GST Full Form / Abbreviation is Goods and Services Tax.
In order to understand the concept of Goods and Services Tax (GST), it is first important to know the taxation system of India.
Taxation plays a critical role in the development of any nation. The revenue earned by the government via taxes is utilized towards the social and economic welfare of the nation and its people. Thus, it is fundamental for an economy to have an effective taxation system.
Accordingly, there are two types of taxes levied in India. These include: Direct and Indirect Taxes.
These are levied directly on the income, profession etc of an individual and are paid directly by the taxpayer to government. Thus, the burden of such taxes cannot be passed to any other person. Further, direct taxes are progressive in nature, that is, such taxes increase with increase in income of the taxpayers. Accordingly, low income taxpayers are charged lower taxes whereas high income taxpayers are charged higher taxes. Some of the direct taxes include income tax, wealth tax etc
Indirect taxes, on the other hand, are consumption based taxes. These are levied indirectly on the ultimate consumer for the consumption of goods and services. Where direct taxes are charged directly on the income of the taxpayer, indirect taxes are levied on goods and services. Thus, the immediate burden is on one person but the ultimate burden of such taxes is borne by the final consumer. Prior to GST, there were a host of indirect taxes taxes levied both by the central and state governments that made the previous indirect tax regime complex in nature.
Goods and Services Tax (GST) is introduced by the Government of India to remove multiple taxes imposed by the Central and State governments and simplify the indirect tax structure.
GST is a comprehensive, destination based indirect tax charged on both goods and services. Its aim is to consolidate multiple indirect taxes levied under the previous indirect tax regime and create a single, unified market throughout India.
It is an indirect tax that is collected on the value added at every stage of the supply chain. Further, the GST paid on purchase of goods and services can be set off against the GST on the supply of goods and services. To understand the concept of GST in detail read the article on GST in India.
GST Meaning in different Indian Languages
|GST meaning in English||Goods and Services Tax|
|GST meaning in Hindi||वस्तु एवं सेवा कर|
|GST meaning in Punjabi||ਗੁਡਸ ਐਂਡ ਸਰਵਿਸਿਜ਼ ਟੈਕਸ|
|GST meaning in Marathi||वस्तू आणि सेवा कर|
|GST meaning in Bengali||পণ্য ও পরিষেবা কর|
|GST meaning in Telugu||వస్తువులు మరియు సేవల పన్ను|
|GST meaning in Kannada||ಸರಕು ಮತ್ತು ಸೇ ವಾ ತೆರಿಗೆ|
|GST meaning in Malayalam||വസ്തുക്കളും സേവന നികുതിയും|
|GST meaning in Gujrati||સામાન અને સેવાઓ કર|
|GST meaning in Urdu||سامان اور خدمات ٹیکس|
|GST meaning in Tamil||பொருட்கள் மற்றும் சேவைகள் வரி|
|GST meaning in Sindhi||سامان ۽ خدمتون ٽيڪس|
|GST meaning in Nepali||सामान र सेवा कर|
India’s new Goods and Services Tax came into effect July 2017. Ultimately, the GST is designed to simplify taxation and unify the country into a common market instead of a collection of states with different rules and requirements. Whether you’re a business owner or a consumer, you may be wondering about the new system.
The GST is a direct sales tax that applies to all goods and services. The tax subsumes a number of indirect taxes that were previously levied by the central government, including excise duties, custom duties, and services taxes. It also replaces several state taxes such as state value added tax, entry taxes, entertainment and amusement taxes, and purchase taxes.
What’s a Location-Based Tax?
The GST is also a location-based tax. This means that location affects the type of tax in play. For transactions that occur in a single state, the Central GST and the State GST apply. The seller collects both taxes. Then, they remit the CGST to the central government and the SGST to the state.
In contrast, if the sale happens across state lines, the Integrated GST takes effect. The seller collects the IGST and sends it to the centre. Then, the centre distributes the applicable tax to the state where the goods or services were supplied. For instance, if a business owner in Orissa sells something to someone located in Tamil Nadu, the goods are supplied in Tamil Nadu, so the centre sends a portion of the IGST to Tamil Nadu.
What’s the History of the GST?
The New GST system took approximately 17 years to complete. After announcing the idea in 2000, the government planned to roll out the system in 2010. But numerous hurdles and debates delayed the process. Finally, in 2017, the Central GST Bill, the Integrated GST Bill, the Union Territory GST Bill, and the GST Compensation to States Bill all became law.
Throughout that process, the GST Council met dozens of time, and as of May 2018, the group is preparing for its 27th meeting. Although the GST has been in effect for almost a year, the council is still working on simplifying the return and ironing out a few other details.
What Are Tax Slabs?
The GST has five major tax slabs: exempt, 5%, 12%, 18%, and 28%. As a general rule of thumb, the more essential a product or service, the lower its tax slab. For instance, fruits and cereal are tax exempt. In contrast, luxuries such as aerated water and personal aircraft are grouped into the 28% tax slab. The council also attempted to tax items in ways that didn’t place an undue burden on people with low or moderate incomes. For example, while brooms are tax exempt, vacuums are in the highest tax slab.
What Are the GST Rules for Businesses?
If your business has a turnover of ₹2.5 million or more annually, you have to register for the GST, but you can opt to register even if your turnover is under that threshold. Once you’re registered, you have to collect GST on your sales. You also have to submit three main GST returns every month. If your earnings are beneath a certain threshold, you may be able to file quarterly.
What’s on a GST Return?
Monthly GST returns contain information related to the previous month. If you file monthly, your GST returns are due as follows:
- 10th – details of your sales and the GST you collected
- 15th – details of your business purchases and the GST you paid
- 20th – monthly GST summary
To illustrate how this works, imagine you sold ₹10,000 worth of goods or services last month and collected ₹1,500 in GST from your customers. You report that on your first return. During that month, you also spent ₹2,000 on goods for your business and paid your suppliers ₹300 in GST. When your suppliers submit their GST returns, they send that information to the government. The government creates your second return based on the information supplied by your vendors. If everything is correct, you sign the second return and remit it to the government.
Finally, the government crunches the numbers to assess your final liability. In this situation, you collected ₹1,500 in GST and paid ₹300 in GST to your clients. As ₹1,500 – ₹300 = ₹1,200, you owe ₹1,200. Note you may have to file additional returns if you’re a nonresident, input service distributor, or e-commerce operator, as well as in other special situations.
What Are Input Credits?
Input credits are credits you receive for paying GST on business expenses. You can’t claim input credits for personal expenses. The type of GST can also affect how the input credits work. For instance, you can only claim SGST and IGST input credits against SGST. You can’t apply CGST credits.
How Does GST Affect Transport?
As part of the effort to turn India into a single market, the GST bills also eliminated border checkpoints and replaced them with e-way bills. In the past, transporters had to undergo checks at the border. Now, they may be subject to random checks to ensure they have the right e-bill on board, but they don’t have to stop and wait.
E-bills are required for all shipments worth over ₹50,000, and if you’re shipping supplies to a customer, you need to generate an e-way bill using the government’s online portal. The bill contains information about your business, the recipient, and the transporter, as well as details about the shipment itself.
The GST bill encompasses a lot of information, and it’s also subject to change. To help your business stay on top of everything, you may want to invest in a cloud-based accounting software such as QuickBooks Online. Thanks to its GST-ready design and automatic updates, it can handle the numbers while you focus on your business.