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GST Bill

For the past few years, the one thing that has been most talked about in India has undoubtedly been the Goods and Service Tax i.e. GST. And why not, GST is after all the biggest tax reform in the country. It is said to have simplified the tax-system in India and has transformed the country into a merged market where all the indirect taxes have been replaced by one tax-GST. For many of us, there are still many aspects of the GST that are rather unclear. If you too have a doubt about GST read on.

GST Bill and its Need

In simple words, when a consumer buys any good or a service, he is levied with a tax. This goods and service tax is what makes GST. When different states and unions levy different taxes there is a cascading effect on taxes. To eliminate this effect is the aim of implementing GST. It is considered to lessen the tax burden on the common man.

Impact on the General Public

The impact of GST is like a mixed bag. Certain services are more expensive in their initial phases, but as the effects of GST kicks in and the cascading effect reduces, the effect of inflation will come down and so would also stabilize. The taxes on services have been increased from 15% to 18%, this means more expenses would be required on restaurant bills, air travel, banking and insurance too. Once the prices reach a steady state, the common man should gain.

Applicability of GST Bill in the State of Jammu and Kashmir

In Jammu and Kashmir, the GST bill was passed in 2017, making it the last state of India to join the regime. Under Article 370, the state has a special autonomous status, however, the Indian Parliament has the power of Defence, communication matters and external affairs. The One Hundred and First Amendment Act of 2016 helped in making way for the GST Bill in J&K.

GST not Applicable on Sale of Land/Building

As per the GST Bill, the conduction of a building that is intended for sale is liable for GST. However, if the property is ready to move in or is completed as per the CGST Act, 2017 then no GST is required to be paid.

Employer’s Gifts to Employee Will No Longer be Taxed under GST

According to the government, gifts that are worth up to INR 50,000 per year and are given by an employer to his employee are not levied by GST.

Fixing the Upper limits of GST Rates

Though GST is considered to be the most significant tax reforms in India, there is still confusion about different aspects of the rates applicable. The GST Council has pegged the highest tax rate at 40%, that comprises of 20% central GST and 20% state GST. This would help them avoid reaching out to the parliament for making any changes in the future.

Petroleum Products Will Come under GST

Five petroleum-products, petrol, diesel, crude oil, aviation turbine fuel (ATF) and natural gas were not included in the purview of GST Bill when it was passed in July 2017. There have been many official debates and discussions about the status of these products. The Centre would have to miss out on INR 20,000 crore input of tax credit if it wishes to put these petroleum-products in the GST circle. The implementation of GST on petrol and diesel is therefore deferred.

Unregistered Seller and registered Buyer – GST is Applicable on Reverse Charge Basis

The new tax system has replaced many of the current indirect taxes, to carry out this transformation smoothly Reverse Charge was introduced by the Government. If in case the buyer is GST registered and he is buying some goods or some services from a seller who is unregistered, the registered dealer would be required to pay the taxes on the supply.

Reduction in Composition Rates

As explained earlier Composition Scheme is a scheme for the taxpayers under GST. In the beginning of 2018, the government lowered the 2% GST to 1%. Almost 15 lakh businesses are under the composition scheme. A taxpayer pays his taxes on a monthly basis but a composition supplier pays taxes every quarter and has to file only one return.

Change in the Provision Time of Supply of Services

The three types of GST namely SGST, CGST and IGST can often confuse an individual about paying his tax. Therefore, knowing about the time, place and value of the supply is imperative. Identifying the due date for tax-payments becomes easy when the dealer keeps a track of the time of supply. Time of supply of services is the earliest of:

  • The date when the Invoice was issued
  • The date when the advance or payment was received
  • The date of the provision of the services

Composition Scheme and GST

The Composition Scheme is a scheme for the taxpayers under GST. The easy to understand and simple scheme allows the taxpayer to avoid the tiresome formalities of GST and pay it in an effortless way. Under the Composition Scheme, the taxpayer who has an annual turnover of less than INR 1.5 crore can pay a fixed rate of GST. The Composition Scheme is less complicated for the taxpayer as there are lesser formalities to be fulfilled. The tax liability is limited and there is higher liquidity because the tax is levied at a lower rate.

