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Gst

Lovely Professional University
Lovely Professional University

UNDERSTAND THE BASICS OF GST AND ITS METHODOLOGY.HIGHLY USEFUL FOR UPCOMING EXAMS AS GST IS GOING TO COMPLETE 1 YEAR ON 1 JULY,2018

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THE BIGGEST TAX REVOLUTION IN THE ECONOMIC HISTORY OF INDIA ONE NATION-ONE TAX EK DESH-EK KAR
GOODS AND SERVICES TAX IS A MULTISTAGE, DESTINATION BASED INDIRECT TAX LEVIED ONLY ON THE VALUE ADDITION. TERMS MULTISTAGE- ON EVERY STAGE OF VALUE ADDITION, GST WILL BE APPLIED. LET US UNDERSTAND WITH THE HELP OF AN EXAMPLE. SUPPOSE WE STUDY THE LIFECYCLE OF A CAKE. FARMER SOWS THE SEEDS MILLER BUYS FROM THE FARMER BAKER BUYS FROM MILLER SHOPKEEPER CONSUMER
EVERY COLURED SEGMENT IS THE STAGE OF VALUE ADDITION AND GST HAS TO BE PAID ON EACH STAGE. DESTINATION BASED TAX-IF YOU LOOK ABOUT ,YOU WILL SEE THAT THE CUSTOMER FORMS THE END SEGMENT OF THE LIFE CYCLE.THE ENTIRE TAX BURDEN IS SHIFTED ON HIM. INDIRECT TAX-THE BURDEN OF THE TAX IS BEING SHIFTED FROM ONE STAGE TO ANOTHER AND THE FINAL BURDEN IS ON THE CUSTOMER.IN CASE OF DIRECT TAXES, THE LIABILITY TO PAY THE TAX LIES ON THE POINT OF INCIDENCE. GST WILL BE SUBSUMING MANY TAXES AND WILL REPLACES ALL BY A SINGLE TAX i.e. GST. HOW IT DIFFERS FROM VAT? VAT AND GST ARE BOTH APPLIED ON THE VALUE ADDITION ITSELF AND THUS REPLACE THE TAX REPETITION.HOW EVER, VAT WAS STREAM SPECIFIC.
LET US SEE HOW? THE INPUT OF VAT LEVIED ON SERVICE TAX IS AVAILABLE AGAINST SERVICE TAX ONLY.SIMILARLY, INPUT VAT AGAINST EXCISE WAS AVAILABLE AGAINST EXCISE ONLY. DELAY IN GETTING THE INPUT CREDITS MULTIPLICITY OF TAXES. AMBIGOUS TAX ENVIRONMENT FARCRY TO UNDERSTAND FOR COMMON CONSUMERS. GOODS AND SERVICES TAX SHALL BE A SINGLE TAX THAT WILL GIVE HOMOGENOUS INPUT CREDIT TO ALMOST ALL TYPE OF INDIRECT TAXES PAID.
GST SHALL BE APPLIED IN THE FOLLOWING MANNER 1.IF THE TRANSACTION i.e. sale and purchase TAKES PLACE WITHING THE STATE, THEN CENTRAL GST (CGST) AND STATE GST(SGST) SHALL BE APPLIED. 2.IF THE TRANSACTION i.e. sale and purchase TAKES PLACE BETWEEN THE STATE i.e. INTERSTATE TRANSACTION THEN INTEGRATED GST (IGST) SHALL BE APPLIED.
CASE #1WHEN TRANSACTION TAKES PLACE WITHIN THE STATE IN THE EXAMPLE ILLUSTRATED BELOW, GOODS ARE MOVING FROM MUMBAI TO PUNE. SINCE IT IS A SALE WITHIN A STATE, CGST AND SGST WILL BE LEVIED. THE COLLECTION GOES TO THE CENTRAL GOVERNMENT AND THE STATE GOVERNMENT AS POINTED OUT IN THE DIAGRAM. THEN THE GOODS ARE RESOLD FROM PUNE TO NAGPUR. THIS IS AGAIN A SALE WITHIN A STATE, SO CGST AND SGST WILL BE LEVIED. SALE PRICE IS INCREASED SO TAX LIABILITY WILL ALSO INCREASE. IN THE CASE OF RESALE, THE CREDIT OF INPUT CGST AND INPUT SGST (RS. 8) IS CLAIMED AS SHOWN; AND THE REMAINING TAXES GO TO THE RESPECTIVE GOVERNMENTS.
