In this article, we will understand GST: Features, Council & Exempted area in simple and easy language, as well as discuss its other important aspects, So to understand well, definitely read this article till the end, hopefully the concept will be understood.
What is GST and why was it introduced? , It has already been discussed with examples, be sure to read it, as well as read other related articles.
Basics of GST [1/3]
How to work GST? [3/3]
What is GST
GST is a comprehensive, indirect and destination based single tax system.
It is comprehensive because it is applicable to the whole country and there is only one tax in lieu of many taxes, and the indirect tax system is because it is not levied on the direct tax system . GST consists of 17 indirect taxes (out of which 8 are central and 9 state level taxes) and 23 central and state cesses.
This is a destination based tax system because it is levied on the supply and not on the production of goods and services.
GST: Features Explained
It is important to understand the features of the GST model in detail for a better understanding of GST. So let’s understand this;
Features of GST as One Nation One Tax
GST is a comprehensive tax regime that establishes a single tax regime across the country. Under this, 8 central indirect taxes and 9 state level indirect taxes were merged into GST. In which Central Excise Tax, Service Tax, Central Sales Tax, Value Added Tax, Custom Duty, Octroi etc. are prominent.
There are four levels of taxes for all goods or services; 5, 12, 18 and 28 percent. With few exceptions, all goods and services will be brought under these tax levels so that there will be uniformity in taxes across the country and this will avoid different prices of the same commodity in different states.
With the removal of customs duty and octroi, the movement of like-laden trucks will be free, this will save time and resources, as well as reduce inflation.
By having the same rates of SGST and IGST, there will be no difference in rates between neighboring states and there will be no difference in rates in selling within and outside the states, thereby there will be no benefit of tax evasion. Along with this, the burden of taxes will also be reduced as input tax credit will be available in all goods and services at each stage of supply.
Overall, GST will help in creating a unified common national market in India. That is why it can be said that GST has ensured the concept of One Nation One Tax .
Features of GST as a Type
There are four types of GST.
CGST i.e. Central GST
SGST i.e. State GST
IGST i.e. Integrated GST or Integrated GST
UTGST i.e. Union Territory GST or Union Territory GST
| Supply of goods and services, or both, at each stage of the supply chain, starting from manufacturing or importing to retail. Since India is based on a federal structure, the state also has the power to levy taxes independently. SGST is levied by the states and the entire amount of recovery belongs to the state. Similarly, UTGST is for the entire center.
| IGST replaces the earlier ongoing Central Sales Tax which is applicable on interstate transactions.
In IGST, the state gets its share only, if something becomes the share of the center, then it gets it according to the Finance Commission.
Similarly, CGST which is under the Central Government; The state also gets some part of it, but the finance commission decides how much it will get.
Remember here that under the GST Council, CGST, SGST, UGST and IGST are collected by the Center and the states at mutually agreed rates.
GST exempted area
Alcohol for human consumption is constitutionally kept out of GST, i.e. it cannot be brought under GST. Except this, GST includes all types of goods and services.
In addition, five petroleum products (crude oil, petrol, diesel, ATF (aircraft fuel) and natural gas) are temporarily out of GST, ie they can be brought under the ambit of GST on the recommendation of the GST Council.
Digital Features of GST
GST compliance will accelerate as all returns will be filed online, verification of input credits will also be done online and paper proof of transactions will be maintained at each stage of the supply chain.
Uniform procedure for registration of taxpayers and refund of taxes, uniform format of tax returns, common tax base, common system of classification of goods and services will bring more certainty to the taxation system.
More use of information technology will reduce the personal contact between the taxpayer and the tax officials, which will greatly help in reducing corruption and bring transparency in the system. (Visit – GST Portal )
Business and industry benefit from GST
Duplication of taxes in the earlier indirect tax system will be eliminated with the help of GST, this will encourage traders to pay taxes.
The burden of taxes will be reduced as input tax credit will be available on all goods and services at each stage of supply.
Being a digital system, the cost of compliance will be less and there will be no need to maintain many records for different types of taxes.
Consumers benefit from GST
The final price of goods may be lower than before due to smooth flow of input tax credit among manufacturers, retailers and service providers and elimination of duplication of taxes.
This will boost export and manufacturing activities, create more jobs and thus increase GDP with gainful employment, thereby accelerating economic growth. Ultimately it will help in eradicating poverty by creating more jobs and more financial resources.
States to benefit from GST
The tax base will expand as states will be able to collect taxes from the entire supply chain from manufacturing to retail. This is why GST is a destination-based consumption tax, the benefit of which will be passed on to the consuming states.
Till now, only the central government used to collect tax on services , but now with the states getting this right, the revenue of the state will increase and the states will get an opportunity to make use of this fastest growing sector of the economy.
With the same rates of SGST and IGST, there will be no difference in rates between neighboring states and there will be no difference in rates in selling within and outside the states, thereby there will be no benefit of tax evasion. The overall investment climate in the country will improve, which will naturally benefit the states in the form of development.
Who has to pay GST?
Traders with annual turnover up to 20 lakhs do not have to pay GST. For hilly states (Northeast states, Sikkim, Uttarakhand and Himachal Pradesh) this limit is 10 lakhs. That is, there is no need for these exempted traders to register on the GST portal.
In addition to the above, every trader (in the tax net) has to file the main return once in a month and pay his tax. Since the entire process is online, every trader will automatically get the full input credit of the tax paid on the purchase of any goods or services that have to be paid.
This council consisting of the Center and the states is an apex body for GST. It is empowered not only to finalize the aspects related to GST but also to settle disputes.
In this important council, headed by the Union Finance Minister, the Minister of State in charge of Finance and Revenue in the Ministry of Finance and the Minister of State for Finance in charge of Taxation and Finance or any other Minister nominated by him shall be a member. as will be included. Effectively, the council will consist of two members, including a chairperson from the central government, one member from 28 states and 3 union territories (having a legislature). Thus the total number of members will be 33.
The Central Revenue Secretary will be the Secretary of the GST Council while the Chairman of the Central Board of Excise and Customs (CBEC) will be the permanent invitee for all the proceedings of the Council, although he will not have the right to vote.
The Council is concerned with important issues related to GST like Goods and Services to be kept under or out of GST, Model GST Laws, Supply Point Monitoring Principles, Limits, GST Rates including Minimum Fixed Rate with Bands, Additional Resource Raising during Natural Calamities Make recommendations to the Union and the States on special rates for, special provisions for certain States, etc.
Every decision of the Council shall be taken by a majority of not less than three-fourths of the members present and voting at the meeting.
The voting group is structured in such a way that neither the Center nor all the states can veto together. The value of the vote of the Central Government shall be one-third of the total votes cast and the value of the votes of all the Governments shall be two-third of the total votes cast. Any decision would require at least three-fourths of the total votes.
Many economists are considering the reduction in the country’s GDP after 2017 as the effect of GST. This fact cannot be completely denied, although the same economists also believe that in the long term, GST will prove to be very effective for the entire economy. Since the implementation of GST, prices of many items have come down but petroleum products are still not covered under GST. Overall, GST is a good system, there is no doubt about it but it is still in its infancy and it may take some more time to work to its full potential.
So here are the features of GST, hopefully you will understand. The links of other articles related to GST are given below for better understanding read them also;
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