Basic things about GST everyone should know about
Any business owner who is dealing with day to day activities, deposit some tax other than income tax. It could be service tax, excise duty, VAT or some version of customs duty. These taxes are known as indirect taxes. All these taxes are going to be replaced with one tax named “GST”.
GST is altogether a completely new tax and not merely a change in tax. GST will completely change the way in which indirect taxes are levied. Presently VAT is levied on goods and it’s added each time when a good changes its ownership and the value is added to the product. Central Sales Tax is charged when goods transits between two or more states. So, as a result, any finished goods can have a CST, VAT, excise duty. Each of this taxes has a different approach of levying it.
When is it Levied?
GST is different from all the indirect taxes which are currently prevalent in the Indian Taxation System and what makes it different is its point of levy. Under GST, a point of the levy is ‘supply’. By supply, we mean the sale of goods and services. Supply will include transfer, exchange, and barter, rental, lease and also supply made to an agent or to a branch. So any business, which is involved in the activities mentioned above, then GST will replace all the taxes paid by you on purchases and will mandate you to levy GST on your supply. The government can also notify some goods and services, which will not be considered as a supply and as a result, it won’t attract any GST. So the first step for you should be to check if your business has made a supply.
Types of GST
Once it is decided that your business has made a supply, then there comes the next step to find out whether it is an intra-state or an inter-state supply. If the state of origin is different from the destination state, then it is considered an inter-state supply. This is the reason why GST is known as the destination-based tax. Those who makes inter-state supplies have to register for GST. Mostly all the supplies are likely to be taxed at the rate of the destination state. Now supplies made outside India would not attract any GST, however, GST registration may still be required for the supplies. Any sales taken place within a state will attract central and state levy called SGST and CGST. And any inter-state sales will attract IGST and which is most like to be the sum of CGST and SGST.
Who should prepare for GST?
If you are registered under VAT or service tax or excise duty, you should register for GST. Those with the yearly turnover of less than Rs. 20 lakhs do not have to compulsory register for GST. Though this limit is not to be considered if the business is involved in inter-state transactions and thus GST registration is mandatory for them.
So if you have a website from where you supply goods or services, then GST registration will be compulsory for you. GST also applies to an ‘input service distributor’. Input service distributor means a head office that receives billing for services received at branches and later on it sends those bills to branches. Such distributors also have to mandatorily register for GST.
GST Applicability for various Businesses
All the trader are registered under VAT, so those traders should register for GST. It will set off tax paid at earlier stages for payment of GST on the supplies you make. Benefits of registering also stand for manufacturers, as they will be able to adjust tax paid on inputs against GST on outputs. So far the only party who are concerned about GST are the service providers. GST on services would be levied by centre and state both. Taxes will be charged to the place of consumption and will be received by the consuming state.
Should you voluntarily opt for GST registration?
Those small businesses that are below the turnover limit and do not make any inter-state supplies have the option to register voluntarily. Now, if your buyers are GST compliant then if you are registered for GST, then it helps them to take credit of taxes you pay for your inputs. If a registered buyer makes a purchase from an unregistered seller then the buyer has to file for GST on behalf of the unregistered seller.
- Posted on Jun 6, 2017
- By Dhruv
- 0 Comments