Goods and Services Tax (GST) is the tax imposed on the supply (consumption) of goods and services. It is a destination based consumption tax and collected on those value- added items at each stage of the supply chain.
A manufacturer in India, need not pay GST wherever he/she manufactures. GST is applicable to all goods and services except alcohol and specified petroleum products. GST Act has proposed four tax rates, i.e. 5%, 12%, 18% and 28%.
Traders having annual turnover, within a state, below Rs.20 lakhs are exempted from GST. These small traders need not register under GST.
But the traders having inter-state business should register and pay GST even the turnover is below Rs.20 lakhs. Special provisions are there in the GST Act for the 8 northeastern states and Himschal Pradesh, Uttarakhand and Jammu and Kashmir.
GST Act was passed on April 12, 2017. GST came into effect from 1st July, 2017. It is the single biggest tax reform since Independence. Several Countries like Russia, Canada, Australia, Singapore, China, etc. have already introduced GST.
The right to levy tax is derived from the Constitution of India. To permit the Centre and the States to levy taxes onthe same goods and services needed unique amendment to the Constitution. Accordingly 101st Constitution Amendment Act 2016 was passed and the President’s acceptance was received on September 8, 2016. Under this Act, GST Council, a constitutional body was to be formed to implement GST.
GST is of three kinds: CGST, SGST/UGST, and IGST.
a. CGST - Central Goods and Services Tax
imposed and collected by the Central Government on all supply of goods within a state (intra-state) under CGST Act 2017
b. SGST - State Goods and Services Tax
imposed and collected by the State Governments under State GST Act. (Tamil Nadu GST Act 2017 passed by Tamil Nadu Govt.)
c. UGST - Union Territory Goods and Services Tax - imposed and collected by the five Union Territory Administrations in India under UGST Act 2017.
d. IGST - Inter-State Goods and Services Tax - imposed and collected by the Central Government and the revenue shared with States under IGST Act 2017.
e. IGST on exports - All exports are treated as Inter-State supply under GST. Since exports are zero rated, GST is not imposed on all goods and services exported from India. Any input credit paid already on exports will be refunded.