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Do You Know GST Basics

GST For Dummies

        The rollout of GST in July last year was touted as the biggest tax reform that our country had seen post-independence. It had a huge impact on our economic environment. However, even after one year, many people struggle with some of the very basic concepts under GST. So here we are breaking down some of those complex concepts for you in ten easy-to-understand key points.

    1. GST Applicability

  • Businesses, professionals, freelancers and service providers–>If your annual turnover (sales) exceeds ₹20 lakh (₹10 lakh if you are in the Northeastern states).
  • You make inter-state sales i.e. you are based in one state and sell goods to a receiver in another state.
  • You sell online.
  • You sell goods on behalf of another taxable person (i.e. you are an agent).
  • You deal in goods/services on which reverse charge applies—where the buyer has to deposit tax instead of the seller.

     2. If you fall in the GST regime then–> REGISTRATION

  • You have to apply for registration in every state in which you will be conducting your business, within 30 days from the date on which you are liable for registration (For example, the day your annual sales crosses ₹20 lakhs).
  • You must obtain a separate registration for each state, as registration under GST will be state-wise.
  • Registration number in GST (GSTIN) will be PAN-based.
  • You can also opt to voluntarily register for GST even if your sales are less than ₹20 lakhs.

     3. Types Of GST

  • Intra-state sales will attract Central and State levy, called SGST and CGST. And inter-state sales will attract IGST, which is likely to be a sum total of CGST and SGST. IGST will also be levied on imports.

     4. Set Off available in GST

  • SGST payments can be set off against – IGST and SGST on inputs
  • CGST payments can be set off against – IGST and CGST on inputs
  • IGST payments can be set off against – IGST, CGST, SGST on inputs

     5. Rates Of GST

  • The GST is imposed at variable rates on variable items.
  • GST slabs are pegged at 0%, 5%, 12%, 18% & 28%.
  • Most of the items fall in 18% bracket but it keeps on changing in GST Council Meetings.

     6. Reverse Charge Mechanism

  • Reverse Charge means the liability to pay tax is by the recipient of goods/services instead of the supplier.
  • It applies both to Goods and Services.
  • Situations where the reverse charge will apply–When the unregistered dealer selling to a registered dealer and when Services are through an e-commerce operator.

     7.”Casual Taxable Person”

  • A person who occasionally supplies goods and/or services in a territory where GST is applicable but does not have a fixed place of business in the said state is treated as a casual taxable person as per GST.
  • A casual taxable person can obtain a temporary registration for a period of 90 days (extendable for an additional 90 days).

     8. GST Invoice

  • It is an Evidence Bill of the supply of Goods and Services. It mentions all the relevant information about the supply.
  • It is must for claiming the benefit of Input tax credit.
  • There is no proper format provided by the Government. The supplier can create the Invoice as per his convenience. But the Government has mandated some of the content which needs to be filled.

     9. GST Return

  • All GST registered entities have to file a document containing details of income with the tax administrative authorities monthly, quarterly and/or annual GST Returns based on the type of business.
  • There are separate returns for each category required to be filed like GSTR1, GSTR3B, GSTR4.
  • A regular business has to file three monthly returns and one annual return. This amounts to 36 returns in a year.
  • Non Compliance of filing returns leads to penalties and heavy fines.

     10. Input Tax Credit(ITC)

  • It means at the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount.
  • ITC can be claimed only for business purpose.
  • ITC can be availed in a specific manner and in a specific time frame.

So the GST is being introduced to create a common market across states, not only to avoid the enfeebled effect of indirect tax but also to improve tax compliance. GST is beneficial for both the economy and corporations. The reduced tax burden on companies will reduce production cost making exporters more competitive.

Have more queries on GST? Write to us directly at – [email protected]

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