Good and Services Tax – Indirect Tax which replaced many indirect taxes in India e. excise duty, VAT, Service tax etc.
Good and service tax (GST) was passed in Parliament on 29th March 2017. With effect from 1st July 2017 GST is levied on supply of good and services. GST law in India is comprehensive, multi-stage, destination-based tax that is levied on very value addition. GST is single domestic indirect tax law for the entire country
Before GST introduced, the structure of indirect tax levy in India is as follow
Under the GST regime, the tax is levied at every point of sale. As
Intra state sales – Central GST and state GST.
All the inter-state sales are chargeable to the Integrated GST.
The Goods and Services Tax is levied on each of these stages making it a multi-stage tax.
Consider goods manufactured in Maharashtra and sold to the final consumer in Karnataka. Since the Goods and Service Tax is levied at the point of consumption, the entire tax revenue will go to Karnataka and not Maharashtra.
GST has mainly remove the cascading effect on the sale of goods and services, has impacted the cost of goods. Since GST regime eliminates the tax on tax, so cost of goods decreases.
Also, GST is mainly technologically driven. All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.
Components of GST
- CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)
- SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)
- IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)
In most cases, the tax structure under the new regime will be as follows:
|Transaction||New Regime||Old Regime||Revenue Distribution|
|Sale within the State||CGST + SGST||VAT + Central Excise/Service tax||Revenue will be shared equally between the Centre and the State|
|Sale to another State||IGST||Central Sales Tax + Excise/Service Tax||There will only be one type of tax (central) in case of inter-state sales. The Centre will then share the IGST revenue based on the destination of goods|
In the case of Goods and Services Tax, there is a way to claim the credit for tax paid in acquiring input. The individual who has already paid a tax can claim credit for this tax when he submits his GST returns.
In the end, every time an individual is able to claims the input tax credit, the sale price is reduced and the cost price for the buyer is reduced because of lower tax liability.
New Compliances under GST
E- Way bill
Under the e-way bill system, manufacturers, traders and transporters can generate e-way bills for the goods transported from the place of its origin to its destination on a common portal with ease. Tax authorities are also benefited as this system has reduced time at check -posts and helps reduce tax evasion.
Unique invoice reference number for every business-to-business invoice by uploading on the GSTN’s portal known as the invoice registration portal. The portal verifies the correctness and genuineness of the invoice. Thereafter, it authorises using the digital signature along with a QR code.
E-invoicing allows interoperability of invoices and helps reduce data entry errors. It is designed to pass the invoice information directly from the IRP to the GST portal and the e-way bill portal. It will, therefore, eliminate the requirement for manual data entry while filing ANX-1/GST returns and for the generation of part-A of the e-way bills.
Esarwa is an experienced application service provider (ASP) and partner of authorized GST Suvidha Providers (GSPs). To understand how Esarwa can help you with GST compliance automation, contact us through https://www.esarwa.com/index.php