GST Act was implemented in Goods and Services Tax Act 2017. Now only GST is levied in place of many indirect taxes like excise duty, custom duty, VAT, service tax etc.
Have you ever wondered how the tax levied on the goods we buy works? Or, do you have a question in your mind that who should get GST registration done? If yes, then you are not alone. GST (Goods and Services Tax) is a tax that has completely changed the tax system in India, GST implemented in 2017 replaced the old tax system like excise duty, VAT, service tax. Its purpose was to create a simple, transparent and theft-free tax system. It is applicable at uniform rates across the country and customers pay it directly in the price of the final product.
But many people have this question in their mind that what is GST and who is required to register for it. What is its benefit? Today we will know about this. Let us know every important thing about GST in this article. So first of all let us understand what is GST (Goods and Services Tax).
What is GST? (What is GST?)
The Goods and Services Tax Act was implemented in 2017. Many indirect taxes like excise duty, custom duty, VAT, service tax etc. are now replaced by only GST. The government’s objective behind implementing GST was to simplify the tax system and prevent tax evasion. This tax rate is the same all over the country.
That is, GST is a single, composite, indirect tax levied on the supply of goods and services. It is a multi-stage tax, which means that in the supply chain of goods, from their manufacturing to their consumption by retailers, whenever there is any value addition in the product, tax is levied. There is a provision to adjust the tax paid at each stage through input tax credit.
Input tax credit is a tax that businesses pay on their purchases and is later used to offset their tax liability at the time of sale. Businesses can reduce their tax burden by claiming credit for the GST paid on their purchases.
It is also a destination-based tax, which means that the tax will be levied at the destination where the goods or services are used by the customers, not at the place where the goods or services are produced or manufactured. Customers pay this tax at the final stage as it is included in the price of the product. The seller deposits the tax to the government, so it is considered an indirect tax.
GST Rate Slabs
Currently, there are five rate slabs for various goods and services for normal taxpayers. These are 0%, 5%, 12%, 18% and 28%, with lower rates on food items and essential services, and higher rates on luxury items.
Types of GST
There are four types of Goods and Services Tax, depending on where it is applicable.
- Central GST: It is a tax levied by the central government on intra-state transactions of goods and services.
- State GST: It is a tax levied by the state on the supply of goods and services within a state.
- UT GST: It is a tax levied by the state on the supply of goods and services within a Union territory.
- Integrated GST: This tax applies to inter-state sales of goods and services, and both the central and state governments share the revenue collected.
Who is required to register for GST?
GST registration is mandatory for all businesses whose turnover in a financial year is more than Rs 40 lakh (the limit is Rs 20 lakh in some states) or Rs 20 lakh (Rs 10 lakh in some states) in the service sector. It also applies to those who are already registered under older tax laws such as excise duty, VAT or service tax. Apart from this, it is also mandatory to register under GST for those who temporarily set up business at a location, suppliers and agents paying tax under the reverse charge mechanism, those running e-commerce platforms or selling services and goods through them, and businesses providing data or services online in India.
