Gst with examples

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GST India – Goods & Service Tax

What is GST?

GST is a consumption based tax levied on sale, manufacture and consumption on goods & services at a national level. This tax will be substitute for all indirect tax levied by state and central government. Exports and direct tax like income tax, corporate tax and capital gain tax will not be affected by GST. GST would apply to all goods other than crude petroleum, motor spirit, diesel, aviation turbine fuel and natural gas. It would apply to all services barring a few to be specified. With the increase of international trade in services, GST has become a global standard. The proposed tax system will take the form of “dual GST” which is concurrently levied by central and state government. This will comprise of:

  • Central GST (CGST) which will be levied by Centre
  • State GST (SGST) Which will be levied by State
  • Integrated GST (IGST) – which will be levied by Central Government on inter-State supply of goods and services.

Many taxes has been subsumed under GST which are as under

Central Indirect Taxes & Levies Central Excise Duty
Additional Excise Duties
Excise Duty levied under the Medicinal Preparations (Excise Duties) Act, 1955
Service Tax
Additional Customs Duty (CVD)
Special Additional Duty of Customs
Central Surcharge and Cess
State Indirect Taxes & Levies VAT / Sales Tax
Entertainment tax (other than the tax levied by local bodies)
Central Sales Tax
Octroi and Entry Tax
Purchase Tax
Luxury Tax
Taxes on Lottery
Betting and Gambling
State Cesses and Surcharges

 

Who will pocket taxes?

  • For Intra State Transactions: In case of Intra State transactions, Seller collects both CGST & SGST from the buyer and CGST needs to be deposited with Central Govt. and SGST with State Govt.
  • For Inter State Transactions: Integrated Goods and Service Tax (IGST) shall be levied on Inter State transactions of goods and services which are based on destination principle. Tax gets transferred to Importing state. More over it is proposed to levy an additional tax on supply of goods, not exceeding one percent, in the course of inter-state trade or commerce, to be collected by the Central Govt. for a period of two years, and assign to the States where the supply originates. Valuation of stock transfers to be determined. Exports and Supplies to SEZ units will be zero rated.

 

How to adjust the Credit?

Setoff of IGST, CGST & SGST will be as follows in the below mentioned chronological order only.

Credit of To be Adjusted with
IGST 1)   IGST
2)   CGST
3)   SGST
CGST 1)   CGST
2)   IGST
SGST 1)   SGST
2)   IGST

 

What impact GST will have on pricing of products as compared to current scenario?

Let us take an EXAMPLE to understand this clearly.

Capture

 

In the above example, you can note that the tax paid on sale within state can be claim against tax paid on sale outside state in GST system, which is not in present tax system.

The credit of CGST cannot be taken against SGST and credit of SGST cannot be taken against CGST but both credits can be taken against IGST.

 

ENROLLMENT & REGISTRATION:

  • NSDL has been appointed to incubate the GST Portal and develop its functionality. NSDL has created a pilot portal known as “GST Pilot Portal”
  • Here, every tax payer will be issued a 15 digit common identification number which will be called as “Goods & Service Tax Identification Number” (GSTIN) a PAN based number.
  • Online application form for dealers will be available to provide their details and upload documents.
  • Registration includes basic steps like register themselves on the Enrolment page, and then Login using the given “User ID” and “password”, filling the application form by uploading the requisite documents related to excise, Service Tax, IEC, CIN, Professional Tax number, Shops & Establishment Number and any other state specific registration numbers, contact numbers, postal address & E-mail address of business entity, bank account details including MICR code, place of business, details of goods & services, scanned signed photographs.

Like, every coin has two sides, even this concept of GST has its own positives and negatives, we leave on the reader to decide for them the impact of GST whether on micro or macro level.

