FAQ on GST
Q. What is GST? How does it work?
GST is one indirect tax for the whole nation, which will make India one unified common market. In Short, it can be said in one line "One India, One Tax".
GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
Q. Which taxes at the State level are being subsumed into GST?
At the State level, the following taxes are being subsumed:
- Subsuming of State Value Added Tax/Sales Tax,
- Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
- Octroi and Entry tax,
- Purchase Tax,
- Luxury tax, and
- Taxes on lottery, betting and gambling.
Q. What are the components of GST in India?
There will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State.
Q. How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?
In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services.
The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order).
Q. How will Exports be treated under GST?
Exports will be treated as zero-rated supplies. No tax will be payable on exports of goods or services.
However, Credit of input tax credit will be available and same will be available as the refund to the exporters.
Q. Assessees on which Exemption Limit Not Applicable?
The following person shall have to register irrespective of the turnover:
- Person making any inter-state taxable supply (i.e. selling outside the state)
- Casual Taxable person
- Person who need to pay under Reverse Charge
- Non-resident taxable person
- A person need to subtract tax (e.g. e-commerce business – marketplace).
- The person supplying goods or services or both as an agent of any other person.
- Input Service Distributor
- A person who supplies goods or services through e-commerce.
- Every e-commerce operator
- An aggregator who supplies services under his brand name
Q. Which taxes at the Centre level being subsumed into GST?
At the Centre level, the following taxes are being subsumed:
- Central Excise Duty,
- Additional Excise Duty,
- Service Tax,
- Additional Customs Duty commonly known as Countervailing Duty, and
- Special Additional Duty of Customs.
Q. What are the Finalized Rates of GST in India?
The GST council on November 4, 2016 has finalized the GST rates and divide the present Goods and Services Tax (GST) rate structure into four slab rates which are 5%, 12%, 18% and 28% and rates on Gold has not been decided till yet but as said by the council it is likely to be on lower side.
Q. Whether Input Tax Credit of CGST can be utilized against the output tax liability of SGST?
No cross utilization of credit would be permitted.
The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be permitted for paying the SGST on output.
Q. How will imports be taxed under GST?
Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country.
Full and complete set-off will be available on the GST paid on import on goods and services.
Q. Is there Exemption / Threshold limit for Small Traders and Service Providers under GST?
The exemption limit for Goods and Service Tax (GST) is as under:
| Particulars | Amount |
|---|---|
| Exemption Limit for North-Eastern States | Rs.10 Lakh |
| Exemption Limit for Rest of India | Rs.20 Lakh |
The exemption limit is applicable only when supply (sale) is made within the state. Any supply outside the state will attract registration provisions.
Q. Is there any concept of Composition Scheme Under GST?
Small taxpayers with an aggregate turnover in a financial year up to [Rs. 50 lakhs] shall be eligible for composition scheme.
Under the scheme, a taxpayer shall pay tax as a percentage of his turnover during the year without the benefit of Input Tax Credit (ITC). The floor rate of tax for CGST and SGST shall not be less than [1%].
A tax payer opting for composition schemshall not collect any tax from his clients. Tax payers making inter- state supplies or paying tax on reverse charge basis shall not be eligible for composition scheme.
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