RCA some basics about GST

Naman GargRajesh Chander and Associates

Email – namangarg1206@gmail.com

Mobile: +91 991-01-46869

Goods And Service Tax (GST)

G S TAre you ready for GST ?

Executive SummaryIntroduction

GST Applicability

Advantages

Types of GST

GST in other countries Taxes to be merged

Utilization of credit

Who will be benefited ?

Goods And Service Tax

A Common tax onGoods Services

GST stands for goods and service tax

It will be a Value added taxIt means tax will be charged on the value addition in the goods or services.

It will be a domestic trade taxIt means it exempts all inputs including capital goods and hence become a

general tax on domestic consumption.

Introduction

GST will apply to all goods and services except-

GST Applicability

Alcohol for human consumption

• Tax levied will be State excise and VAT

Electricity

• Tax levied will be electricity duty which will be collected by State

Tobacoo

• Excise duty and GST both will be levied

Real Estate

• Stamp duty and property tax will be levied.

CGST

• CGST stands for Centralgoods and service tax.

• This will be levied on allintra-state transactions ofgoods and services. It willbe levied and collectedby Centre.

SGST

• SGST stands for Stategoods and service tax.

• This will be levied on allintra-state of goods andservices. It will be leviedand collected by State.

IGST

• IGST stands for Inter-state goods and servicetax.

• This will be levied on allinter-state transactionsof goods and services. Itwill be levied andcollected by Centre.

Types of GST

Sample list of GST in different countries are as below

GST in other countries

Country Rate of GST Country Rate of GST

India ??? Australia 10.00%

France 19.60% Singapore 7.00%

Germany 19.00% Canada 5.00%

Pakistan 18.00% Japan 5.00%

New Zealand 15.00% Sweden 25.00%

Following taxes will be merged in GST:- Excise duty (Both central and state except on Alcohol)

CVD and SAD in customs

Service tax

VAT and CST

Entry tax

Entertainment tax (levied by state government)

Purchase tax (tax levied on purchase of goods from unregistered dealer)

Surcharges and Cess (both i.e. central and state)

Taxes to be merged in GST

• Removal of cascading effectIn present system tax is levied on the tax itself such as VAT on exciseduty. In GST there will not be any cascading effect.

• More clarity and less complicationsIt will make the tax calculation very easy as

there will not be requirement of judging the type of tax

weather the process is manufacturing or service etc.

• Increase in revenueGovernment revenue will increase from the GST without effecting theprices of goods. (explained later in detail)

Advantages of GST

GST

CGST 150 Lakhs

SGST 10 Lakhs

Threshold Limit

Threshold limit means if the sum total of sales (total turnover) in the previousyear is below that limit then there will not be any liability to pay tax thereon.

Entities with turnover below INR 150 Lakhs would pay their taxes to states, whichwould subsequently pass on to the Centre its share.

Utilization of credit

CGST

• CGST can be utilized forthe payment of IGST butnot SGST.

SGST

• SGST can be utilized forthe payment of IGST butnot CGST.

IGST

• It can be utilized for thepayment of CGST and ifwhole utilization fromCGST is not possible thenit can be utilized for thepayment of SGST.

*Credit is a sum subtracted from the total amount a taxpayer owes to the government.*Credit here means tax credit

• Benefit of GST will be in the following sequence Trader

Service provider

Manufacturer

Who will be benefited

PersonsExcise Duty Service tax VAT CST

Before After Before After Before After Before After

Manufactures a a a a a a r a

Traders r a r a a a r a

Service Provider a a a a r a r a

Table shows credit ofduties paid on inputsavailable before andafter GST

Generally it is assumed that if there is increase in tax then there will beincrease in price of goods. Whereas, impact of GST on goods and services isas below-

Refer attached MS-Excel sheet for the calculation of increase and decrease inrevenue and prices of goods and services in both the case i.e. in case of intra-state sale and inter-state sale of goods and services.

Revenue VS Price of goods

Particulars Revenue Prices

Intra-state goods Increase Decrease

Inter-state goods Decrease Decrease

Services Increase Increase

Lets Calculate

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