GST or Goods and Services Tax is a tax form that was imposed by the National Government of India at a countrywide level. The Indian Government levied this tax on manufacturers, consumers of goods, sellers, and services at an all India level.
GST was coined from the idea of VAT (Value Added Tax) which was applied at every stage of the business and also included the consumer who also needs to pay for the GST charged by the supplier or last dealer charged in the supply chain.
What is GST?
The Government of India imposes GST (Goods and Services Tax) on the goods & supply chain and services in India. This tax is an indirect tax. From July 1, 2017, this tax replaced all other active taxation systems in the country. GST was introduced so that the country has one tax with one nation rule. This taxation system is a comprehensive, multistage, and destination-based system that has additions at every stage. In the budget session of 2017, the GST Act was introduced by the Government of India and was approved on March 29, 2017. As a result of this act, all existing indirect tax schemes like Central Excise Duty, Entry Tax, Octroi, and VAT were abolished.
Goods and Services Tax (GST) was divided by the Finance Ministry into five tax slabs (rates) which are 28%, 18%, 12%, 5%, and 0%. Nonetheless, the Finance Ministry exempted some products from GST like petroleum, electricity, and alcoholic drinks. These products or services are excluded so that the state government can imply tax on the products mentioned above according to the conventional tax system.
To pay under GST, a person needs to register for the same under the GST portal to get a unique identification number. All small and large organizations must register under GST for the purchases or transactions which are inter-state require an integrated GST. For interstate sales, the State GST (SGST) as well as Central (CGST) GST is charged.
Different Types of Taxes under the GST
The Finance Ministry categorized GST under 4 types of the tax system. These types are:-
- CGST - Central Goods and Services Tax
- IGST - Integrated Goods and Services Tax
- SGST - State Goods and Services Tax
- UTGST - Union Territory Goods and Services Tax
Central Goods and Services Tax (CGST)
CGST or Central Goods and Services Tax is charged for intrastate delivering or purchasing of services or goods. All the CGST paid is levied by the Central Government. This tax is governed under Central Goods and Services Tax Act. Due to the implementation of CGST all the conventional systems of taxes, i.e. Customs Duty, Central Excise Duty, SAD, Service Tax, CST, and other taxation systems are removed. The CGST and SGST are charged together at the same rate. The tax amount paid under CGST goes to the Central Government.
State Goods and Services Tax (SGST)
SGST or State Goods and Services Tax, the same as CGST, is levied by the State Government for the purchase of services or goods in a particular state. SGST is governed by the State Goods and Services Tax Act. Like the CGST, SGST has replaced all previous taxation systems like Value Added Tax, Entry Tax, Entertainment Tax, Cesses State Sales Tax, and surcharges. The tax amount paid under SGST goes to the State Government.
Integrated Goods and Services Tax (IGST)
IGST or Integrated Goods and Services Tax is a tax that is charged on the inter-state purchase of goods and services. One also needs to pay it during the import of goods. IGST is levied by the Central Government, which is distributed back to the states. IGST is charged when there is a transfer of services or goods from one state to another. IGST is governed by the Integrated Goods and Services Tax Act. This particular tax was implemented so that a person is free from the hassle of dealing with multiple states rather he/she has to pay it to the Central government which later sends the appropriate GST to the states.
Union Territory Goods and Services Tax (UTGST)
UTGST or Union Territory Goods and Services Tax is the tax charged on the purchase or supply of services and products to the Union Territory of the country which are Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep. This tax is paid along with CGST and regulated under the Union Territory Goods and Services Act.
Computation of GST
With the change in the taxation system, the taxpayer can easily calculate the tax, which is being levied under different acts at different places on the various services and goods under these tax rules. To calculate the GST, one must know the different rates of GST under the taxation system. The calculation of GST can be done, as explained by the below example.
If product A is being sold at Rs 1897 and for this product, the GST is 28%, then the GST for the product is:-
GST = 28% of Rs 1897 = 28/100 of Rs 1897 = Rs 532 (figure rounded) of which CGST & SGST (if they have same rates) is Rs 266.
The total amount paid including GST = Rs 2429
There are various GST calculators available online at different websites that are used for calculating GST.
What is a GST calculator?
GST calculator is a tool meant to calculate GST, which is paid every quarterly or monthly. The interface of the GST calculator is easy. It comes with a ready to use and handy calculator for computing GST for monthly, quarterly, or annually. The calculator is usable for everyone from manufacturers, buyers, to wholesalers.
Without the calculator, filing GST returns can become a tedious job. There are several factors and aspects that need to be taken into account like exempt supplies, ITC & reverse charges. If one fails to pay the GST or unable to pay the entire amount, they may be asked to 18% on the amount as a penalty so one must pay the right amount on time.