Gst
CASE#2: SALE TAKES PLACE IN ONE STATE AND RESALE IN ANOTHER STATE. In this case, goods are moving from Indore to Bhopal. Since it is a sale within a state, CGST and SGST will be levied. The collection goes to the Central Government and the State Government as pointed out in the diagram. Later the goods are resold from Bhopal to Lucknow (outside the state). Therefore, IGST will be levied. Whole IGST goes to the central government. Against IGST, both the input taxes are taken as credit. But we see that SGST never went to the central government, still the credit is claimed. This is the crux of GST. Since this amounts to a loss to the Central Government, the state government compensates the central government by transferring the credit to the central government.
Gst
CASE #3:: SALE OUTSIDE THE STATE AND RESALE INSIDE THE STATE IN THIS CASE, GOODS ARE MOVING FROM DELHI TO JAIPUR. SINCE IT IS AN INTERSTATE SALE, IGST WILL BE LEVIED. THE COLLECTION GOES TO THE CENTRAL GOVERNMENT. LATER THE GOODS ARE RESOLD FROM JAIPUR TO JODHPUR (WITHIN THE STATE). THEREFORE, CGST AND SGST WILL BE LEVIED. AGAINST CGST AND SGST, 50% OF THE IGST, THAT IS RS. 8 IS TAKEN AS A CREDIT. BUT WE SEE THAT IGST NEVER WENT TO THE STATE GOVERNMENT, STILL THE CREDIT IS CLAIMED AGAINST SGST. SINCE THIS AMOUNTS TO A LOSS TO THE STATE GOVERNMENT, THE CENTRAL GOVERNMENT COMPENSATES THE STATE GOVERNMENT BY TRANSFERRING THE CREDIT TO THE STATE GOVERNMENT.
Gst
NUMBER OF TAX SLABS IN GST- 0 % 5 % 12 % 18 % 28 %
HOW VAT OR GST CHANGE THINGS? BEFORE GST AFTER GST
Gst

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  • 2. THE BIGGEST TAX REVOLUTION IN THE ECONOMIC HISTORY OF INDIA ONE NATION-ONE TAX EK DESH-EK KAR
  • 3. GOODS AND SERVICES TAX IS A MULTISTAGE, DESTINATION BASED INDIRECT TAX LEVIED ONLY ON THE VALUE ADDITION. TERMS MULTISTAGE- ON EVERY STAGE OF VALUE ADDITION, GST WILL BE APPLIED. LET US UNDERSTAND WITH THE HELP OF AN EXAMPLE. SUPPOSE WE STUDY THE LIFECYCLE OF A CAKE. FARMER SOWS THE SEEDS MILLER BUYS FROM THE FARMER BAKER BUYS FROM MILLER SHOPKEEPER CONSUMER
  • 4. EVERY COLURED SEGMENT IS THE STAGE OF VALUE ADDITION AND GST HAS TO BE PAID ON EACH STAGE. DESTINATION BASED TAX-IF YOU LOOK ABOUT ,YOU WILL SEE THAT THE CUSTOMER FORMS THE END SEGMENT OF THE LIFE CYCLE.THE ENTIRE TAX BURDEN IS SHIFTED ON HIM. INDIRECT TAX-THE BURDEN OF THE TAX IS BEING SHIFTED FROM ONE STAGE TO ANOTHER AND THE FINAL BURDEN IS ON THE CUSTOMER.IN CASE OF DIRECT TAXES, THE LIABILITY TO PAY THE TAX LIES ON THE POINT OF INCIDENCE. GST WILL BE SUBSUMING MANY TAXES AND WILL REPLACES ALL BY A SINGLE TAX i.e. GST. HOW IT DIFFERS FROM VAT? VAT AND GST ARE BOTH APPLIED ON THE VALUE ADDITION ITSELF AND THUS REPLACE THE TAX REPETITION.HOW EVER, VAT WAS STREAM SPECIFIC.
