What is Goods and service tax and its types?

 

What is Goods and service tax and its types

What is Goods and service tax and its types

The full form of GST is Good and Service Tax (GST). In this article we are discussing about the GST, its types, what is GSTR? What are GSTIN and GSTN? Here we are taking the example of India because India Government implemented the GST in its tax system on IST July 2017 and since it makes some significant changes in the indirect tax system of India.

Tax system is divided into two types,Direct tax and Indirect tax. Direct tax, which Government levied directly on the tax payer, like Income tax, corporation tax, property tax, wealth tax, gift tax, Interest tax etc... These types of direct tax are also known as Progressive tax or it may be Proportional tax (click the link to know the progressive and proportional tax). On the other hand Government also levied some tax on purchase and sale of goods it is known as indirect tax. Indirect tax is imposed without knowing the ability of the tax payer, so it is also known as the Regressive tax system. There were mainly 17 types of indirect tax  exists before the implementation of GST in India , like custom duty, exercise duty, service tax, sales tax, vat (Value added tax)octroi duty(local tax )etc.

GST mainly replaced the 17 types of indirect taxes and makes a unified tax system all over the country to make a balanced growth and development all over the country. Moreover, it meets up the gap between the dualistic economics status. 

 So it is very much clear that GST levied only purchase and sales of the goods and it replace the indirect tax only, Direct tax is not included in the GST system.

Now the question is who are paying the GST?

If the annual turnover of a business is more than or 20 lakes per year then the company has to pay GST. Suppose a company yearly invest and produce goods of Rs 20 lakes and sell it on Rs 22 lakes then his profit is 2 lakes. Here company annual turnover is above 20 lakes, so company bound to pay GST. The regime of GST has been relaxed in hilly regions where it is consider 10 lakes annually turnover.

But the annual turnover of Rs20 lakes is valid if the products produced and sell are limited within the state, but if the product produced at one state and sell at another state and if the transaction is one rupee then as per GST norms you have to pay tax. On the other hand the E-commerce businesses also have to pay GST if they sell any single amount of goods within or outside the states.

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Types of GST

There are mainly four types of GST; they are C-GST, S-GST, UT-GST and I-GST. The full form of these four types of GST are C-GST --- Central Goods and Service Tax , S-GST --- State Goods and Service Tax, UT-GST---- Union Territory Goods and Service Tax, I-GST------ Integrated Goods and Service tax

Now we are discussing these four types of GST one by one

C-GST

C-GST is the central tax which center Government levied when goods purchased or sold within the state, or it may be called central tax for intra state business. C-GST is subsuming all the central Government indirect taxes after the implementation of GST.

 S-GST

 S-GST is the state Government tax, which state Government levied on purchased and sale of the Goods within the state. It also replace the all types of local and state Government taxes ,which State government levied before the implementation of GST.

Now, C-GST and S-GST are jointly charged as a GST when goods are purchased and sale within the state.

Suppose you purchased a sewing machine, which is come under the 12% GST slabs .So your sewing machine produced and sale within the same state and its cost is Rs5000. Now the GST charged on this sewing machine is RS 600 as per 12% slabs. So, this 12% divided on state and center as C-GST and S-GST. That is C- GST= Rs 300 and S-GST = Rs300

UT-GST

India has 8 union territories, like Delhi, Pondicherry, Ladakh etc. Here instead of S-GST Union territories levied UT- GST. SO if any product produced and sold within the union territories then Government levied GST, which is divided into UT-GST and C-GST. Because Union territory is a part of the center, so central Government charges C-GST and union territory government charges UT- GST.

I-GST

I-GST is levied when goods are produced in one state and sold in another state. In this case if you cross the state border for selling the product then you have to pay I-GST instead of C-GST or S-GST. I-GST which is charged by the central Government also divided into C-GST and S-GST give to the state where the product is sold not to the state where the product is produced. Let’s take an example which clarifies the whole topics.

Suppose, a sewing machine is produced in Maharashtra and sold in Odisha ( two different states of India ) then when the sewing machine is sold in Odisha then  central Government charged I-GST. Central government charged 12 % I-GST, which central Government divided into 6% as a C-GST and another 6% give to Odisha state as the product is sold in Odisha. For this reason I-GST is also known as the Destination GST.

I-GST reduced the tax difficulties, earlier different states charges different rates of taxes, so the investors are confused where to invest. Investors always searched which states charges lowest tax. These limited states enjoyed the produced and selling taxes of the products. So there arises an unbalanced growth and developed a dual economic structures. Now the same tax structures solved the problems of unbalanced growth among the states. Investors are also happy and able to set up their factories where the demands of the products are high. States, like Maharashtra where the factories set up they get employments and states where the products sold get GST.

The whole country now enjoys the same amount of tax burden.

So in short we can say that, if a product is produced and sold within the state you have to pay C-GST + S-GST

If the product produced and sold within the union territories you have to pay

C-GST +UT-GST

If the product produced at one state and sold in another state you have to pay

I-GST =C-GST + S-GST (The state where the product sold or destination state)

Slabs of GST

There are mainly four types of tax slabs under GST and near 1800 goods and services are fitted in to the regime of GST. The slabs are 5%, 12%, 18%, and 28% .Some necessary goods like agriculture products, vegetables, fruits, flowers, eggs, milk are exempted from the GST.

In 5 % slabs the product like fertilizers, frozen vegetables, spices, takeaway food etc. included in GST.

In 12 % slabs the costly products like ghee, nuts, purses, handbags etc. are included.

In 18% slabs washing machine, camera, IT services, telecom services included

In 28 % slabs Motorcycles, car, stay at five star hotels, luxury items are included.

Some products which are not included in GST are Petrol, Diesels, Gas, Electric and Alcohols. In these products different states imposed different tax rates. So it has shown that the price of these products is not same among the states. Recently, due to the heavy hike of the price of petrol some states like ASSAM, West Bengal, Meghalaya and Rajasthan reduced state VAT. This is possible because the individual states imposed VAT on their own, so they take this decision as per the requirements.

 What is GSTR?

The full form of GSTR is Goods and service tax return. That is, when you sold any products you charges GST from the buyer as per the GST norms. This amount of GST now you have to pay to the Government as per the rule. GST returns take place three times in a month.

What is GSTIN?

The full form of GSTIN is Goods and service tax Identification Number. It is the 15 digits number .When you registered your company for business in tax department you got this number. The first two digits is the state code, next ten digits is your PAN number (Permanent Account Number) and the last three digits is the computer generated number.

GST Council

GST council members solve the problems of GST through meeting and revised the tax rates as per the requirements. There are 33 members in GST council. On 12^th September 2016 under the Article 279A GST council amended in the constitution with effect.

What is GSTN?

The full form of GSTN is Goods and service tax Network. The whole GST calculations and submission process controlled through GSTN.

Conclusion

GST is the important concept in Indian indirect tax structures. GST in tax system first started in France on 1954. It implemented to overcome the unbalanced growth of the economy.