Goods and Service Tax of India or GST of India is the taxes to be paid to the government as indirect taxes to be paid to the country for the different types of goods and services sold.
- What Is the Goods and Services Tax of India (GST)?
- How do Goods and Services Tax (GST) System Work?
- Which Countries Collect Goods and Services Tax (GST)?
- Why the Goods and Services Tax (GST) is important?
- which Goods and Service Tax of India registration is mandatory?
- Mandatory conditions for the GST registration
- Documents required for GST registration
- Penalty for not registering goods and Service Tax of India
What Is the Goods and Services Tax of India (GST)?
The tax on goods and services (GST) is an added value tax that is imposed on the majority of products and services to consumers in the country. GST is a tax that the consumer pays. In India, GST will be paid by the consumers but remitted to the government through firms that offer the products and services.
Goods and Services Tax or GST is the new indirect tax regime of the Government of India which is effective from 1st July 2017. Most of the GST Registered Business has to pay the taxes according to their own country rule.
KEY TAKEAWAYS: GST India
The tax on goods and services (GST) is additional for goods and services offered domestically to consumers. Goods and Service Tax of India are included in the total price, and consumers in India pay it at the point of sale. It is then transferred onto the authorities by the retailer.
GST is a tax that’s widely used. GST is a tax that is common that is used by many countries worldwide. The GST is generally taxed at one rate for all countries.
Understanding the Goods and Services Tax (GST) The tax on services and goods (GST) is an indirect federal sales tax that is imposed on the cost of certain products and services. The seller adds GST to the cost of the item and the buyer who purchases the product must pay the retail price, including the GST.
It is the GST part is collected either by the company or seller and then forwarded towards the federal government. This Goods and Services Tax of India is also known in the form of VAT (VAT) in some countries.
How do Goods and Services Tax (GST) System Work?
The majority of countries that have a GST use a unified GST system, meaning that one tax rate is in effect across the entire country. In each and every country, unifying GST platform integrates the central tax rate (e.g., sales tax and excise duty tax and tax on services) together with local taxes (e.g., entertainment tax, tax on entry transfer tax, sin tax as well as the luxury tax) and makes them one tax. They tax nearly all of the items at one rate.
Dual Goods and Services Tax (GST) Structures A handful of countries, including Canada and Brazil, have a dual GST structure. In contrast to a uniform GST economy, where taxes are taken from the Federal government, and later distributed to states and states, in a dual structure, it is the case that the federal GST is in addition to state-specific sales taxes.
For example, in Canada, the federal government charges a 5% tax and some states and provinces levie state taxes in the province (PST) that range between 7% and 10 percent. In this instance, the receipt of a consumer will have PST and GST rates that were added to the purchase price.
Recently in recent times, more recently, GST and PST are now combined in a few provinces into one tax called the Harmonized Sales Tax (HST). This was implemented in 2013 in Prince Edward Island for the very first time in around December 2013. This HST system combines provincial and federal sales taxes into one single tax.
Since then, a number of provinces have also adopted the same policy with the HST, including New Brunswick, Newfoundland and Labrador, Nova Scotia, and Ontario.
India’s Adoption of the Goods and Services Tax (GST) India introduced the GST in dual structure in 2017that was the most significant change to the country’s tax structure over the last many years.
Implementing GST was to eradicate tax on tax or dual taxation, which entails a cascade of taxation from the production level to the level of consumption.
For and example, a business that makes notebooks purchases the essential materials for, the sum of amount Rs. 10, which is inclusive of the tax of 10. It means they have to have to pay the equivalent of Rs. 1 in tax for Rs. 9 worth of material.
When making it, the maker will add value to the initial materials at 5 rupees. 5 for an overall worth of. 10 + Rs. 5 = Rs. 15. The tax rate of 10% on the final product will be 1.50 rupees. 1.50. In a GST scheme, prior tax paid may be used to offset this additional tax, bringing the total tax rate to the amount of. 1.50 – Rs. 1.00 = Rs. 0.50.
The wholesaler buys the notebook for the sum of Rs. 15 and then sells it to the retailer at a price of. 2.50 markup value for Rs. 17.50. The tax rate of 10% on the total value of the item will be 1.75 rupees. 1.75.
The wholesaler can apply against taxes on the initial cost price of the product from the manufacturer (i.e. 15 rupees. 15). The effective tax rate for wholesalers is, therefore, the amount of Rs. 1.75 – Rs. 1.50 = Rs. 0.25.
Which Countries Collect Goods and Services Tax (GST)?
France is the very first nation to adopt GST in 1954. Since the time, more than 160 countries have implemented the tax system in one shape or form for the effective GST system.
Some of the countries that have GST are Canada, Vietnam, Australia, Singapore, the United Kingdom, Monaco, Spain, Italy, Nigeria, Brazil, South Korea, and India.
In Nepal, this tax is taken as VAT( value-added tax) for goods and services.
Why the Goods and Services Tax (GST) is important?
To know the importance we should understand GST well. , Let’s see why it will play such an important role in transforming the current tax structure and the economy in the country.
Currently, the Indian tax structure is divided into two taxes: direct taxes and indirect taxes which are as follow
Direct Taxes are those types of taxes in which the liability cannot be passed on to anyone else. An example of this is the individual income tax. Income tax is being paid for your income and this is only you are liable to pay tax on it.
In indirect taxes, the burden of tax is being passed from one to person or party. For instance, the shopkeeper pays VAT on his sales which is just the transfer of the tax burden to his customer. They used to pay so that the shopkeeper could collect VAT or GST and pay it to the government.
In this indirect tax payment system, the customer not only pays the price of the product but also has to pay taxes on the goods or service. . Here the shopkeeper had to pay tax when he bought the item from the wholesaler.
which Goods and Service Tax of India registration is mandatory?
Goods and Service Tax of India needs to be collected and paid if your turnover limit exceeds Rs.20 lakhs (in some cases Rs.40 lakhs) in the base financial year in India. For some special category states the limit is 10 lakhs also.
This limit is applicable for payment of GST. “Total turnover” shall mean all taxable supplies, exempt supplies, exports of goods and/or services, and inter-State supplies of a person having the same PAN computed on all India basis and inclusive of taxes ( if any) will be payable under CGST Act, SGST Act, and IGST Act.
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Mandatory conditions for the GST registration
- for the inter-state supply of goods and services
- E-commerce operator on e-business
- Any person who supplies goods/services and does not have a fixed place of business in India – called a non-resident taxable person. The registration issued to such a person is valid for a period of 90 days.
- Any person who supplies goods/services in a taxable area
- To a person paying tax under reverse charge mechanism. A reverse charge mechanism means where the person receiving the goods/services has to pay the tax instead of the supplier.
- Agent or any other person who makes supplies on behalf of other registered taxable persons
- Distributor or Input Service Distributor
- Persons supplying through an e-commerce operator (other than branded services)
- Aggregator that provides services under its own brand name
- Person supplying online information and database access or retrieval services from a place outside India to a person in India (other than a registered taxable person)
Documents required for GST registration
- Recent Photo
- taxpayer’s constitution
- proof of business location
- Bank account statement
- authorization form
Penalty for not registering goods and Service Tax of India
There is the provision of penalties for not registered under GST.Any offender who is not paying the tax or paying less will have to pay a penalty of 10% of the tax amount payable (of which 10000 is the minimum amount).
Where a presumed tax evasion is observed, the offender shall be liable to pay a penalty of 100% of the tax amount due. However, for other genuine errors, the penalty is 10% of the tax.