Goods & Services Tax (GST)
The Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption.
Why GST?
Goods & Services Tax (GST) will replace over 10 central and state taxes, so obviously it comes with new concepts that will need understanding: Central Goods & Services Tax (CGST), State Goods & Services Tax (SGST) and Integrated Goods & Services Tax (IGST) are three of them.
Let’s Find Out What They Are:
Central GST :
Central GST is the component of GST that will be levied by the central government on all items, both goods and services. It only applies to intra-state trade. A dealer can use input tax credit of CGST against CGST or IGST.
State GST :
State GST is the component of GST that will be levied by the state government on all items, both goods and services. It only applies to intra-state trade. A dealer can use input tax credit of SGST against SGST or IGST.
Integrated GST :
Integrated GST is the component of GST that will be levied by the central government in case of inter-state trade. It is applicable on all items, both goods and services. A dealer can use input tax credit of IGST against SGST, CGST or IGST.
What is the Exemption Limit :
GST is applicable to all dealers with a turnover of over Rs. 20 lakh (Rs. 10 lakh in North Eastern states) in case they are involved exclusively in intra-state trade (i.e. their supplies and sales are within a single state). In case of any inter-state activity, GST is applicable regardless of turnover.
Composition Scheme :
The GST Composition Scheme is applicable only on traders operating in a single state with a supply turnover of less than Rs. 50 lakh. Supply turnover includes any freebies, discounts and even goods and services not liable to be taxed.