Know GST

Tax is a mandatory financial charge or some other type of levy imposed upon a taxpayer (an individual or other legal entity) by the Government in order to fund various public expenditures. Taxes contribute to the major source of revenue for a country. The money collected as tax is utilized for the growth and development of the nation and for the maintenance of public properties and services. There are two major types of taxation according to the Government of India, direct tax and indirect tax.

DIRECT TAX & INDIRECT TAX

Direct tax is levied directly on personal or corporate income. Indirect tax is levied on the price of a good or service.

In direct tax, the incidence and impact of taxation fall on the same entity. In this case, the burden of tax cannot be transferred by the tax payer to someone else. The taxpayer has to pay the tax directly to the government.

In case of indirect tax, the burden of tax can be shifted by the tax payer to someone else. Indirect tax is levied on goods and services rather than on income or profits. All the indirect taxes, both central and state, are now subsumed under GST.

GST is one indirect tax for the whole of India that makes India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Taxes paid at each stage of trade will be available in the subsequent stage of value addition as input credit set off, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
Goods & Service Tax or GST is an Indirect Tax levied on the supply of goods and services. It has replaced various indirect taxes and brought them under one umbrella to make compliance easier.

(i) Taxes previously levied and collected by the Centre:

  • Central Excise duty
  • Additional Duties of Customs (commonly known as CVD)
  • Special Additional Duty of Customs (SAD)
  • Service Tax

AND

(ii) Taxes previously levied and collected by the State:

  • State VAT
  • Central Sales Tax
  • Entertainment and Amusement Tax (except when levied by the local bodies)
  • Taxes on lotteries, betting, and gambling
  • Luxury Tax
  • Octroi

India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes. Both the levels of Government have distinct responsibilities to perform for which they need to raise resources.

  • Central GST or CGST – To be charged by the central government.
  • State GST or SGST – To be charged by the state government.
  • Integrated GST or IGST – To be charged by central government on the inter-state supply of various goods and services.

There will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State.

In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services. The IGST would be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another.

In one invoice either CGST & SGST or IGST is available. Not all in one invoice

 

The GST scheme consists of different slab structure under which the proposed goods and services will be taxed accordingly. The five slabs currently available are 0%, 5%, 12%, 18% and 28%.

GST cess is levied on intra-state supply of goods or services and inter-state supply of goods or services to provide compensation to the States for loss of revenue due to implementation of GST in India. As per the Goods and Services Tax (Compensation to State) Act, 2017, GST compensation cess would be levied for a period of 5 years from GST implementation. Cess will be levied on Goods and supplies notified from time to time.

Every registered supplier of taxable goods and services can collect tax, except those who have registered under the composition scheme. The collection of tax is done at the time of supply of Goods. The taxable person must prominently indicate the GST amount on tax invoices. GST is charged on the value or selling price of the products at the prescribed rate of tax.

Taxable person under composition scheme is restricted from collecting tax. Every registered taxable person, except composition dealers and those who have registered under TDC system, is conferred with power to collect tax under GST.

 

Invoicing forms a crucial function when it comes to the purpose of execution of a transaction. On every outward / inward supply, an invoice is issued by the supplier i.e. the person who is making the sale. is to be derogatorily issued if the value of supply is more than Rs.200/- and is the basis for a charge of tax.
In the GST regime, two types of invoices are to be issued:

  1. Tax invoice
  2. Bill of supply

When a registered taxable person supplies taxable goods or services, a GST invoice is to be issued. 

Particulars

  • Name, Address & of supplier
  • Consecutive Serial Number
  • Date of issue
  • Name, Address of recipient
  • (as per  on turnover basis)
  • Description of Goods, Quantity &
  • (and Address of Delivery if it is different from Place Of Supply)
  • Signature

Tax invoice is generally issued to charge the tax and pass on the credit. In GST there are some instances where the supplier is not allowed to charge any tax and hence a Tax invoice can’t be issued instead another document called Bill of Supply is issued.

Cases where a registered supplier needs to issue bill of supply:

  • Supply of exempted goods or services
  • Supplier is paying tax under composition scheme

Particulars

  • Name, Address & of supplier
  • Consecutive Serial Number
  • Date of issue
  • Name, Address & GSTIN (if registered) of recipient
  • Description of Goods, Quantity & Value
  • Signature or Digital Signature


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