Goods and Services Tax (GST) is a value-added tax at each stage of the supply of goods and services precisely on the amount of value addition achieved. It seeks to eliminate inefficiencies in the tax system that result in ‘tax on tax’, known as cascading of taxes. GST is a destination-based tax on consumption, as per which the state’s share of taxes on inter-state commerce goes to the one that is home to the final consumer, rather than to the exporting state. GST has two equal components of central and state GST.
What is input tax credit?
To make sure that tax is levied only on the amount of value addition at each stage of the supply chain, credit for the taxes paid at the previous stage is granted. For example, a garment manufacturer gets credit for the taxes paid on the materials purchased while computing the final indirect tax liability on his product that is collected from the consumer. Similarly, a service provider, say, a telecom company, gets credits for the taxes paid on the goods and services used in his business.
Who is liable to pay GST?
Businesses and traders with annual sales above Rs20 lakh are liable to pay GST. The threshold for paying GST is Rs10 lakh in the case of north-eastern and special category states. GST is applicable on inter-state trade irrespective of this threshold.
What are the existing taxes subsumed into GST?
Charges on creation, for example, focal extract obligation and extra extract obligation, import obligations, for example, extra traditions obligation known as countervailing obligation and extraordinary extra traditions obligation, benefit impose, focal cesses and additional charges, state charges like esteem included expense (VAT), focal deals assess on between state exchange of products, extravagance assess, excitement charge with the exception of those collected by neighbourhood bodies, imposes on commercials, assesses on wagering and betting and state cesses and extra charges on supply of merchandise and enterprises are subsumed into GST. Essential traditions obligation, which incorporates the tax obstruction on imports, isn't a piece of GST.
What are the benefits of GST?
GST brings transparency to the taxes levied on the supply of goods and services. At present, when an item is purchased, the common man sees only the state taxes on the product label, not the various embedded tax components. GST will improve the ease of doing business as entry barriers along state borders will be dismantled. The new indirect tax system is expected to improve tax compliance, boost revenue receipts of central and state governments and accelerate GDP growth rate by an estimated 1.5-2 percentage point. Elimination of cascading of taxes will result in the reduced tax burden on many items.
What are the products not part of GST?
Crude oil, diesel, petrol, natural gas and jet fuel are temporarily kept out of GST. The GST Council, the federal indirect tax body of state finance ministers chaired by the Union finance minister, will decide when to bring these items into GST. Liquor is kept out of GST as a constitutional provision and hence it would require an amendment to Constitution if it is to be brought into GST net.
What is integrated GST or IGST?
IGST is the tax on inter-state supply of goods and services with central and state GST components.
How are decisions taken at the GST Council?
No decision can be taken in the Council without the concurrence of both the Union and the state governments. Decisions will be taken by a 75% majority of the weighted votes of members present and voting. The Union government’s vote has a weightage of one-third of the votes cast, while all states together will have a weightage of two-thirds of the votes cast.
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