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    krishna

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    alexpandyan0911

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    krishna

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    alexpandyan0911
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    2 views6 pages

    krishna

    Uploaded by

    alexpandyan0911

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    © All Rights Reserved
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    of 6

    Working of GST

    GST stands for “Goods and Services Tax”, and is proposed to be a comprehensive
    indirect tax levy on manufacture, sale and consumption of goods as well as services
    at the national level. Its main objective is to consolidates all indirect tax levies into a
    single tax, except customs (excluding SAD) replacing multiple tax levies,
    overcoming the limitations of existing indirect tax structure, and creating efficiencies
    in tax administration.

    Simply put, goods and services tax is a tax levied on goods and services imposed at
    each point of sale or rendering of service. Such GST could be on entire goods and
    services or there could be some exempted class of goods or services or a negative
    list of goods and services on which GST is not levied. GST is an indirect tax in lieu
    of tax on goods (excise) and tax on service (service tax). The GST is just like State
    level VAT which is levied as tax on sale of goods. GST will be a national level value
    added tax applicable on goods and services.

    A major change in administering GST will be that the tax incidence is at the point of
    sale as against the present system of point of origin. According to the Task Force
    under the 13th Finance Commission, GST, as a well designed value added tax on
    all goods and services, is the most elegant method to eliminate distortions and to tax
    consumption.

    One of the reasons to go the GST way is to facilitate seamless credit across the
    entire supply chain and across all States under a common tax base. It is a tax on
    goods and services, which will be levied at each point of sale or provision of service,
    in which at the time of sale of goods or providing the services the seller or service
    provider can claim the input credit of tax which he has paid while purchasing the
    goods or procuring the service. This is because they include GST in the price of the
    goods and services they sell and can claim credits for the most GST included in the
    price of goods and services they buy. The cost of GST is borne by the final
    consumer, who can’t claim GST credits, i.e. input credit of the tax paid.

    Example: A product whose base price is ₹ 100 and after levying excise duty @
    12%value of the product is ₹ 112. On sale of such goods VAT is levied @ 12.5%
    and value to the ultimate consumer is ₹ 126. In the proposed GST system on base
    price of ₹ 100 CGST and SGST both will be charged, say @ 8% each, and then the
    value to the ultimate consumer is ₹ 116. So, in such a case the industry can better
    compete in global environment.
    Therefore, GST is a broad based and a single comprehensive tax levied on goods
    and services consumed in an economy.

    Submitted by: Krishna Kumar Pandey


    Roll no.:- MBA/40077/19
    Uses of GST at Centre and State

    In particular, it would replace the following indirect taxes as these will be subsumed
    in the proposed GST:

    At Central level

     Central Excise Duty


     Service Tax
     Additional Excise Duties
     CVD (levied on imports in lieu of Excise duty)
     SAD (levied on imports in lieu of VAT)
     Excise Duty levied on Medicinal and Toiletries preparations,
     Surcharges and cesses
     Central Sales Tax

    At State level

     VAT/Sales tax
     Entertainment tax (unless it is levied by the local bodies)
     Luxury Tax
     Taxes on lottery, betting and gambling
     Entry tax not in lieu of Octroi
     Cesses and Surcharges

    Advantages of GST

    1. GST eliminates the cascading effect of tax


    2. Higher threshold for registration
    3. Composition scheme for small businesses
    4. Simple and easy online procedure
    5. The number of compliances is lesser
    6. Defined treatment for E-commerce operators
    7. Improved efficiency of logistics
    8. Unorganized sector is regulated under GST
    1. GST eliminates the cascading effect of tax
    GST is a comprehensive indirect tax that was designed to bring the indirect taxation
    under one umbrella. More importantly, it is going to eliminate the cascading effect of
    tax that was evident earlier.
    Cascading tax effect can be best described as ‘Tax on Tax’. Let us take this
    example to understand what is Tax on Tax:
    Before GST regime:
    A consultant offering services for say, Rs 50,000 and charged a service tax of 15%
    (Rs 50,000 * 15% = Rs 7,500).
    Then say, he would buy office supplies for Rs. 20,000 paying 5% as VAT (Rs 20,000
    *5% = Rs 1,000).
    He had to pay Rs 7,500 output service tax without getting any deduction of Rs 1,000
    VAT already paid on stationery.
    His total outflow is Rs 8,500.

    2. Higher threshold for registration


    Earlier, in the VAT structure, any business with a turnover of more than Rs 5 lakh (in
    most states) was liable to pay VAT. Please note that this limit differed state-wise.
    Also, service tax was exempted for service providers with a turnover of less than Rs
    10 lakh.
    Under GST regime, however, this threshold has been increased to Rs 20 lakh,
    which exempts many small traders and service providers.
    Let us look at this table below:

    3. Composition scheme for small businesses


    Under GST, small businesses (with a turnover of Rs 20 to 75 lakh) can benefit as it
    gives an option to lower taxes by utilizing the Composition scheme. This move has
    brought down the tax and compliance burden on many small businesses.

    4. Simple and easy online procedure


    The entire process of GST (from registration to filing returns) is made online, and it
    is super simple. This has been beneficial for start-ups especially, as they do not
    have to run from pillar to post to get different registrations such as VAT, excise, and
    service tax.
    Our ClearTax GST software is already on a roll filing GST returns
    5. The number of compliances is lesser
    Earlier, there was VAT and service tax, each of which had their own returns and
    compliances. Below table shows the same:
    Under GST, however, there is just one, unified return to be filed. Therefore, the
    number of returns to be filed has come down. There are about 11 returns under
    GST, out of which 4 are basic returns which apply to all taxable persons under GST.
    The main GSTR-1 is manually populated and GSTR-2 and GSTR-3 will be auto-
    populated.

    6. Defined treatment for E-commerce operators


    Earlier to GST regime, supplying goods through e-commerce sector was not
    defined. It had variable VAT laws. Let us look at this example:
    Online websites (like Flipkart and Amazon) delivering to Uttar Pradesh had to file a
    VAT declaration and mention the registration number of the delivery truck. Tax
    authorities could sometimes seize goods if the documents were not produced.
    Again, these e-commerce brands were treated as facilitators or mediators by states
    like Kerala, Rajasthan, and West Bengal which did not require them to register for
    VAT.
    All these differential treatments and confusing compliances have been removed
    under GST. For the first time, GST has clearly mapped out the provisions applicable
    to the e-commerce sector and since these are applicable all over India, there should
    be no complication regarding the inter-state movement of goods anymore.
    Read a more detailed analysis of the impact of GST on e-commerce.

    7. Improved efficiency of logistics


    Earlier, the logistics industry in India had to maintain multiple warehouses across
    states to avoid the current CST and state entry taxes on inter-state movement.
    These warehouses were forced to operate below their capacity, giving room to
    increased operating costs.
    Under GST, however, these restrictions on inter-state movement of goods have
    been lessened.
    As an outcome of GST, warehouse operators and e-commerce aggregators players
    have shown interest in setting up their warehouses at strategic locations such as
    Nagpur (which is the zero-mile city of India), instead of every other city on their
    delivery route.
    Reduction in unnecessary logistics costs is already increasing profits for businesses
    involved in the supply of goods through transportation.
    Visit here to read more about the impact of GST on logistics.

    8. Unorganized sector is regulated under GST


    In the pre-GST era, it was often seen that certain industries in India like construction
    and textile were largely unregulated and unorganized.
    Under GST, however, there are provisions for online compliances and payments,
    and for availing of input credit only when the supplier has accepted the amount. This
    has brought in accountability and regulation to these industries.

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