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The Goods and Service Tax (GST) was one of the most significant and transformative tax reforms ever brought about in India. In simple words, the GST is an indirect tax that is applicable to all goods and services. It subsumes many intermediary taxes like excise duty, VAT, service tax, etc., which were previously levied on the manufacture, storage, sale, or consumption of goods and services. The new tax regime has replaced multiple state and central taxes with a single GST. It brings about a neutralization of inputs among businesses while serving as the final consumer; thereby making it a lot easier to operate business-to-business transactions with suppliers. This article lists out some frequently asked questions related to GST that you should know.

What is Goods and Service Tax?

The Goods and Service Tax (GST) is a value-added tax that is levied when a business sells you goods or services. It’s a single tax that you pay for all your purchases, no matter what country you’re in. The GST rate will be uniform across the country, and all traders will charge the same rate on their goods. Exports are tax-exempt, while imports will attract an equivalent rate of GST. All collected tax revenue will be distributed among the Central Government (CG), State Government (SG), and the Union Territories (UTs). The CG will use the money to pay for the administrative cost of running the GST. The SG will use the money to pay for their respective state government expenses. The UTs will use the money to pay for their administrative costs.

Meaning of GST in easy words

The Goods and Service Tax (GST) is an indirect tax levied on the manufacture, storage, sale, or consumption of goods and services in India. The GST subsumes many intermediary taxes like excise duty, service tax, etc., which were previously levied on the manufacture, storage, sale, or consumption of goods and services. The new tax regime has replaced multiple state and central taxes with a single GST. It brings about a neutralization of inputs among businesses while serving as the final consumer; thereby making it a lot easier to operate business-to-business transactions with suppliers.

What are the types of Goods and Services Tax?

There are five types of GST, i.e., standard GST, special GST, nil GST, SGST, and CGST. Let’s go through each of them in detail.

Standard GST :

This is the rate that will be applicable to most items in the country. It is expected to be at 18% to 19%.

Special GST :

This is the rate that will be applicable to some items, like gold, silver, precious stones, gems, etc. It is expected to be levied at 2%.

Nil GST :

This is the rate that will apply to certain services like healthcare, education, etc.

SGST :

This is the rate that will be applicable to businesses in the state of Gujarat and the Union Territories of Daman, Diu, and Lakshadweep. It is expected to range from 5% to 9%.

CGST :

This is the rate that will be applicable to businesses in the remaining states of India. It is expected to be levied at 1% for the first two years, followed by 2% from the third year onwards.

Where is GST applicable?

The Goods and Service Tax (GST) is applicable across the country but it has certain exceptions. It is applicable for purchase of goods and services at every place in India except Jammu and Kashmir. The place of supply of service is the same as the place of supply of goods. The place of supply of goods is the place where the goods are received. This means that if the goods are received in any of the states of India except Jammu and Kashmir, the GST will be applicable.

How will you be affected by GST?

If you are a consumer: GST will be a single tax levied on the final consumer. This means that you will pay one tax on your purchases and not multiple taxes levied on each stage in the supply chain. This will significantly reduce the cost of goods since the businesses (manufacturers) will not require as much money to maintain the supply chain. If you are a business: GST will result in a significant reduction in your operational costs since you will be required to maintain only one supply chain. This is a significant reduction from the multiple supply chains that businesses need to maintain under the current system. If you are an employee: GST will result in an increase in your take-home salary since the taxes imposed under the current system will be replaced with the GST.

Conclusion

The Goods and Service Tax (GST) is a value-added tax that is levied when a business sells you goods or services. It’s a single tax that you pay for all your purchases, no matter what country you’re in. The GST will result in a significant reduction in your operational costs since you will be required to maintain only one supply chain. This is a significant reduction from the multiple supply chains that businesses need to maintain under the current system. If you are a consumer, GST will be a single tax levied on the final consumer. This means that you will pay one tax on your purchases and not multiple taxes levied on each stage in the supply chain. This will significantly reduce the cost of goods since the businesses (manufacturers) will not require as much money to maintain the supply chain.