suppose you are a trader from Ludhiana and are supplying goods to a customer based in Chandigarh, then you will charge CGST while the state of Punjab will charge SGST. However, if the goods are being transferred to Agra (Uttar Pradesh), then IGST will be charged on the supply of goods. 
  3. Claiming of GST
    GST is payable on the transactional value of goods and services which includes various expenses such as the cost of packaging, commission and so on. Plus, the value of discounts offered at the time of sale or supply are permissible to be deducted provided certain prescribed conditions have been fulfilled. Moreover, to claim input tax credit, the supplier must deposit GST and file returns.
  4. GST Compliance
    A trader would need to be updated about various laws pertaining to CGST, IGST and SGST. This would increase in the level of tax compliance for the trader. Presently, a trader needs to file tax returns twice a year for payment of service tax, however under the GST regime, he would have to file as many as 61 returns (5 returns/month plus 1 annual return).
  5. Online Based Platform for GSTGST is a fully online based tax wherein all tax returns will be filed electronically without any paper physical form. Due to this reason, entrepreneurs, traders, manufacturers, small businessmen would have to become tech savvy to comply with GST rules and procedures. 

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