Features of GST
The Goods and Services Tax (GST) in India has the following features:
- Comprehensive: GST subsumes multiple indirect taxes such as VAT, Excise Duty, Service Tax, etc.
- Dual GST: GST in India is dual in nature, which means that it is levied by both the Central and State Governments, and it is divided into two parts: Central GST (CGST) and State GST (SGST).
- Input Tax Credit: GST allows businesses to claim credit for the GST paid on their inputs (goods and services used in the course of business) against the GST payable on their outputs (goods and services sold by the business).
- Registration: Businesses whose turnover exceeds a certain threshold limit (currently Rs. 40 Lakhs for most states) are required to register for GST.
- Returns: Businesses are required to file regular returns to the government, disclosing their sales and GST liability.
- E-way bill: Businesses are required to generate an e-way bill for the movement of goods worth more than Rs. 50,000.
- Electronic Invoicing: GST also introduced the concept of electronic invoicing which is mandatory for certain taxpayers
- Simplified compliance: GST is intended to simplify compliance by reducing the number of taxes that need to be paid, making it easier for businesses to comply with tax laws.
- Harmonized tax system: GST aims to create a harmonized tax system across India by removing barriers to the movement of goods and services between states.
- Increased revenue: GST is intended to increase revenue for the government by expanding the tax base and making it more difficult for businesses to evade taxes.
- Cascading effect: GST eliminates the cascading effect of taxes, where taxes are levied on taxes, making the overall cost of goods and services lower for consumers.
Benefits of GST
The Goods and Services Tax (GST) in India brings several benefits to businesses, consumers and the government, some of them are:
- Simplification of the tax system: GST subsumes multiple indirect taxes such as VAT, Excise Duty, Service Tax, etc. This simplifies the tax system and makes it easier for businesses to comply with tax laws.
- Improved compliance: GST is a self-policing system, where businesses are responsible for collecting GST from their customers and depositing it with the government. This improves compliance and reduces the chances of tax evasion.
- Increased revenue: GST is intended to increase revenue for the government by expanding the tax base and making it more difficult for businesses to evade taxes.
- Reduced cascading effect: GST eliminates the cascading effect of taxes, where taxes are levied on taxes, making the overall cost of goods and services lower for consumers.
- Improved competitiveness: GST makes it easier for businesses to operate across state borders, which improves competitiveness and encourages investment.
- Input Tax Credit: GST allows businesses to claim credit for the GST paid on their inputs (goods and services used in the course of business) against the GST payable on their outputs (goods and services sold by the business). This reduces the tax burden on businesses and makes it easier for them to comply with tax laws.
- E-way bill and electronic invoicing: GST introduced e-way bill and electronic invoicing system which improves the transparency in the movement of goods and reduces the compliance burden for the businesses.
- Harmonized tax system: GST aims to create a harmonized tax system across India by removing barriers to the movement of goods and services between states.
- Increased transparency: GST also improves the transparency in the tax system and makes it more predictable for businesses.
- Increased consumer confidence: GST also increases consumer confidence by reducing the overall cost of goods and services.
What are the 3 types of GST?
There are three types of GST in India:
- CGST (Central GST) which is collected by the Central government
- SGST (State GST) which is collected by the State government
- IGST (Integrated GST) which is collected by the Central government on inter-state supply of goods and services.
CGST and SGST are levied on intrastate supply of goods and services and the revenue collected from these taxes is retained by the respective state government. IGST, on the other hand, is levied on inter-state supply of goods and services and the revenue collected is retained by the Central Government.
What is the main purpose of GST?
The main purpose of GST is to simplify and streamline the tax system in India by replacing multiple indirect taxes with a single, unified tax. GST is intended to create a common national market by removing barriers to the movement of goods and services between states, and to make it easier for businesses to comply with tax laws by simplifying the process of tax collection and reducing the number of taxes that need to be paid. Additionally, GST is intended to increase revenue for the government by expanding the tax base and making it more difficult for businesses to evade taxes.
GST aims to eliminate the cascading effect of taxes, where taxes are levied on taxes, making the overall cost of goods and services higher for consumers. By subsuming various indirect taxes, GST aims to make the tax system more transparent, predictable and less complicated for businesses, thereby increasing their competitiveness and encouraging investment.
