Goods and Service Tax (GST):
Goods and Service tax (GST) is an indirect form of tax which replaced many Central and State taxes in India like VAT, Service tax, Excise duty, Entry tax, Octroi, etc and was the biggest tax reform in India in recent times. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
GST is multi-stage as goods generally go through many stages and change hands from Manufacturer to wholesaler to retailer to consumer. There is a value addition at each stage hence GST is levied at each stage.
GST is destination-based tax, which means as the tax is collected by the state where the goods/service is consumed. For e.g, An equipment is manufactured in Tamilnadu and consumed in Karnataka, GST is levied at the point of consumption so tax revenue goes to Karnataka.
When would GST registration be required:
Goods and Service tax (GST) is required if your annual turnover is more than 20 lakhs. Irrespective of the turnover in the below cases GST has to be applied:
- Interstate sellers/service providers
- E-commerce operator/aggregator
- Exporters of Goods/Service
- Vendors on E-commerce portals
- Casual Taxable person- Person who supplies but has no fixed place
CGST, SGST, and IGST
CGST is a tax levied on Intra State supplies of goods and services by the Central Government and is governed by the CGST Act.
SGST is a tax levied on Intra State supplies of goods and services by the State Government and is governed by the SGST Act.
For e.g, The Startup Zone provides GST registration service to a business registered in Karnataka for Rs.2000, GST levied is 18% which is Rs.360 in which CGST is Rs.180 and SGST is Rs.180
IGST is a tax levied on all Inter-State supplies of goods and/or services and will be governed by the IGST Act. IGST will be also applicable on any supply of goods and/or services in case of import into India or export from India.
For e.g, The Startup Zone provides GST registration service to a business registered in Outside Karnataka for Rs.2000, GST levied is 18% which is Rs.360 in which IGST is Rs.360.
Benefits of Goods And Services Tax
- Creation of a unified common market as GST is one tax across the nation
- Removal of the cascading effect which was prevailing in VAT and other taxes
- Introduction of GST has regulated the unorganized sector
- Composition scheme for SME/MSMEs
- Seamless GST input credit on goods/services
- Simpler tax regime
- Higher threshold for registration
- Easy tax filing and documentation
- Increased efficiency in logistics
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