People have paid attention to the Goods and Services Tax (GST) rule. In India, a new rule has been proposed that will change how people do business and how goods and services are taxed. No one knows if it makes things cheaper for regular people like you and me. But this will change our jobs, our companies, and the way the economy works as a whole. Enough to make us want to learn more about it!

Who does it apply to?

• To every person who supplies goods and/or services of value exceeding Rs 20 lakh in a financial year. (Limit is Rs 10 lakh for some special category states). Compulsory registration for these. And GST must be paid when turnover exceeds Rs 20 lakh (Rs 10 lakh for some special category states).
  To any person making inter-state taxable supply of goods and/or services
• Every e-commerce operator
• Every person who supplies goods and/or services, other than branded services, through e-commerce operator
• Aggregators who supply services under their own brand name
• Casual Taxable Person
• Non-Resident Taxable Person
• Person required to deduct/collect tax (TDS/TCS)
• Input Service Distributor
• Person supplying online information and database access or retrieval services from a place outside India to a person in india, other than a registered taxable person.
• Person required to pay tax under Reverse Charge
• Person supplying the goods on behalf of other taxable person (eg. Agent)
• GST does NOT apply to Agriculturists
• GST does not apply to any person engaged exclusively in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax under this Act

What is the GST framework as per the new law?

GST is meant to replace secondary taxes like VAT, customs duty, Excise, CST, Service Tax, and 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 level IGST (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

Will the new GST allow tax cascading benefits?

Many of us know that service tax and VAT have cascading benefits, which means that you can get a credit for the tax you paid on supplies. In the case of service tax, for example, you charge service tax on the services you sell, and when you pay this tax, you can deduct the service tax you paid on the services you used as inputs. In the case of GST, this cascading benefit will also be possible.

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. To read the entire GST Bill draft, click here.