Complete Guide on GST Act

With new businesses and business organization entering the Indian economy each day, the base of India’s revenue generation is constantly growing. This means that the system of direct and indirect taxes levied by the government has now become more and more widespread and complex.

Therefore to overcome these complexities, India has replaced several indirect taxes levied by Central and State government and introduced one Pan-Indian Goods and Services Tax (GST) which eliminate the cascading effect of taxes on the economy.

Cascading effect means the tax is levied on a value which includes tax paid by the previous buyer, thus, making the final consumer pay “tax on already paid tax”.

What is the Goods and Services Tax?

GST stands for Goods and Services Tax, it is an Indirect tax that customers have to pay when they buy any goods or services like food, clothes, items of daily needs etc.

It has two components i.e. Central GST and State GST. It was brought with the purpose of uniforming the Indian market to attract business owners and investors and also to bring black money back into the mainstream market.

GST is a tax system which is applied at every step of value creation, therefore, it is difficult for owners of black money to participate in this chain without accounting for all other transactions.

The need for GST

India has notched up 53 positions in ease of doing business after the introduction of GST and has made it to the top 100th ranking in 2018. Other factors which have helped in this improvement are resolving insolvency, protecting minority and getting credit.

CGST is Central GST where the powers of a centre lie, SGST is State GST where the state has the capability of imposing tax and IGST is integrated GST which is for movement of goods within the Indian states.

This classification of the area was done to prevent an overlapping of taxation. Petroleum sector and liquor consumption are exempted from GST whereas tobacco and tobacco products come under the ambit of GST.

The GST Council

Any matter related to GST will be decided before GST council whose chairman is Finance Minister of India. Decisions in GST council are taken by 75% of majority members present & voting. The Union Government has a weight of one-third votes whereas all the states together have the weight of two-thirds votes.

GST tax slab has a four-tier tax structure. Firstly, Commonly used Goods and Services charged at 5%. Secondly, standard goods and services fall under the 1st slab charged at 12%. Thirdly, standard goods and services fall under the 1stslab charged at 18%. And fourthly, the special category of goods and services including luxury charged at 28%.

GST benefits the consumer as it provides relief from the overall tax burden and also is a single and transparent tax system which provides the lowering of inflation. Basic goods will be free from taxes and the luxury item will be taxed more.

 Impact of GST on E-Commerce:

E-commerce in India is growing at a fast rate. GST proposes a tax collection at source (TCS) where it is mandatory to deduct 1% amount as the GST liability of the seller and deposit it to the government. Sellers have to file monthly return in order to claim a credit of TCS under GST. This impacts the liquidity and cash flow of sellers with which they are not too happy. A question which arises is what if GST dilutes the boom in this sector in the near future.

Thus, by the implementation of Good and Services Tax (GST) on goods and services, the Indian government is looking at improving the economy by eliminating the cascading system of tax and reforming the business process in India.