10 Things you Should Know About GST

GST

Good and services tax (GST) was introduce in India on July 1, 2017. This indirect tax replaced all the previous taxes which we used to pay. It is applicable all over India will be levied by central and state government. There are different rates for different services and the rate also depends on your income but the common rate is 18% from which 9% will be for central government and the other 9% will be for state government. There are five categories of the tax starting from 0%, 5%, 12%, 18%, and 28%.

Here, are 10 things which you should know about GST

  • Single tax system

The main motto of GST is ‘One Country, One Tax’ and due to this GST will unify all the taxes. The taxes which we used to pay earlier will be included in the GST. As we know GST is divided into two i.e. CGST and SGST. Service tax, Customs Duty tax, Central Excise Duty tax etc. will be the part of CGST (i.e. Central Goods and Services Tax) where as Sales tax, Luxury tax, VAT etc. will be the part of SGST (i.e. State Goods and Services Tax).

  • Benefit of tax reduction

Providers as well as manufactures will now be able to pass benefits to the customers and this is due to the input tax credit. Due to GST’s anti-profiteering clause, now it is compulsory to pass all the benefit of tax reduction to the consumers.

  • It is a destination based tax

This tax will be applicable in inter-state supplies which mean those which are occurring within your state have to compulsory register for GST. And IGST (Integrated Goods and Services Tax) will be applied instead of CGST and SGST. But the Intra-state supplies which will be occurring outside your state will applied with CGST and SGST.

  • Replacement of several taxes

Now service tax, entertainment tax, VAT, Central Sales tax, Lottery Tax, Luxury tax, Central Excuse Duty are some of the taxes which be replaced by GST.

  • Impact on industry

Due to transparent taxation system there will be no place of hiding the cost of doing business. Doing business will become easy. The registration and payment will be online which will make paying tax easier.

  • Impact on inflation

Inflation rate will be high in the initial stage but will get under control in the long run. GST will also boost the economic growth by 1-2% which will be a win-win situation for all the parties which are involved.

  • Benefits to small business

The small scale businesses and companies who have a turnover of less than Rs. 20 lakhs will not have to pay GST. Small businesses will not have to give detailed compliance like the big companies. The companies which have a turnover of less than Rs. 75 lakhs will have to pay 1% tax on turnover under the composition scheme. Restaurant businesses 5% and manufacturers have to pay 2% on turnover.

  • Levy of GST

This tax is applicable on supply.As per defined by the GST Act, supply is the sale of goods and services. Supply not necessarily be done by the selling of product but can also be done by transferring, exchanging or renting the product. So you have to pay GST if you are engaged in supply of goods and services.

  • Price of some of the products might get increased

It might happen that prices of Cigarettes, Commercial vehicles like trucks, Cell phones and jewelry may increase. Electronic products, movie tickets, cars and bikes, paint and cement might get cheap.

  • Benefits to consumers

Earlier, the tax system was very complicated as there were several taxes. Consumers had to pay number of taxes starting from manufacture sale of goods and services. Due to GST the tax payment has become transparent and consumers are getting to know which taxes they are paying at every stage.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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