 

Positive Aspects

  1. The main reason to implement GST is to abolish the cascading effect on tax. A product on which excise duty is paid can also be liable for VAT. Suppose a product A is manufactured in a factory. As soon as it releases from factory, excise duty has to be paid to central government. When that product A is sold in same state then VAT has to be paid to state government. Also no credit on excise duty paid can be taken against output VAT. This is termed as cascading effect since double tax is levied on same product.
  2. The GST is being introduced to create a common market across states, not only to avoid enfeebled effect of indirect tax but also to improve tax compliance.
  3. GST will lead a more transparent and neutral manner to raise revenue.
  4. Price reduction as credit of input tax is available against output tax.
  5. Simplified and cost saving system as procedural cost reduces due to uniform accounting for all types of taxes. Only three accounts; CGST, SGST, IGST have to be maintained.
  6. GST is structured to simplify the current indirect system. It is a long term strategy leading to a higher output, more employment opportunities, and economic boom.
  7. GST is beneficial for both economy and corporations. The reduced tax burden on companies will reduce production cost making exporters more competitive.

Negative Aspects

  1. GST is being referred as a single taxation system but in reality it is a dual tax in which state and centre both collects separate tax on a single transaction of sale and service.
  2. At present the main Indirect tax system of central Government is central excise. All the goods and commodities are not covered by the central excise and further there is an exemption limit of Rs. 1.50 Crores in the central excise and further traders are not liable to pay central excise. The central excise is payable up to the stage of Manufacturing but now GST is payable up to the stage of sale.
  3. Majority of dealers are not covered with the central excise but are only paying VAT in the state. Now all the Vat dealers will be required to pay “Central Goods and service tax”.
  4. The calculation of RNR (Revenue Neutral Rate) is very difficult and further Govt. wants to enhance its revenue hence rate of Tax will be a problem. As per the News reports the proposed rate for State GST is 12% and Central GST is 14% Plus Govt. wants to impose 1% CST at the initial stage of GST on the interstate sale of Goods and services. So the normal rate of overall tax will be 26%. This rate is very high comparing to the fact that small and medium Industries are at present not covered by the central excise and most of the Goods such as agricultural products are out of the preview of the Central Excise.
  5. Improvement in the Manufacturing and distribution of Goods and service, increase in exports, various reforms, check on corruption, less Government control are some of the factors which are responsible for the economic growth of the country. A tax system can make a revolution in the economy of the country is “rarest of the rare” thing.

Source: Finmart.com

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15 Replies to “Gst with examples”

  1. Yugal says:

    Your example is wrong, Bcoz in GST case you are showing that cost in nag to Chan is 1100 which.is 1000 Bcoz cgst and sgst will not add cost.

  2. s k pradhan says:

    Yes you are right.

  3. Vijaya kumar says:

    The high increase in service tax is not covered at all which is at present 15%

  4. chockalingam says:

    pl.ref GST

  5. Kaialsh Bucha says:

    I pur. goods for Rs. 1000/- From Local Market, The said Goods Sold to A out state Party after addition of My profit 20%, What Calculation Should Come For GST ( Proposed GST Rate 18%)

    1. Anonymous says:

      GST=0.18(1200-1000)=36

  6. Raj says:

    i’m a manufacturer of plastic mould components, if i purchase laptop [ which is not part of raw material used in the manufacturing ] for Rs.10000 + IGST (10% say) Rs.1000 = Rs.11000 , can this IGST (say 10%) can be taken in the Input Tax, since i have paid some tax… will the burden of paying Double tax will be avoided….

  7. shine says:

    No , Input TAX CREDIT IS AVAILABLE ONLY FOR PURCHASE OF GOODS FOR RESALE

  8. Jayanti Shah says:

    I think ITC on Capital goods (Laptop) purchased for Business (Word used “Capital Good used in Business” not only used in Production) can be available, if used partly or fully for Business. Ration may be applied if it is used partly for business. IGST can be adjusted with any part of GST..

  9. R.R.NAIK says:

    OUR IS ONE OF THE EDUCATIONAL TRUST
    AN ALL INDIA EDUCATIONAL INSTITUTE
    WE ARE CONDUCTING COURSES WHICH IS APPROVED BY THE GOVT. OF INDIA
    ALSO SOME COURSES FOR CORPORATE ENTITY FOR THIS WE HAVE REGISTRATION OF SERVICE TAX
    REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT 1950.
    IS GST REGISTRATION IS REQUIRED,

  10. KISHAN says:

    YOUR EXAMPLE WRONG BECAUSE CST ONLY 2%

  11. sk fazal says:

    By whom is GST taxed
    reply fast I have to write in exam

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