5 Important Things You Should Know About GST
GST has been a much debatable topic for many accountants since 2017. After the introduction of GST by the Indian government, the percentage of indirect tax has changed on many items. It has also eliminated several other types of taxes that were levied earlier on all the items.
The Goods and Services Tax (GST) is a kind of indirect tax on different goods and services. The consumers finally pay GST on different types of products and services. Since the introduction of GST, there is a single tax system in India.
From GST Registration to get a GST number, there are various things that you might not know. In this blog, we will discuss some important things about GST to help under this concept better.
What is GST?
Before knowing everything about GST, we must know what GST is. The Goods and Service Tax or GST is a type of indirect tax levied on various goods and services. After the GST introduction, there is a uniform tax on goods and services. It is introduced to levy a single tax system by removing all other kinds of indirect taxes on products and services.
Types of GST
There are different kinds of GST that you must know. Let us discuss the several kinds of GST in the below section:
IGSC is the Integrated Goods and Service Tax that is charged between two states on different goods and services. There is a separate act governing Integrated Goods and Services known as IGST Act. Central Government is the main body in collecting taxes on the supply of goods between two states.
Under the IGSC system, the taxes collected by the Central Government are divided among states. Both Central Government and State government get huge revenue through IGSC for infrastructure and development.
2. Central Goods and Services Tax (CGST)
The full form of CGST is Central Goods and Services Tax. It is a type of GST regime that is charged on transactions within the state. The revenue earned through this tax goes to the Central Government. After Central Government, the tax is further divided among the state government.
3. Union Territory Goods and Services Tax (UTGST)
Union Territory Goods and Service Tax comes under State Goods and Services Tax (SGST). This type of tax is charged on the supply of goods and services in the major Union Territories of India. This tax applies in Union Territories such as Daman Diu, Andaman and Nicobar Islands, Lakshadweep, Chandigarh, Dadra, and Nagar Haveli.
The main act governing UTGST is UTGST Act. The taxes are collected by the Union Territory government. UTGST is levied with CGST in all the Union Territories of India.
4. SGST or State Goods and Service Tax
SGST is a type of IGSC. State Goods and Service Tax is charged on the supply of goods and services within the same state. This tax is levied by the state on goods, products, and services offered within the state. SGST Act is the main act governing the State Goods and Service Tax. Revenue earned in this type of tax is divided between Central Government and State Government equally.
Things You Should Know About GST
There are many things about GST that one must know. Now, we will further discuss the different things related to GST.
Who Should Pay GST?
Every businessman has to pay tax to the government on his income. Before the introduction of GST, there were different taxes for different businesses, goods, and products. Now, there is a common indirect tax on all goods and services in the form of GST. Every manufacturer and supplier with an annual turnover of more than INR 20 lakh has to pay GST on goods and services. However, some items are exempt from paying GST.
Traders and businessmen in the northeastern and special category must file GST Return if they have an annual turnover of more than INR 10 Lakhs. GST is levied on all interstate transactions irrespective of annual income.
6 Things You Should Know About GST (Goods and Service Tax)
GST provides many benefits to traders and businessmen. Let us have a look at some of the major benefits of GST such as:
1. Eliminates Different Types of Indirect Taxes
Before GST's introduction, businessmen and suppliers had to pay several types of indirect taxes on goods and services. Many indirect taxes increased the price of goods and services. After GST, there is no need to pay different types of indirect taxes on goods and services.
2. Grows Revenue of Central and State Government
GST is levied on a continuous supply of goods and services. It helps to boost the income of the Central and State government for the growth and development of the country. Besides, it also boosts the GDP growth rate in the country.
3. No Tax on Tax
The Goods and Service Tax removes cascading effects on taxes. Now, businessmen do not have to pay taxes on taxes or other types of indirect taxes on products and services.
4. Goods and Services Exempt From GST
Not all the products and services include GST. Many products and services are exempt from GST. They include jet fuel, crude oil, petrol, diesel, and natural gas. Apart from that, Liquor is also exempt from GST. GST is not payable on many other things such as fruits, vegetables, and natural products like cheese, honey, and eggs. Moreover, the plants, live trees, and flowers are exempt from GST.
5. Input–Tax Credit
Input-tax credit is an important concept to know under GST. It is the method of getting credit on GST paid on several goods and services. It is one of the major benefits for small businesses that want to grow their small business operations.
6. Rates of GST
GST Annual Return filing is a beneficial step for every businessman. This indirect tax is paid on all goods and services. There is a 4-tier rate structure of GST of 5%, 12%, 18%, and 28%. This structure might change to a 2-tier or 3-tier structure in the coming years.