For calculating GST, one needs to enter all the essential details like the tenure for which GST is being calculated, return filing due date, and the actual date of GST filed monthly tax liability, 'Reverse Charge Mechanism' attracting mechanism, credit ledger opening balance, cash ledger's opening balance, and ITC for which one is eligible.
How to Calculate GST with GST Calculator
For the calculation of GST under the GST Calculator, one needs to go through the following formula.
To add the GST amount to the original cost we have:-
Total GST charged = ( Actual cost of the product multiplied by the rate of GST ) / 100
Total price = GST Amount + Actual Cost
To remove GST amount to the original cost we have:-
Total GST Charged = Actual Cost of Product or Service – (Actual Cost of Product or Service * (100 divided by (100 + Rate of GST ) )
Price without GST = Actual Cost of Product or Service – GST Tax
Advantages of GST Calculator
Using a GST calculator will help taxpayers in determining the gross or net price of the service or product using the GST rate percentage. GST Calculator is a great tool that can compute SGST, CGST as well as IGST and divide the rate according to rates between State & Central GST. Further, using a GST calculator not only saves time but also helps in avoiding error during calculations of GST, which can lead to error in submitting GST returns.
How to use GST Calculator
The GST tool in PaisaWiki offers its taxpayers a professional and dedicated GST calculator, which efficiently helps in the calculation of GST. It has an option to calculate differential GST, which helps in easy & faster calculation of the tax.
Here are the steps one should follow to calculate GST using the GST calculator:-
Step A: Choose GST Exclusive or GST Inclusive in the calculator according to one's choice.
Step B: Input the actual amount on which GST is to be calculated.
Step C: Choose the GST rate from the list of GST rates and according to the category chosen.
Step D: Select the calculate button for checking the answer. The calculation result shows the total GST charged along with CGST, IGST, and others. It also shows pre or post-GST according to one's needs.
Advantages of GST
There are many advantages of implementing GST on all products. The term GST refers to a single indirect tax because it eliminates 17 different types of taxation like Vat Luxury tax, Entertainment tax, etc. GST does away with the accumulation of added taxation whenever the value is added to goods and services at every stage. This has great benefits, as given below
This tax structure, i.e., GST, aids in building an international standard. It also assists in bringing more transparency between the customers and the manufacturer. The main reason for introducing GST is to eliminate the system of double taxation on all kinds of goods. This way a healthy competition can be created among product-manufacturers because now instead of wasting time on taxation they can concentrate more on improving the quality of their products. This results in the production of goods and services which are of high quality. It increases the reputation of our products on an international level, too, thereby an increase in exports which then results in boosting the GDP of the country.
The single taxation practice curtails the actual amount of tax considerations and this, in turn, leads to a decrease in the cost of production of goods many-times. What follows for manufacturers is that they, now, have a reduction in the actual cost of production. This results in bringing down the cost of production for manufacturers. This leads to the growth of healthy competition which in turn increases competition amongst all manufacturers and exporters. In today's circumstances, i.e., after the implementation of GST, the most important reason for inflation in the economy has decreased because now there is only one tax in place of seventeen different types of taxation. Another opinion getting popular is that tax liability will decrease substantially. Since input tax is made available against the output tax, there is an expectation of a reduction in actual price.
Listed below are the benefits of GST:-
- Composition scheme
- Cascading tax effect elimination
- E-Commerce doesn't have different rates.
- Fewer complications
- Higher threshold
- Simple procedure
- z Unorganized sector regulation
Ans: Yes, ISD is a must to obtain registration which is compulsory under GST in any area whether it is a State or Union Territory from where the manufacturer or distributor makes a taxable supply of goods as well as services or both.
Ans: The deciding of rates of CGST and SGST is done jointly by the Central government and State governments.
Ans: In India, the Central, as well as the State governments, are assigned the role of levying and collecting taxes. Both governments have different responsibilities for the fulfillment of which they need to raise their resources. A dual GST keeps the structure of fiscal federalism intact.
Ans: CGST is being levied and administered by the Central government, whereas SGST is being levied and administered by State/UT Governments as the case may be.
Q: When a dealer has migrated with an incorrect PAN, and the firm's status is changed to the partnership from proprietorship is new registration needed?Ans: Yes, new registration is required as a partnership requires new PAN.
Q: As liquor does not come in the list of goods and services to come under GST law, is it required for a liquor trader to change from VAT to GST?Ans: No, registration is needed in case of goods which do not come under GST law.
Ans: GST inclusive amount means the original value of the product plus the GST tax levied on it. No other taxes like sales tax, etc., are then charged from the customer.
Ans: GST Exclusive amount means the selling price of the product minus the GST tax from the GST Inclusive price of the product.