What’s GST? About GST in India Explained
About GST: The Goods and Services Tax Explained!
(Can’t read? Watch video in the end instead)
GST is an abbreviation for goods and services tax. It came into to effect on 1st of July 2017. GST is an indirect tax in India levied on total Goods and services purchased and sold within a month.
Why it’s important for India: The new system is the biggest tax reform in India after Independence. It’s the most comprehensive tax policy adopted by the central. This was expected to boost Indian economy and overall growth.
About GST Calculation: GST is calculated and paid in the next month. The calculations are based on the total input and output supplies of goods and services a company makes in a month.
About GST Rates: The various GST Rates include 5%, 12%, 18% and 28%.
The launch of goods and services tax on 1st July midnight was a historic moment for India. The importance of the launch was the simplification of complexities involved in the previous tax system.
HSN Code: It is a code of 8 digits, to identify the rate of tax applicable. A company having turnover up to 1.5 crores need not mention HSN codes. Between 1.5 crores and up to 5 crores, the company has to mention 2 digit HSN code in invoices. If the turnover exceeds 5 crores in the preceding financial year it is necessary to mention 4 digit HSN code.
Changes: Previously Indian Tax System had several tax levy including Central Excise Duty, Services Tax, Surcharges, State Value-Added Tax, additional Customs Duty, Octroi. With the launch of GST, it replaced all of them with a simplified tax structure. India has adopted dual GST system which means it is administered by both the state and the Central governments.
Components: There are mainly four components in GST.
- CGST ( Central Goods and Services tax)
- SGST ( State Goods and services Tax)
- IGST (Interstate Goods and services Tax)
- UTGST (Union Territories Goods and services Tax)
CGST and SGSTs are applicable when the transaction is made within the state. IGST or integrated Goods and services Tax is applicable when the transactions are made between two states.
Applicability: The GST Bill is applicable under these circumstances –
- A person who is supplying goods and services, having turnover more than 20 lakhs is liable to pay GST.
- An interstate supplier.
- However, a e-commerce trader, person or persons specified by the council or the government as exception, Input service provider, an agent – are whether or not cross the turnover, however, are required to register themselves under GST regime.
E-way Bill: It is a project in GST. When the supplier transports goods between two places, he needs to get the e-way bill and carry along. You can read more about an e-way bill by searching above from our website as we’ve already covered it in previous post.
GSTN: It’s a non-profit organisation. Goods and Services Network (Read about gst.gov.in here) was formed to design website and create a platform where Government, stakeholders and taxpayers can engage.
You can also watch this video