Important Points About Goods and Services Tax (GST)
What is GST?
Goods and services tax is India’s most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states. It is a single national uniform tax levied across India on all goods and services.
Why is it required?
The indirect tax system is currently mired in multi-layered taxes levied by the Centre and state governments at different stages of the supply chain such as excise duty, octroi, central sales tax (CST) and value-added tax (VAT), among others. In GST, all these will be subsumed under a single regime.
How will the system work?
GST, if adopted, can dramatically alter tax administration. Then, the Centre and states will tax goods and services in identical rates. For instance, if 20% is the agreed rate on a certain good, the Centre and states will collect 10% each on the good. The proceeds would be shared on the basis of the devolution formula recommended by the Finance Commission.
What is the GST framework as per the new law?
GST is expected to replace a myriad of indirect taxes such as VAT, customs duty, Excise, CST, Service Tax, Entertainment Tax with a single tax called the Goods and Services Tax.
- Broadly there will be 2 forms of GST in India.
- At the intra-state level (when goods travel within a state) and at the inter-state level (when goods travel between states).
- At the intra-state level two types of GST shall be levied CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax).
- At the inter-state levelIGST (Or Integrated Goods and Services Tax) shall be levied.
- Imports shall be considered as inter-state supply.
- Exports shall be zero rated.
- Supplies to SEZ will be Zero-rated
Here is how set off works in case of GST –
IGST payments can be set off against – IGST, CGST, SGST on inputs
CGST payments can be set off against – IGST and CGST on inputs
SGST payments can be set off against – IGST and SGST on inputs
Hope our readers will find this information about GST useful. We will bring more details on the draft law which is under discussion and has not been approved yet, so you can better understand its impact on your business.