A Small Business Owner’s Guide to Goods and Services Tax

Most countries that introduce GST systems have a single unified tax rate throughout the country. GST, or Goods and Service Tax, is an all-inclusive, destination-based tax on the supply of certain goods and services. It was intended to replace the previous tax iterations, such as VAT, excise, import and export duty, etc., and make the taxing process easier and less convoluted.

The business adds GST to the product’s price, and the customer pays the sales price of the goods and services consumed, including GST. The business collects the GST portion of the product price and forwards it to the respective government authorities.

One advantage of tomatoes is that they are easy to track and steal. The central organization in charge of all books and revisions pertaining to it is the Central Board of Customs and Customs (CBCI).

What are Goods and Services Taxes?

GST is a destination-based, multi-stage, comprehensive tax levied at each stage of value addition. The different indirect taxes in the country implemented during the pre-GST era were replaced and, in fact, had helped the Indian Government in its ‘One Nation One Tax’ agenda successfully.

GST is levied from the manufacturing stage to the final consumption of the product. The credit of GST paid shall be available for setoff. The majority of products and services sold for domestic use are subject to the goods and services tax (GST), a value-added tax (VAT). Consumers pay the GST, but businesses selling the goods and services remit it to the government.

GST is applied to the final market price of goods and services produced internally, which reflects the maximum retail price. Customers must pay this tax as part of their final price when purchasing goods or services. The seller collects it and is obligated to remit it to the government, indicating the indirect incidence.

Components of GST

India’s Goods and Services Tax (GST) system comprises several components.

Integrated Goods and Services Tax (IGST)
State Goods and Services Tax,
Central Goods and Services Tax (CGST)
Union Territory Goods and Services Tax (UTGST).

Every one of them works to form the country’s taxation structure.

Integrated Goods and Services Tax or IGST

IGST is the tax levied on the supply of goods and/or services to other states, imports, and exports. It falls under the jurisdiction of the IGST Act. The tax collected by the central government under IGST is passed on to the respective states.

For instance, if a trader from West Bengal sells some goods worth Rs. 5,000 to a customer in Karnataka, the transaction is interstate; hence IGST applies to it. Assuming a GST rate of 18% for this transaction, for the above goods, a trader would charge Rs. 5,900, out of which Rs. 900 is collected IGST and is received by Central Government.

State Goods and Services Tax or SGST

The amount of tax levied on intrastate transactions is referred to as the State Goods and Services Tax. This is again separated into two categories: state GST and central GST, both of which apply to intrastate supplies of goods and/or services.

Under SGST Act, the state imposes and collects SGST from the goods and /or service sold or purchased within its territorial jurisdiction. The entire revenue collected through SGST is claimed by the respective state government alone.

For instance, if a trader from West Bengal sells goods worth Rs. 5,000 to a customer within the state, both CGST and SGST are applicable. Assuming a GST rate of 18%, it is split equally into 9% for each CGST and SGST. In this case, the trader will charge a total of Rs. 5,900, of which Rs. 450 will be remitted to the West Bengal state government as SGST.

Central Goods and Services Tax or CGST

Much like SGST, Central Goods and Services Tax (CGST) applies on all intrastate transactions – those that take place in the same state. Revenue from CGST is collected by the Central Government; the CGST Act administers CGST.

Continuing from the above scenario, if a trader from West Bengal sells goods worth Rs. 5,000 to a customer within the state, CGST and SGST are applicable. Assuming a GST rate of 18%, it is divided equally into 9% for each CGST and SGST. Consequently, the trader will charge a total of Rs. 5,900. Out of the revenue earned from CGST, specifically Rs. 450, the Central Government receives it as CGST.

UTGST, or the Union Territory Goods and Services Tax

India’s Union Territory Goods and Services Tax (UTGST) India’s Union Territory Goods and Services Tax (UTGST) is subject to the establishment of supply of goods and/or services. This represents the basic State Goods and Services Tax (SGST).

UTGST is a supply of goods and/or services in Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra, Nagar Haveli and Lakshadweep, UT governed by UTGST Act, collected by the revenue department of the concerned Union Territory Government.

UTGST replaces SGST in Union Territory and is levied besides CGST in these states.

What is GSTIN

GSTIN, also known as a 15-digit unique identification number assigned to your firm or name once you have registered under the GST regime of India. It comprises of state, PAN, and entity-based information. GSTIN is linked to all types of processes like filing returns, claiming input tax credit and paying taxes.

Before the implementation of the business, the state tax authorities issued a unique TIN number to the shareholders registered under the state VAT law. Similarly, the Central Saudi Tax and Customs Board has provided service tax registration numbers to service providers.

The GST regime has consolidated all registered taxpayers under one umbrella for compliance and administration purposes. They receive registration from a single authority, and the process becomes streamlined while ensuring uniformity.

Calculation of GST

Since the introduction of GST, this indirect taxation regime has actually simplified calculating applicable taxes. GST rates for certain goods or services can now be established based on the transaction type, such as interstate or intrastate.

Intra-state GST tax calculator

GST can be calculated in the following way:

CGST = Applicable GST Rate / 2 (for 28%, CGST will be 28/2=14%)

SGST / UTGST = Applicable GST Rate / 2 (for 28%, SGST will be 28/2=14%)

In other words, CGST + SGST / UTGST = Applicable GST Rate

Inter-State GST tax calculator

The following formula can be used to determine GST:

IGST = Applicable GST rate

Even a GST credit calculator would be based on the same principles.

Hence, a simple formula emerges as follows:

GST Amount = (Original Cost*GST Rate Percentage)/100

Net Price = Original Cost + GST Amount

Conclusion

India continues its journey with a motion picture, crossed the glimpse and policy slogan, community and citizens alike must collaborate and make concerted efforts to reap the benefits of this historic tax reform. Only constant refinement, effective, and empowered governance systems would allow India’s economic journey to become internationally competitive, wealthy, and inclusive for all.