Goods and Services Tax (GST) is soon going to land soon in Indian tax system by July 2017. This system will amend all the current indirect taxation system and will bind all goods and services under one taxation umbrella. This page will give you a brief overview of this new tax reformation.
Goods and Services Tax or GST is a destination oriented consumption tax system that will be levied on goods and services provided in India. This tax will be imposed on each stage of goods manufacture and distribution and input taxes will be set-off against output taxes. It will be a comprehensive and integrated tax system levied on value addition at each stage.
Currently, India has a number of indirect taxation system by which both state and central government collect the tax which ultimately imposes double-tax on many goods and services. This system will subsume all these indirect taxes and will bring a stability in tax revenue system of India. An improved tax compliance will be built by this system which can be seen in 150 other developed countries who uses it from last many decades.
The tax levied on goods and services will be added to the revenue of the place where it will be consumed.
For instance, if a seller of Haryana sells a good or service to a seller of Uttar Pradesh, then the tax will be credited to UP Government along with Central Government.
Any Existing taxpayers enrolled under Central Excise, Customs, Service Tax, VAT and Sales Tax are required to get enrolled with GST system.
The GST enrollment needs to be done online through the GST system portal. Businesses with an annual turnover above 20 lakhs need to be registered with this system. However, the limit is 10 l0 lakhs for the north-eastern states. To get registered, a taxpayer needs to get the provisional ID and password from the concerned state authorities to access the GST system portal.
GSTR-1 need to filed by 10th of succeeding month as levied u/s-8/TDS u/s-37 and this applies to every registered entity or person except Input Service Distributor (ISD).
GSTR-2 need to be filed by the person who will not file GSTR-1 need to file this by 15th of succeeding month.
GSTR-3 need to filed by 20th of succeeding month as levied u/s-8/TDS u/s-37 except for Input Service Distributor (ISD).
GSTR-4 need to be filed in quarterly basis by the compounding taxpayer u/s 8 by 18th of the month next to a quarter.
GSTR-5 need to file by the NRFs periodically by last day of registration.
GSTR-6 need to filed by Input Service Distributors (ISD) by 15th of the next month.
GSTR-7 need to file to submit the return collected for Tax Deducted at Source u/s 37 by 10th of the next month.
GSTR-8 need to be filed annually 31st December following the end of the financial year.
If any taxpayer or entity decide to cancel the registration, then they need to file a final return with 3months of the date of cancellation or date of cancellation order.
In this Goods and Services Tax, return filed by the inward and outward seller will be matched with each other. Both the parties need to keep their invoice updated in the portal to avail credit.
The final decision for GST rates have not been decided yet and it is still under revision. It has been assumed that rates will be different for CGST, SGST, and IGST and there may be multiple rates for goods and services depending on their importance. In brief, taxes will be lower for essential goods and will be higher for luxury goods.
For the inter-state transaction of goods and services, the tax levied will be Integrated Goods and Service Tax (IGST) which is a total of CGST and SGST. This will be applicable while selling goods to the buyer from other states and this IGST will be payable only after adjusting the available credit of IGST+CGST+SGST paid on buying the goods. The selling state is supposed to transfer the credit to SGST and the buyer can claim credit for the IGST during discharging SGST liabilities. And the center will transfer the credit of IGST used in payment of SGST to buyer’s state.
For the transaction of goods and services within the state will levy SGST and CGST on them. The payment for SGST will be done only by SGST credit and CGST will be done by CGST credits. No cross adjustment will be allowed in such cases.