GST - Basics

Learn Goods and Service Tax Law ( GST ) Basics in a very simple Q&A manner..

1. GST – Basics 01 www.gstindiareturn.com I was wondering, What does GST stand for? It stands for Goods and Service Tax Ohh!! Again one more tax No!! Now there will be only one indirect tax i.e. GST. Other taxes such as Excise Duty, VAT, Service Tax, Entertainment Tax, Entry tax etc shall be replaced by GST.

2. GST – Basics 02 www.gstindiareturn.com So, when do we need to pay GST??? GST would be applicable on “SUPPLY” of goods or services.

3. GST – Basics 03 www.gstindiareturn.com Who will be liable to pay GST?? GST will be charged by the supplier on the value of goods and services. The supplier will be required to collect the GST from the Customer and pay to the Government.

4. GST – Basics 04 www.gstindiareturn.com But I heard that there are three taxes and not one?? Is there only one GST??? You are partially correct. There is only one GST. However, there are three types of GST – Central GST (CGST), State GST (SGST) and Integrated GST (IGST).

5. GST – Basics 05 www.gstindiareturn.com Ohh!! So there are 3 types of GST. But I am not sure how will it work. Ok!! I will explain you with a simple example. Example – A : Intrastate Supply (Supply within the state) Supply of Goods/Services Rs. 100 CGST @10% Rs. 10* SGST @ 10% Rs. 10* Example – B : Interstate Supply (Supply outside the state) Supply of Goods/Services Rs. 100 IGST @ 20% Rs. 20* . *rates are taken for example

6. GST – Basics 06 www.gstindiareturn.com At what rate GST will be levied?? There are broadly 4 rates of GST – 5%, 12%, 18% and 28%

7. GST – Basics 07 www.gstindiareturn.com Hmm!!! Can we take the credit of the tax paid on inputs and utilize the same for payment of output GST?? Yes, a registered person can take the credit of the tax paid on inputs purchased by it and further, it can utilize the credit for the payment of output GST. I will explain it with a simple example. Example – B has purchased the goods from A and paid GST of Rs. 20. B will take the credit of Rs. 20. When B will sell the goods further, he will charge Rs. 28 from its customer but remit Rs. 8 (Rs.28 minus Rs.20) to Govt. by utilizing input tax credit of Rs. 20.

8. GST – Basics 08 www.gstindiareturn.com So, This means GST paid on inputs can be utilized for payment of output GST, without any restrictions?? No, There are conditions for utilization of GST. As I told you earlier, there are three types of GST. So there are certain restrictions on utilization of credit, which is explained in the below chart. Order of Utilization

9. GST – Basics 09 www.gstindiareturn.com But what is the threshold limit for registration in GST?? For those with an aggregate turnover below Rs.20 lakhs annually will be exempted from GST. Where as for the north-eastern States, the exemption threshold is Rs.10 lakhs Aggregate Turnover 20 Lakhs Mandatory Registration in GST

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