What is a GST?
GST is an Indirect tax known as the Goods and services tax. It has replaced many taxes, such as excise duty, VAT, services tax, etc. GST Law was passed in the parliament and enacted on July 1, 2017.
The goods and services tax is a single indirect tax levied on the entire country.
Let's understand through the example:
When we buy raw materials like oats flour and sugar to produce oats biscuits, taxes are applied at every stage—from manufacturer to retailer—reflecting the value added at each step to reach the final product.
Now, discover the various types of GST in India —SGST, CGST, and IGST. This unified tax system streamlines taxation nationwide, benefiting businesses and consumers alike.
What are the differences between CGST, SGST, and IGST in India?
The differences between CGST, SGST, and IGST in India are as follows:
|
BASIS OF DIFFERENCE |
CGST |
SGST |
IGST |
|
Central Goods and Services Tax |
State Goods and Services Tax |
Integrated Goods and Services Tax |
|
Collected by the Central Government within the same state transactions. |
Collected by the state government within the same state transactions. |
Collected by the Central government on interstate transactions, which means from different states or imports |
|
Applicable for both goods or services |
SGST is also applicable to both goods and services. |
IGST also covers both goods and services. |
|
The central government collects revenue. |
The State Government collects revenue. |
Both the central and state government will share the revenue. |
The CGST, SGST, and IGST have shared a balanced tax revenue distribution and created a clear and effective tax system.
Who is liable to pay GST?
The following individuals are liable to pay GST:
1. The individuals who are registered under GST and making taxable supplies are liable to pay GST.
2. E-commerce business operators are liable to pay GST.
3. E-commerce businesses that are registered under GST are required to deduct tax collected at source.
4. Persons registered under GST are required to make payment of tax under the reverse charge mechanism.
What are exempted goods from GST payment?
GST exemption means no GST will be charged on the supply of goods.
The following list of goods is exempt from GST payment but is not limited to the following:
1. Fruits and vegetables, cereals, fresh fish and meat (unprocessed), unroasted coffee beans, edible tubers and roots, jaggery, coconut tender, seeds for planting, etc.
2. Raw Materials like raw silk and silk waste, raw jute fiber, charcoal, firewood, etc.
3. Agricultural tools, hand tools, hand-made instruments, etc.
4. Fossil fuels, Energy.
What is the list of services exempt from GST payment?
The list of services that are exempt from GST payment is as follows but is not limited to the following:
1. Transportation services: Transportation of goods by rail, cargo, road, etc.; payment of toll tax; transportation of goods where the transport cost is less than 1500 INR, etc.
2. Agricultural services: Harvesting, cultivating, renting agricultural machinery, services provided by the commission agent, Agriculture marketing committee board, etc.
3. Medical services: These are exempted services offered by ambulances, charities, and veterinary doctors, but they do not include hair transplant medical services.
4. Government services: Services offered by the Reserve Bank of India, services by a foreign diplomat in India, etc.
What is the GST exemption for businesses?
Businesses and individuals who are supplying goods can claim a GST exemption if their aggregate turnover is less than 40 lakhs in a financial year.
For individuals and businesses that are suppliers of services, the GST exemption claiming limit is 20 lakhs.
What is the Impact of CGST, SGST, and IGST on Businesses in India?
There is a significant impact of CGST (Central Goods and Services Tax), SGST (State Goods and Services Tax), and IGST (Integrated Goods and Services Tax) on businesses in India. Here are some key points:
- Tax structure: The introduction of GST has replaced multiple indirect taxes; simply the tax structure compliance and making it easier for businesses to understand their tax obligations.
- One nation, one tax: GST has replaced multiple taxes and levied with us only one tax without needing to navigate different tax structures.
- Encouragement of Compliance Related to Input Tax Credit: The Input Tax Credit mechanism encourages businesses to maintain proper documentation and comply with the tax regulations.
- Technology Adoption: Many businesses need to invest in technology to manage GST compliance effectively.
- Revenue for Government: GST has broadened the tax base, increasing revenue for both central and state governments, which may lead to improved infrastructure and public relations.
- Boost E-commerce: Simplified tax structures support the growth of e-commerce by easing the procedure for online businesses.
Conclusion
Overall, CGST, SGST, and IGST in India have reshaped the tax landscape and brought more challenges and opportunities for businesses. CGST, SGST, and IGST simplify the tax structure, promote transparency, and enhance compliance for businesses. JustStart has helped many entrepreneurs comply with their compliances on time. Contact the team now.
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