GST (Goods and Services Taxes) – A Complete Guide On the New Tax Bill
Last year, President Pranab Mukherjee gave his approval for the long pending Goods and Sevice Tax (GST) Bill. This is considered to be India’s biggest indirect tax reform. The government is all set to roll out the implementation of this re-formative bill from 1 July 2017. For this, 4 new supplementary GST draft bills were passed in the Lok Sabha and Rajya Sabha recently.
GST will replace many existing indirect taxes. The implementation could mean different tax rules for you.
Let’s have a Look at the Impact of GST on Different Sectors:
Here is Everything You need to Know about GST:
What is GST?
GST is a single tax that replaces all the existing indirect taxes. It is a tax levied on the manufacture, sale, and consumption of goods and services in the country. This re-formative tax aims to create a single market. Once the GST Act comes into force, you will have to pay tax only once on goods and services.
What are the salient features of GST?
- It has two components:
The GST tax will be made of two components. One will be levied by the Centre and the other by the States.
- Rate structure:
The maximum rate of GST can be 40%. The GST council approved a four slab rate structure of 5%, 12%, 18% and 28%. The rates for essential items would be lower. Whereas, luxurious and sin goods (alcohol, cigarettes) will have a higher tax rate.
GST will be applicable to goods and services. However, there are certain goods and services that will not be covered by GST. These include natural gas, crude oil, aviation fuel, diesel, and petrol.
What Are the Advantages of GST?
For long, manufacturers had to pay taxes at multiple levels. There is excise duty when the good is manufactured. There is sales tax when it reaches the market and it varies from one state to another. There is Octroy when it enters metropolitan cities. GST eliminates taxes at multiple stages for manufacturers. This is likely to reduce the time taken to move goods from the factory to the market. There is a possibility that prices of some goods and services you use could decline. Such a single tax will ensure uniformity of the tax rates throughout the country. This is likely to eliminate unhealthy competition among the states.
Elimination of multiple taxes also means ease of filing returns by individuals. The entire process becomes hassle-free. This is because there will be lesser records to maintain.
What Are the Disadvantages of GST?
Every coin has two sides. GST also has certain perceived disadvantages. GST is likely to affect small businesses in the manufacturing sector. This is because, currently, only those businesses with a turnover above Rs.1.50 crore, have to pay excise duty. Under GST, this limit is reduced to Rs.20 lakh. This means some tax burden for such small businesses
Once the GST is in force, businesses registered under VAT or Service Tax will have to migrate to the new act. To migrate, you will need a provisional ID and password. These will either be provided by the Central Board of Excise and Customs (CBEC) or state commercial tax departments. You are liable to register for GST only if your aggregate turnover in a year exceeds Rs.20 lakh. This limit is Rs.10 lakh for north-eastern states including Sikkim. In case of multiple businesses, you can register for each business separately.
India’s indirect tax structure is in the transition period. A provisional certificate will be given to the assesse registered under previous indirect tax laws. Such a certificate will be valid for a period of 6 months. You need to register for GST compulsorily if you meet the turnover requirement. Otherwise, you can either register voluntarily or go for a composite scheme.
Now, you will have to file returns as per the GST law. You will have separate return filing rules if you are any of the three – Registered under the composite scheme, input service distributor or a person liable to collect or deduct tax.
Invoicing under GST will be as per the government’s notified rule. You can issue only two types of invoices, namely tax invoice or a bill of supply. Such rules also provide for the timelines within which an invoice or a revised invoice can be issued.
GST aims to simplify the process of claiming a refund. Refunds would be calculated for each tax component separately. For claiming a refund, all you will have to do is file an application on the GST network portal.
Also Read : What will be the Impact of GST?
Latest news on GST – Draft GST Bills:
Lok Sabha and Rajya Sabha passed the following 4 drafts of GST bills last month:
- The Central Goods and Service Tax Bill 2017 (CGST)
- The Integrated Goods and Service Tax Bill 2017 (IGST)
- The Union Territory Goods and Service Tax Bill 2017 (UTGST)
- The Compensation Bill
The CGST sets tax laws for the supply of goods and services within the boundaries of a state. On the other hand, the IGST deals with the supply between different states. And, the UGST covers the supply within the Union territory. The last bill provides for the compensation to be given to the States.
The government is hopeful that the implementation of GST will increase the GDP by 1-2%.
The bottom line:
The government aims to leverage GST to make India a tax-efficient country. Some of the sectors could be affected adversely during the initial years. However, the government believes that GST will contribute to the growth of the Indian economy in the long run.