GST on Actionable Claims

As per the GST Act, an actionable claim is a claim that is made by the creditor for any kind of debt other than one secured by mortgage of immovable property, be it constructive or actual. For example:

  • Insurance money
  • Lottery Tickets
  • Claim for Arrear Rent
  • The dividend on shares etc.

Actionable claims can be applied only for Goods and not Services,

Insurance and Banking

After the implementation of GST, insurance as well as the banking industry, have become more expensive. The earlier rates of 15% have been hiked to 18%. This would have a direct effect on the premiums. However, life insurance plans and health insurance plans that are for personal purposes would not have an input tax credit. The service charges at banks will now be levied at 18%. Most of the banks are now applying transaction charges on cash withdrawals when done from other banks.

GST and Credit of Rent-a-cab

ITC, Input Tax Credit, is not applicable to Rent-a-Cab. There are certain exceptions to it. If the Government has made it compulsory for an employer to provide the service to his employee, then ITC is available.

Reverse Charge and GST

Generally, the person who is supplying the goods and services is the one who pays the taxes. In the case of a reverse charge, it is the opposite. Reverse charge is a procedure where the recipient or the receiver of the goods or services have to pay the levied GST.

Change in Conditions for Disallowing ITC

Under section 17(5) of the CGST, Central Goods and Services Tax Act, 2017, there are nine entries for which ITC is not applicable. These 9 entries are:

  1. Motor Vehicles
  2. Food and Beverages
  3. Beauty Treatment
  4. Health Services and Fitness Center
  5. Club Membership
  6. Life insurance
  7. Outdoor Catering
  8. Rent-a-cab, Health and Life Insurance
  9. Travel benefits extended to an Employee

Conclusion

The GST is aimed to create uniformity in the Indian market where the competition is free and fair. The Centre and the State harmoniously have gathered their resources as well as their sovereignty to lead to economic upliftment through this fiscal consolidation.

Though it is still the initial phase, across the spectrum, there has been a considerable price drop. There has also been an increase in the manufacturing activities under this unified market. Despite the teething problems and the heavy disproval, it seems that the economy is slowly but steadily picking up. Let’s hope that with GST the Indian economy emerges stronger than ever before.

Frequently Asked Questions

What is GST?

When a consumer buys a good or a service, he is levied with a tax, this goods and service tax is what makes GST. GST is considered to be the biggest tax reform in the country. It is said to have simplified the tax-system in India and has transformed the country into a merged market where all the indirect taxes have been replaced by one tax-GST.

What is the meaning of the GST rate slab?

GST is levied at different rates that ranges from 0% to 28%. A 4-tier structure has been finalised which is-5%, 12%, 18% and 28%. The rates for essential goods have been kept lower and the rates increase for luxury goods which may also have to pay an additional cess.

How is GST applicable to business?

If you are a businessman and your yearly turnover is more than INR 20 lakh, you are supposed to pay the GST. However, in states like Meghalaya, Tripura, Arunachal Pradesh, Manipur, Nagaland Assam and Mizoram and the hilly areas like Himachal Pradesh, J&K, Sikkim and Uttarakhand, the limit is INR 10 lakh. Every businessman has to get himself registered if his turnover crosses INR 19 lakhs or INR 9 lakhs in case of the special states.

Will GST be applicable on the goods and services that are exported?

GST is basically a consumption-based tax. In the case of exports, consumption is being done outside the country, so there is no GST.

Do I need a PAN if I want to register for GST?

Yes, it is compulsory to have a PAN for the same.

What documents will be needed if I want to register for GST?

The following documents are needed:

  • State or Centre Issued ID card
  • State or Centre received Password
  • E-mail id
  • Mobile Number
  • Bank Account details

What is Dual GST?

In India, the Central government as well as the state government levy taxes, with Dual GST both state and centre will keep a common base of tax and simultaneously levy it. The GST that is levied by the Centre is called Central GST (CGST), while the State levied tax is the State GST (SGST).

What are the different kinds of GST?

GST can be applicable in the following forms:

  • CGST that stands for Central Goods and Services Tax. It is collected by the Centre.
  • SGST that stands for State Goods and Services Tax. It is collected by the State.
  • IGST that stands for Integrated Goods and Services Tax. It is collected by the Centre.

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