What is Goods and Services Tax (GST)?What are the indirect taxes?

GST is a single indirect tax that is the same everywhere. It was made to replace Central and State indirect taxes like VAT, CENVAT, and others with a single, uniform indirect tax. Any business, no matter how big or small, has to pay GST. This makes it one of the best tax changes the country has ever made. A single tax system will be used for the whole country. As the name suggests, GST will apply to both goods and services, and India will use a dual GST scheme to keep the Centre and the State from interfering with each other. The Union Finance Minister will be in charge of the GST council, which will be made up of Finance Ministers from different states. GST will be set up as a four-tiered tax system with tax rates of 5%, 12%, 18%, and 28% for different types of goods and services. Most necessary goods, like rice and wheat, keep their 0% rate.

What are the indirect taxes that GST has replace?

It is meant to be a standard tax for the whole country. It will replace the following indirect taxes that the Centre and the State used to charge:

Taxes that the Center charges and collects:

Central Excise duty
Additional Duties of Customs (commonly known as CVD)
Special Additional Duty of Customs (SAD)
Service Tax

Taxes levied and collected by the State:

State VAT
Central Sales Tax
Entertainment and Amusement Tax (except when levied by the local bodies)
Taxes on lotteries, betting and gambling

What is the framework that the GST follows?

India will use the dual form of GST, just like countries like Canada and Brazil. CGST (Central items and Services Tax) and SGST (State Goods and Services Tax) will be charged when items and services are sold within the state. The Integrated items and Services Tax (IGST) will be charged when items and services are sold into other states. Importing things will be subject to IGST because it will be seen as a supply between states. Basic customs duty will also be charged on things that are brought in. But exports and goods to SEZ will not be taxed.

Benefits of GST

As was already said, GST will create a single tax system for the whole country. This will help get rid of the tax result of taxes going up and up. The term “cascading effect” refers to having to pay taxes on taxes. With GST, this won’t happen anymore because the unified tax will bring all secondary taxes under one roof. Another important benefit of GST is that the input tax credit can be used on both items and services, which gets rid of the cascading effect. Since there won’t be a separate VAT and service tax, GST will also make it easier to file and pay taxes. Read our piece to find out how GST can help you.

Who are the taxable persons under GST?

The short answer is anyone who runs a business in India and is registered or has to be registered under the GST Act.
Registration for GST is required, among other things, for:

Any business whose turnover in a financial year exceeds Rs 20 lakhs (Rs 10 lakhs for North Eastern and hill states)
An input service distributor
An E-commerce operator or aggregator
A person who supplies via e-commerce aggregator

What is a GSTIN?

GSTIN stands for the GST identification number that will be given to every business. A 15-digit Goods and Services Taxpayer Identification Number (GSTIN) will be given to each taxpayer based on his or her PAN and the state in which they live. Also, keep in mind that you must have a PAN in order to sign up for GST. It’s easy to sign up for GST, and our piece walks you through the steps.

What is Reverse Charge?

Most of the time, the tax is paid by the person who sells the goods. Sometimes, the tax is paid by the person who buys the goods. This is called “reverse charge” because the tax gets paid backwards. This was already the case before GST, when VAT was in place, but it only applied to services. Now, under the GST, it will also apply to goods.

What happens to mixed supply and composite supply under GST?

Under GST, a new idea called “mixed supply” and “composite supply” has been added. This will cover all goods made at the same time, even if they have nothing to do with each other. This idea is kind of like the package services that used to be available. The only thing that is completely new is the idea of mixed supply. Let’s look at these things in more depth. A composite supply is a bundle of two or more things or services that are sold or given away together. Only one of these things can be the main source of supply, but they can’t be sold separately. This is where the idea of a “compound supply” comes in. For example, when things are packed, shipped, and insured, the goods, packing materials, shipping, and insurance are all part of a composite supply. If there are no things to ship, insurance and shipping can’t be done separately. So, the main source is the supply of goods. A taxable person makes a mixed supply when they sell two or more different things or services at the same time for the same price. Each of these things can be given on its own and doesn’t need the others. A mixed supply is, for example, a box of canned foods, sweets, chocolates, cakes, dry fruits, carbonated drinks, and fruit juices that is sold for one price. Each one can be sold on its own. Since the GST rate on carbonated drinks is the highest, at 28%, carbonated drinks will be considered the main source. To learn more, read our piece on mixed and composite supplies.

What is continuous supply?

A continuous supply is when things and services are offered or given out on a regular basis (every two weeks, every month, etc.) and payments are also made on a regular basis. For example, a telecom and internet company will have a steady supply because they have been doing business for a long time and get paid every month or three months.

What is a compliance rating?

The GST compliance rating is a success grade given to all taxpayers who are registered. This grade tells you how well the supplier will follow the rules for GST. This lets the buyer choose the seller based on how well they follow GST rules. Based on the type of business, the rating system can be made on a range from 1 to 10, with 10 being the most complaints and 1 being the least.

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What is Goods and Services Tax (GST)?