5 Basic Things about GST Everyone Should Know

If you are a merchant, there are almost certain taxes that you deposit other than income tax deposits. This may be in form of service tax, excise duty, VAT or custom fees, etc. These are called by almost all the indirect taxes taxes will be replaced by GST now.

You should know about following things:

1. When is GST Applicable?

GST is applicable on supply of goods and services as defined in the GST Act. Supply includes sales, transfers, barters, exchanges, rentals, and leases. Even transactions without direct monetary exchange, like supplies between branches or agents can attract GST. However the government can exempt certain goods and services from GST by issuing notifications.

To determine GST liability, businesses first need to identify if their transactions fall under taxable supply.

2. Types of GST

GST is categorized based on type of transaction:

• Central Goods and Services Tax (CGST) & State Goods and Services Tax (SGST): These are applicable on intra-state transactions where goods and services are supplied within the same state. CGST is collected by central government and SGST is collected by state government.
• Integrated Goods and Services Tax (IGST): This is applicable on inter-state transactions where supplier and buyer is in different states. IGST is collected by central government and later distributed to respective states.
• Union Territory Goods and Services Tax (UTGST): This is similar to SGST but applicable to Union Territories without legislature.

For imports, IGST is applicable at the time of customs clearance so that domestic business do not face competitive disadvantage.

3. Who Should Register for GST?

Businesses should register for GST if:

• Their annual turnover is ?20 lakh (?10 lakh for North Eastern and special category states).
• They are engaged in inter-state transactions, regardless of turnover.
• They are into e-commerce, exports or imports.
• They supply goods or services through online marketplace.

Even if a business does not meet above criteria, voluntary GST registration is an option. Registering for GST allows businesses to claim Input Tax Credit (ITC) on purchases, reducing overall tax liability.

4. GST Applicability for Different Businesses

GST impacts different business sectors differently:

• Traders and Merchants: Those who were registered under VAT need to transition to GST. Input tax credit is available on purchases made for resale.
• Manufacturers: Manufacturers benefit from GST as they can set off input taxes against output taxes, simplifying tax structure and reducing cascading tax effect.* Service Providers: Under GST, services are taxed at both central and state level. However service providers now have wider scope to claim input tax credit on goods purchased for service delivery.
• Exempt Services: Essential services like healthcare (doctors, paramedics), educational institutions and charitable organizations are exempt from GST so that these critical sectors remain accessible and affordable.

5. Do You Want to Opt for GST Voluntarily?

Small businesses with turnover below the mandatory threshold can still opt for GST voluntarily. There are several benefits to that:

• Credibility: Registered businesses look more credible and trustworthy to customers and vendors.
• Input Tax Credit (ITC): Buyers can claim credit for GST paid on purchases from registered vendors, so it’s beneficial for them to deal with GST registered suppliers.
• Ease of Doing Business: Businesses dealing with registered suppliers and buyers have smoother transactions and better tax compliance.

Also, as per GST Act, registered buyers buying from unregistered vendors have to pay GST on their behalf, so many businesses prefer to deal only with registered suppliers.

Conclusion

GST has changed the face of Indian taxation, making it more transparent and uniform. Knowing when GST is applicable, its types, registration requirements, sector wise implications and voluntary registration can help you comply better. Whether you are a trader, manufacturer or service provider, GST can lead to better financial management, tax savings and overall business efficiency.