What is GST?
The goods and services tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. So the consumers pay the GST, but it is remitted to the government by the businesses selling the goods and services. – Definition by Investopedia.
- Goods and services tax was passed in the parliament on March 29, 2017.
- GST came into force on July 1, 2017.
- Indirect tax for the entire nation has replaced many indirect taxes such as excise duty, VAT, service tax, etc.
- At every point of sale, the tax is imposed Under the GST administration.
- So, in the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.
Types of GST
There are four types of GST:
- SGST- State goods and service tax
- CGST- Central goods and service tax
- IGST- Integrated goods and services tax
- UGST- Union goods and service tax
1.State goods and service tax ( SGST)
The state government imposes SGST on intrastate goods and service affairs.
Therefore, the revenue generated through SGST is earned by the state government where the transaction has happened.
SGST includes earlier taxes such as VAT, entertainment tax, luxury tax, octroi, tax on lottery, and purchase tax.
But, USGT replaces SGST in the case of union territories like Andaman and Nicobar Islands or Chandigarh.
2.Central goods and service tax ( CGST)
The central government imposes CGST on intra-state goods and service affairs.
Therefore, the Central government collects the revenue generated by this. So, it is imposed along with the CSGT and UGST, and central and state governments share revenues.
For instance, if you are a Bengaluru-based dealer selling your goods or service to a Bengaluru-based dealer since it’s an intrastate transaction, both CSGT and SGST will be imposed.
If your transaction is of 40,000 and 18% GST is applied, then the equal amounts of the GST collected will be shared between central and state governments.
3. Integrated goods and services tax (IGST)
Integrated goods and service tax is the tax imposed on inter-state goods and service affairs. Also, it is applied to imports and exports. The revenue generated through IGST is shared between central and state governments.
So, the SGST part of the tax goes to the state of the government where the goods and services are used.
IGST also helps you claim an input tax credit ( the tax paid by the buyer on the purchase of goods and services.)
4. Union goods and service tax (USGT)
The respective union territory imposes UGST on the affairs in the union territory, including Andaman and Nicobar Islands, Dadra and Nagar Haveli, Chandigarh, Lakshadweep, and Daman, and Diu. So, this tax is identical to SGST in apportionment and payment rules.
Registration of GST
- Every business that does a business over INR 20 lakhs has to be registered for GST.
- But, in special category states, every company with a turnover over INR 10 lakhs has to be registered for Goods and services tax.
- Any business providing services has to register for GST irrespective of the revenue it generates.
- In addition, any company selling goods or services across state boundaries has to register for GST mandatorily.
There are more aspects of Goods and services Tax; Vardaan will be writing more articles on GST to keep you aware and informed. Meanwhile, have a look at what Vardaan is up to by following us on our social media accounts.
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