GST FAQs

GST is an abbreviation for Goods and Service Tax. GST would be levied on all the transactions of goods and services made for a consideration. This new levy would replace almost all of the indirect taxes at Central and State level.

GST would be payable on the the ‘Transaction value’.

Transaction value is the price actually paid or payable for the said supply of goods and/ or services between unrelated parties. The transaction value is also said to include all expenses in relation to sale such as packing, commission etc.

However, discounts/ incentives given before or at the time of supply will be permissible as deduction from the transaction value. As regards, discounts given after supply is made, the same will be permissible as deduction, subject to fulfillment of prescribed conditions.

Currently a trader having Intra-State sales pays VAT typically @ 13.50%. Going forward, both CGST and SGST will be payable taking the tax component heavier by 5% to 15% (as generic rate of GST on goods could be 18% or 28%).

Currently a trader having Inter-State sales pays CST typically @ 2% subject to certain forms. Going forward, IGST will be payable on inter-State transactions, making the tax component heavier by 16% to 26% (as generic rate of GST on goods could be 18% or 28%).

For enabling buyer claim input tax credit, the GST law inter-alia prescribes that the supplier should deposit the GST and file GST returns. Effectively, through this provision, the buyer of goods/ services, will have to ensure that all his vendors pay GST and file returns.

Currently, taxes treat goods and services differently. ‘Goods’ attract Excise at manufacturing level and VAT at the time of sale. In contrast, services attract only one levy i.e. Services tax on provision of taxable services.

However, GST does not discriminate between goods and services as well as trader and manufacturer and thus GST is different from the current tax structure.

Currently a service provider is required to pay Service Tax. This amount is required to be paid to Central Government. Going forward, in GST regime, the service provider will have to pay GST on services based on ‘place of supply’. Also, registration requirement at present could be centralised, in GST it will be State-wise.

The rates have been notified by the government and for banking and financial services, rate is 18%.

Taxpayers will have to take into consideration the increase in tax compliances. Take example of a service tax assessee, who currently files 2 returns on an annual basis. Now, in GST regime, Service tax assessee could be required to file as many as 61 returns (5 returns per month plus 1 annual return)!

The Government has initiated GST Enrolment process across India and has provided State-wise dates for obtaining enrolment at gst.gov.in

It is advisable to enroll for GST at the earliest.

In ‘dual GST’ regime, all the intra-State transactions of goods and services made for a consideration would attract two levies i.e. CGST (Central GST) and SGST (State GST) and an Inter-State supply transaction will attract IGST.

For e.g. If a trader from Mumbai supplies goods to his customer in Pune then he will charge CGST and Maharashtra SGST. Whereas in case the trader from Mumbai supplies goods to his customer in say Ahmedabad (Gujarat) then he will charge IGST

In GST regime, all ‘supply’ such as sale, transfer, barter, lease, import of services etc. of goods and/ or services made for a consideration will attract CGST (to be levied by Centre) and SGST (to be levied by State).

As GST will be applicable on ‘supply’ the erstwhile taxable events such as ‘manufacture’, ‘sale’, ‘provision of services’ etc. will lose their relevance.

Also, distinction, in GST regime, would lose its importance as both goods and services would be treated at par for taxing purposes. Effectively, trader and manufacturer will both be equal from the perspective of taxation.

Under GST, all documents — returns, refunds, payments etc. are expected to be in electronic/online format rather than in physical paper form.

Therefore, as the Government will put more emphasis on electronic filing and tax compliance, entrepreneurs will either have to become tech-savvy or opt for easy-to-use automation software to help them meet this challenge. Even the current software being used by traders may be of help provided the said software gives invoice level details required for filing GST returns.