In summary, the main purpose of GST is to create a simpler and more efficient tax system, increase revenue for the government, create a common national market, and reduce the overall cost of goods and services for consumers.
Who is called father of GST?
The father of GST in India is considered to be Dr. Asim Dasgupta. Dr. Dasgupta was the Finance Minister of West Bengal state from 2000 to 2011 and the Chairman of the Empowered Committee of State Finance Ministers on GST during that period. He played a key role in the designing and implementation of the GST system in India.
He was instrumental in pushing for the GST system to be implemented in India and in bringing all the states on board to support the new tax system. He was closely involved in the drafting of the GST legislation and worked to build consensus among the various stakeholders. Dr. Dasgupta passed away in 2021.
What is GST percentage?
In India, GST is applied at various rates depending on the goods or services being sold. The GST rates are divided into five slabs:
- 0% GST: Basic necessities such as food grains, fresh fruits and vegetables, and some essential services such as education, healthcare, and public transport are taxed at 0%.
- 5% GST: Some goods such as skimmed milk powder, fish fillet, and some services such as transportation of goods by rail, and small restaurants are taxed at 5%.
- 12% GST: Some goods such as frozen meat products, butter, cheese, ghee and some services such as telephone bills, and hotel accommodation with tariffs below Rs. 1,000 are taxed at 12%.
- 18% GST: Most goods and services fall under this slab, including items like air conditioners, washing machines, and packaged food items, as well as services such as insurance, and hotel accommodation with tariffs between Rs. 1,000 and Rs. 7,500.
- 28% GST: Luxury and sin goods such as tobacco, pan masala, and aerated water are taxed at the highest slab of 28%. Services such as renting of a motor vehicle, and hotel accommodation with tariffs above Rs. 7,500 are also taxed at 28%.
It’s worth noting that GST council, which is made up of representatives from the Central and State Governments, periodically reviews and can change the GST rates.
What is GST formula?
The GST formula is used to calculate the amount of GST that is included in the price of a good or service. The formula is as follows:
GST Amount = (Price of the good or service x GST Rate) / 100
Here, the “Price of the good or service” is the total cost of the item, including any taxes that were already included in the price. The “GST Rate” is the percentage rate at which GST is applied to the item, which is one of the rates mentioned in my previous answer (0%, 5%, 12%, 18%, or 28%).
For example, if the price of a good is Rs. 100 and the GST rate is 18%, the GST amount would be:
GST Amount = (100 x 18) / 100 = 18
Therefore, the total cost of the good including GST would be Rs. 100 + Rs. 18 = Rs. 118
There is also another formula that GST is calculated with respect to the taxable value. This formula is:
GST Amount = Taxable Value x GST Rate / (100 + GST Rate)
It is similar to the previous one, but with Taxable Value instead of Price of the good or service. Taxable value is the value of the goods or services on which GST is actually calculated, it’s the value of goods or services after deducting all the discounts, exemptions and GST already included on the invoice.
This formula is also used when trying to calculate GST on the input tax credit.
Is GST tax free?
No, GST is not a tax-free system. GST is an indirect tax that is applied to the sale of goods and services in India. GST is intended to simplify the tax system and increase revenue for the government by expanding the tax base and making it more difficult for businesses to evade taxes. GST is not free, it is an indirect tax which is added on to the price of goods and services, and is paid by the consumers when they purchase those goods or services.
However, certain goods and services are taxed at 0% GST rate, these include basic necessities such as food grains, fresh fruits and vegetables, and some essential services such as education and healthcare. The GST council periodically reviews the GST rates, and can change the tax rates, so it’s worth to check the GST rates periodically.
It’s worth noting that GST is a self-policing system, where businesses are responsible for collecting GST from their customers and depositing it with the government, and GST is also creditable, meaning that GST paid on inputs (goods and services used in the course of business) can be offset against GST payable on output (goods and services sold by the business). This is intended to reduce the tax burden on businesses and make it easier for them to comply with tax laws.
How do I calculate GST?
