Understanding Goods and Services Tax (GST) in India
Read below to know about Goods and Services Tax (GST) Regime in India
What is GST?
GST is an Indirect Tax which is levied on the supply of both goods and services in India. It is destination-based tax where tax is levied on every value addition. It was implemented on 1st July 2017. All the state and central taxes and duties under the erstwhile indirect tax regime except Custom Duty levied on import of goods were subsumed with the implementation of GST.
India has adopted a dual GST model where GST shall have two components one levied by the Centre (referred to as Central GST), and the other levied by the States (referred to as State GST).
What are the merits of GST?
Some of the ways in which GST is beneficial are stated below:
- Avoidance of multiplicity of taxation;
- Enhanced transparency in the tax regime;
- Increased uniformity preventing unhealthy competition between the States;
- Elimination of double charging system;
- Reduction of cascading effect by limiting the taxation to value addition only;
- Easy filing and necessary documentation owing to reliance on digitalization;
- Prevention of tax evasion;
- Increase in the revenue
What are different Components of GST in India?
- Central Goods or Services Tax or (“CGST”) is the tax levied by Central Government on an intra-state supply of goods and/or services.
- State Goods and Services Tax (“SGST”) is the tax levied by the State Government on an intra-state supply of goods and/or services.
- Union Territory Goods and Services Tax (“UTGST”) is the tax levied by the Union Territory Government on an intra-state supply of goods and/or services.
- Integrated Goods and Services Tax (“IGST”) is the tax levied on an inter-state supply of goods or services.
What is the threshold limit for registration under GST?
Taxpayers with an aggregate turnover upto Rupees Forty Lakhs are exempt from obtaining registration under GST. For North-Eastern states, taxpayers with an aggregate turnover upto Rupees Twenty Lakhs are exempt from obtaining registration under GST.
How can a return be filed under GST?
Taxpayers are required to file returns under GST on annual as well as monthly and quarterly basis in the terms of the forms available based on applicability and duration.
Whether goods and services are both liable to GST?
Yes, goods and services are both liable to GST. The applicable component of GST on the supply of goods/ services shall depend on whether the supply of goods/services is an inter-state supply or an intra-state supply.
How is GST applied in respect of goods/ services?
Dual system of GST shall be levied on goods and services. Centre would levy and collect Central Goods and Services Tax (hereinafter referred to as “CGST”), and States would levy and collect the State Goods and Services Tax (hereinafter referred to as “SGST”) on all transactions within a State.
How should dealers register for GST?
Existing or new dealers are required to apply online for registration under GST after the submission of the requisite documents. After approval of the said application, each dealer would be allotted a 15 digit common identification number also known as GSTIN.
When shall an entity be liable to pay GST?
An entity shall be liable to pay GST when the turnover is over the threshold of INR 2,0000,000 or INR 1,000,000 in case of North Eastern & Special Category States unless specifically exempted.
Whether services provided by lawyers / law firms to clients are liable to pay GST?
Lawyers/ firm of lawyers are exempt from payment of GST. The services provided by a lawyer/law firm to a body corporate are required to be discharged by the body corporate under reverse charge mechanism.
Can a person without GST registration claim ITC and collect tax?
No, a person without GST registration can neither collect GST from his customers nor can claim any input tax credit of GST paid by him.
Why is place of supply essential under GST in India?
The fundamental objective under GST is that is it should tax the consumption of supply of goods or services at the destination or at the point of consumption. Accordingly, place of supply determines the place i.e. taxable jurisdiction where the tax should be levied.
The place of supply determines whether a transaction qualifies as an intra-state supply or an inter-state supply. This will assist in determining that the supply of goods or services is subject to CGST and SGST in case of an intra-state supply or IGST in case of an inter-state supply.
To know more about GST in India
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