With less than 24 hours left for the implementation of one of the biggest reforms the country has ever seen, the first question that will strike your mind is, ‘are we GST ready’?
The GST storm will be hitting the country at midnight today. The storm, that was predicted decades ago, is finally coming to life. Things are going to change, and, change beyond expectations. The way you do business will never be the same again. The complex tax structure of the nation might become even more complex.
Implementing a new reform in a country like India is a tough job. But, when the reform is as complex as ‘GST’, the problem in implementation escalates to an all new level. Believe me; the government will be more anxious than the common people, because if things don’t work out the way they are supposed to, people will know who to blame.
There are several experts talking about the positives and negatives of the reform, but the absolute truth or the fate of GST is unknown and can’t be predicted.
The lack of knowledge about the GST is one of government’s major concerns. As we inch closer to the historic 1st of July, here are the things about GST you must know:
Basics:
- The GST is a destination based tax which is proposed to be levied at all stages, from manufacture to consumption.
- GST would follow the destination principle. The imports will be subjected to GST, while the exports will have zero tax rates.
- In case of Inter-state transactions within India, the state tax would apply in the state of destination as opposed to that of origin.
For example- In the present system, if a product is being sold from Mumbai to Chennai at a price of Rs. 2100, you have to pay a CST (Central State Tax) of 10% which is Rs. 210. So, the total cost becomes Rs. 2310.
Under GST, you will only have to pay IGST (Integrated Goods and Service Tax) of 10% as the cost of CGST (Central goods and service tax) and SGST (State Goods and Service Tax) will be deducted from the integrated tax. The CGST and SGST comprises of 5% tax. So, for the above mentioned scenario, the total cost from Mumbai to Chennai will only be Rs. 2210. You save Rs. 100.
Threshold Limit for Registration:
Every supplier must register with the state if his/her aggregate turnover in a financial year exceeds a certain threshold limit based upon the state’s category:
If a person is engaged in the business of supplying non-taxable supplies, or wholly exempt supplies, the person is not liable to register.
Taxes to be subsumed (The below taxes would not exist separately from now on):
CENTRAL TAXES:
STATE TAXES:
Exclusions from GST: (The below sectors would not come under the GST)
Invoices under GST:
Input Tax Credit:
Challenges:
(This has been summarised from a report on GST by Sudhir Sunil & Co)