To calculate GST, you can use the following formula:
GST Amount = (Price of the good or service x GST Rate) / 100
Where the “Price of the good or service” is the total cost of the item, including any taxes that were already included in the price and “GST Rate” is the percentage rate at which GST is applied to the item (0%, 5%, 12%, 18%, or 28%).
For example, if you want to calculate GST on a good that costs Rs. 100 and the GST rate is 18%, you would use the following calculation:
GST Amount = (100 x 18) / 100 = 18
Therefore, the GST amount is 18 Rupees.
You can also calculate GST on the taxable value, in this case the formula is:
GST Amount = Taxable Value x GST Rate / (100 + GST Rate)
Where “Taxable Value” is the value of the goods or services on which GST is actually calculated, it’s the value of goods or services after deducting all the discounts, exemptions, and GST already included on the invoice.
Another way is to use GST calculator which are available online, you can enter the value of the item and GST rate, it will automatically calculate GST amount for you.
It’s worth noting that GST council, which is made up of representatives from the Central and State Governments, periodically reviews and can change the GST rates. So, it’s advisable to check the GST rate for the item you want to calculate before applying the formula.
What is GST for salary?
GST is not applicable to salary income. GST is an indirect tax that is applied to the sale of goods and services. Salary income is considered to be a form of direct income, and is therefore not subject to GST. However, certain goods and services that are used by employees, such as telephone bills, transportation, or accommodation, may be subject to GST. In this case, the employer or the employee can claim GST credit, if they are registered under GST, on the GST paid on these goods and services.
It’s worth noting that salary income is subject to income tax, which is a separate tax that is calculated based on the employee’s income level and other factors such as deductions and exemptions. Employers are responsible for withholding income tax from employee’s salary and depositing it with the government, and employees are responsible for filing their income tax returns.
Is GST always 15 percent?
No, GST is not always 15%. GST in India is applied at various rates depending on the goods or services being sold. GST rates are divided into five slabs: 0%, 5%, 12%, 18%, and 28%.
The GST council, which is made up of representatives from the Central and State Governments, periodically reviews the GST rates and can change them. GST rate for a particular good or service is determined by the GST council based on the item’s nature, usage and other factors, and is applied uniformly across the country.
It’s important to note that GST rates may change over time, and it’s advisable to check the current GST rate for a particular item before making a purchase or calculating GST. You can check the GST rates on the official website of GST council or through GST Suvidha Provider (GSP) or GST Practitioner (GSTP) authorized by GST council.
GST FAQ
Q: What is GST?
A: GST stands for Goods and Services Tax, it is an indirect tax which was introduced in India on July 1, 2017, replacing various taxes that were levied by the central and state governments. GST is a destination-based tax, which means that the tax is collected by the state where the goods or services are consumed, rather than where they are produced. GST is applied at various rates, including 0%, 5%, 12%, 18%, and 28%, depending on the goods or services being sold.
Q: What are the different types of GST?
A: There are three types of GST in India: CGST (Central GST) which is collected by the Central government, SGST (State GST) which is collected by the State government, and IGST (Integrated GST) which is collected by the Central government on inter-state supply of goods and services.
Q: What is the GST rate for a particular item?
A: GST rate for a particular item is determined by the GST council and it can be 0%, 5%, 12%, 18%, or 28%. The GST council periodically reviews and can change the GST rates.
Q: Is GST creditable?
A: Yes, GST is creditable, meaning that GST paid on inputs (goods and services used in the course of business) can be offset against GST payable on output (goods and services sold by the business). This is intended to reduce the tax burden on businesses and make it easier for them to comply with tax laws.
Q: Is GST applicable to salary income?
A: No, GST is not applicable to salary income. Salary income is considered to be a form of direct income, and is therefore not subject to GST.
Q: How often do I need to file GST returns?
A: Businesses are required to file regular returns to the government, disclosing their sales and GST liability. The frequency of filing GST returns depends on the turnover of the business and can be monthly, quarterly, or annually.
Q: What is the threshold limit for GST registration?
A: Businesses whose turnover exceeds a certain threshold limit (currently Rs. 40 Lakhs for most states) are required to register for GST.
Q: What is the benefit of e-way bill?
A: E-way bill is an electronic document that is required for the movement of goods worth more than Rs. 50,000. It helps in tracking the movement of goods and improves transparency in the supply chain.
