The Goods and Services Tax (GST), implemented in India in 2017, has been a significant reform in the nation’s indirect tax structure. While it brought about a unified taxation system across the country, it can still seem complex for many individuals and businesses. This blog aims to provide a beginner-friendly understanding of the key aspects of GST.
What is GST?
Think of GST as a single tax levied on the supply of goods and services. It essentially replaced a multitude of indirect taxes previously levied at the central and state levels, aiming to create a seamless and transparent taxation system.
Benefits of GST:
- Simplified Tax Structure: Eliminates cascading taxes, reducing the overall tax burden on businesses and consumers.
- Improved Compliance: Encourages transparency and discourages tax evasion due to a centralized system.
- Enhanced Efficiency: Streamlines the movement of goods across states, fostering economic activity.
Key Concepts of GST:
- GST Rate: The tax rate levied on the supply of goods and services. Different rates (0%, 5%, 12%, 18%, and 28%) apply to various categories.
- Input Tax Credit (ITC): Allows businesses to claim credit for the GST paid on their purchases, reducing the final tax liability.
- HSN Code: A harmonized system code used to classify goods for tax purposes.
- GSTIN: A unique identification number assigned to every registered taxpayer.
Who needs to register for GST?
Businesses with a turnover exceeding ₹20 lakh (₹40 lakh in certain special cases) are generally mandated to register for GST.
Compliances under GST:
- Filing GST returns: Regular filing of returns to report transactions and tax liabilities.
- Issuing invoices: Providing proper invoices with all mandatory details for every supply made.
- Making tax payments: Timely payment of GST based on the tax liability calculated.