  • 5. LET US SEE HOW? THE INPUT OF VAT LEVIED ON SERVICE TAX IS AVAILABLE AGAINST SERVICE TAX ONLY.SIMILARLY, INPUT VAT AGAINST EXCISE WAS AVAILABLE AGAINST EXCISE ONLY. DELAY IN GETTING THE INPUT CREDITS MULTIPLICITY OF TAXES. AMBIGOUS TAX ENVIRONMENT FARCRY TO UNDERSTAND FOR COMMON CONSUMERS. GOODS AND SERVICES TAX SHALL BE A SINGLE TAX THAT WILL GIVE HOMOGENOUS INPUT CREDIT TO ALMOST ALL TYPE OF INDIRECT TAXES PAID.
  • 6. GST SHALL BE APPLIED IN THE FOLLOWING MANNER 1.IF THE TRANSACTION i.e. sale and purchase TAKES PLACE WITHING THE STATE, THEN CENTRAL GST (CGST) AND STATE GST(SGST) SHALL BE APPLIED. 2.IF THE TRANSACTION i.e. sale and purchase TAKES PLACE BETWEEN THE STATE i.e. INTERSTATE TRANSACTION THEN INTEGRATED GST (IGST) SHALL BE APPLIED.
  • 7. CASE #1WHEN TRANSACTION TAKES PLACE WITHIN THE STATE IN THE EXAMPLE ILLUSTRATED BELOW, GOODS ARE MOVING FROM MUMBAI TO PUNE. SINCE IT IS A SALE WITHIN A STATE, CGST AND SGST WILL BE LEVIED. THE COLLECTION GOES TO THE CENTRAL GOVERNMENT AND THE STATE GOVERNMENT AS POINTED OUT IN THE DIAGRAM. THEN THE GOODS ARE RESOLD FROM PUNE TO NAGPUR. THIS IS AGAIN A SALE WITHIN A STATE, SO CGST AND SGST WILL BE LEVIED. SALE PRICE IS INCREASED SO TAX LIABILITY WILL ALSO INCREASE. IN THE CASE OF RESALE, THE CREDIT OF INPUT CGST AND INPUT SGST (RS. 8) IS CLAIMED AS SHOWN; AND THE REMAINING TAXES GO TO THE RESPECTIVE GOVERNMENTS.
  • 9. CASE#2: SALE TAKES PLACE IN ONE STATE AND RESALE IN ANOTHER STATE. In this case, goods are moving from Indore to Bhopal. Since it is a sale within a state, CGST and SGST will be levied. The collection goes to the Central Government and the State Government as pointed out in the diagram. Later the goods are resold from Bhopal to Lucknow (outside the state). Therefore, IGST will be levied. Whole IGST goes to the central government. Against IGST, both the input taxes are taken as credit. But we see that SGST never went to the central government, still the credit is claimed. This is the crux of GST. Since this amounts to a loss to the Central Government, the state government compensates the central government by transferring the credit to the central government.
  • 11. CASE #3:: SALE OUTSIDE THE STATE AND RESALE INSIDE THE STATE IN THIS CASE, GOODS ARE MOVING FROM DELHI TO JAIPUR. SINCE IT IS AN INTERSTATE SALE, IGST WILL BE LEVIED. THE COLLECTION GOES TO THE CENTRAL GOVERNMENT. LATER THE GOODS ARE RESOLD FROM JAIPUR TO JODHPUR (WITHIN THE STATE). THEREFORE, CGST AND SGST WILL BE LEVIED. AGAINST CGST AND SGST, 50% OF THE IGST, THAT IS RS. 8 IS TAKEN AS A CREDIT. BUT WE SEE THAT IGST NEVER WENT TO THE STATE GOVERNMENT, STILL THE CREDIT IS CLAIMED AGAINST SGST. SINCE THIS AMOUNTS TO A LOSS TO THE STATE GOVERNMENT, THE CENTRAL GOVERNMENT COMPENSATES THE STATE GOVERNMENT BY TRANSFERRING THE CREDIT TO THE STATE GOVERNMENT.
  • 13. NUMBER OF TAX SLABS IN GST- 0 % 5 % 12 % 18 % 28 %
  • 14. HOW VAT OR GST CHANGE THINGS? BEFORE GST AFTER GST