GST: 5 Ways Your Business Will Be Affected
Here’s a quick rundown of what you need to know.
What Is GST?
In March 2017, the Indian Government passed the Goods and Service Tax Act, which took effect on 1st July 2017. Throughout the country, GST is the common indirect tax law.
Goods and services are both subject to the GST (Goods and Services Tax). As an indirect tax, it has largely replaced VAT, service tax, excise duty, and other indirect taxes in India.
As a result, we will be able to collect taxes smoothly, reduce double taxation, and improve the efficiency of the process. GST tax is also the customer’s responsibility.
In what ways does GST differ from other taxes?
GST is divided into 4 parts:
- Central Goods & Service Tax (CGST)
- State Goods & Service Tax (SGST)
- Integrated Goods & Service Tax (IGST)
- Union Territory Goods and Services Tax (UTGST)
Here’s a detailed explanation of GST:
- Central Goods & Service Tax (CGST):A central government is responsible for collecting taxes on intra-state sales. Excise duty and service tax revenues are lost as a result of this tax.
Intra-state sales are subject to CGST in the proportion of 50%.
(e.g. a trade that is taking place in Karnataka)
- State Goods & Service Tax (SGST): This tax is collected by the state government on intra-state trade. This portion of the tax compensates the state government for the loss of VAT or Sales Tax revenue.
Intra-state trade is subject to SGST. The remaining 50% goes to the SGST. (e.g. a trade that is taking place in Karnataka)
- Integrated Goods & Service Tax (IGST): The Central Government collects the tax on inter-state trade. The central government receives a portion of the tax, while the state government receives the remaining amount.
IGST is only applied in the case of interstate sales or transactions involving two states. (e.g. Karnataka to Maharashtra)
- Union Territory Goods and Services Tax (UTGST):This tax is collected by the Central Government on intra-union territory trade. A portion of the tax is received by the central government, and the rest is received by the Union Territory Government.
How will GST affect your business in 5 different ways?
GST impacts you in five different ways:
- Business owners used to have to keep track of numerous taxes and payment deadlines.
- Searching for and managing your corporate tax filings and documents may require some research. As a result, the process was very time-consuming.
- GST simplifies your business’s tax calculations and payments by combining all indirect taxes under one umbrella.
Lower Tax Burden
- Businesses with a turnover of more than Rs 5 lakh were previously required to pay VAT (in most states). It is important to keep in mind that this limitation varies from state to state.
- Businesses with a turnover of less than Rs 10 lakh are exempt from service tax as well.
- The government is considering raising the GST exemption limit to Rs. 20 lakh, which would benefit over 60% of small business owners and sellers.
- GST is an internet-based taxing system that improves on manual filing procedures under the previous tax system.
- Fraudulent tax transactions are easier to detect, and transactions have become more transparent and accountable.
- GST returns are simple to file, and any errors will be easy to rectify.
Starting or expanding a business is easier
- Registration with various departments is necessary when setting up a new business, including the VAT department, the service tax department, the excise department, and so on.
- In addition, different registration formalities and documents were required in different states. Conducting business in multiple states made it more challenging.
- Before doing business in a particular state, you must register with that state. However, it is a simple process.
- Getting started and expanding has never been easier thanks to the single point of registration.
- GST input credits are available for all in-state and out-of-state transactions in order to increase cross-border business.
- Previously, excise/service tax credits could not be offset against VAT liability or vice versa. In addition, CST and VAT had to be offset.
- Input tax credits now flow smoothly, which is a key feature of GST.
A major decision made by the Indian government was the implementation of GST. Due to its ability to eliminate the need for different corporate tax rates at the federal and state levels, it is a widely known and well-respected system.