Basic Understanding About GST ( Goods and Services Tax)

 Goods and Services Tax

In short, the Goods and Services Tax is applicable for  supply of products and services. it is called indirect tax. The Indian government create a unique structure for levying tax on taxpayers. the government strictly emphasizes all transactions must be recorded online through the business GST Number. Every Taxpayer must have a GST Number GST Certificate.  not only that, the GST Number must mentioned Under the Business Name Board and the GST certificate copy must placed in the business place. 

    Who has 20L Turnover the last financial year that business person must registered under the GST act. and there is have some Exemption for MSME & SEZ.

There are 4 types of GST Followed in business transactions.

1. CGST: Central Goods and Services Tax,

2. SGST: State Goods And Services Tax,

                This two-tax occurs when the business transaction occurs within a state, and the tax amount is split in two. the central government collect one part of the amount through CGST. and the state government Collect another part of the tax through SGST.

EX: 5% tax worth of product, that 5% divided as two 2.5% CGST and 2.5% SGST.

3. IGST: Integrated Goods and Services Tax,    

                This Tax is Followed when the transaction Occurs interstate transaction. in short one state to another state Transection, its goods or services. The central government collected the tax through IGST. and again central government furnish to the state government. 

EX: 5% tax worth of product, that 5% directly comes under IGST 5%.

4. UTGST: Union Territory Goods and Services Tax, 

                This tax is followed when the transaction occurs between the union territory, the tax is recorded as UTGST.

 Percentage of Tax:


                5% -  Household Essentials, coal, Sweets, Fabrics and some more.

                12% - Fruit Juice, Ghee, Butter, Almont and some more.

                18% - Stationary, Furniture, mobile phones, computers and some more.

                28%  - Aircraft, Tobacco products, Three-wheeler motorized vehicles & listed luxury items and some more.

                Nil Rated: Grains, Salt, Jaggery and some more.

                Exempted: Milk, Curd, Vegetable, listed FMCG Products and some more.

                Non-GST - Petrol, Alcohol, Natural Gas.

                Services GST tax: 18%

Who is paid GST? with Example.

              For example, AI Company is a manufacturing sector like fabric manufacturing. at least the company need 3 raw materials to produce finished goods of fabric. raw material one Yarn 5%  And 12%, Dyeing colors 18% and chemicals for washing  18% GST rate. so AI company purchased these raw materials  from various suppliers paid with GST. and the AI company sold theirs finished goods with 5% of GST Tax. The AI company closed theirs transection when the return filed in GST portal. But the product transection does not complete yet. The AI company's Finished goods comes a raw material for garments company. the Supply chain continue and end with customers. explanation with diagram,

  


How is the GST calculated and paid in the GST portal?  

                  In short, input tax - output tax = Net tax payable 

     Input tax is, the all-eligible purchase tax is called input tax. 

    output tax is, all the sales tax is called output tax. 


Example, 

AI Pvt Ltd Company  Purchased Goods from Various Companies. when AI Company's Suppliers Filed GSTR 1 in the GST portal That Input amount Auto-populates in AI Company's GST portal GSTR 2A & 2B. When the  AI Company File their Sales In GSTR 1 in the GST portal with a Debit or Credit Note, that time the net payable GST amount is shown in GST R 3B. The tax amount is paid through the online in GSTR 3B.

    AI Company Input tax =  ₹ 5000 (GSTR 2A & 2B)

    (purchase tax)

    AI company Output Tax = ₹ 8000 (GSTR 1)

     (sales tax)

  Total Payable Tax = ₹ 3000 ( GSTR 3B)

(GSTR 1 - GSTR 2A & 2B = Payable Tax GSTR 3B)

At some times the input tax is more than the output tax. That excess amount was adjusted to next month.

   AI Company Input tax =  ₹ 8000 (GSTR 2A & 2B)

    (purchase tax)

    AI company Output Tax = ₹ 5000 (GSTR 1)

     (sales tax)

  Total Payable Tax = ₹ - 3000 ( GSTR 3B) - That ₹ 3000 will be adjusted in the next month or quarter return filing.

Sometimes the input tax is equal to the output tax. At that time the taxpayer should file a nil return.

AI Company Input tax =  ₹ 8000 (GSTR 2A & 2B)

    (purchase tax)

    AI company Output Tax = ₹ 8000 (GSTR 1)

     (sales tax)

Nil Returns ( Nil returns should be filed even in absence of purchases and sales)

ITC Eligible & Ineligible:

       The input tax credit eligible is the purchases  Expenses utilized for production purposes. other than the production expenses are not eligible for ITC.

    For Example, if the company purchased goods for production, that are eligible for ITC.

    The company paid any staff welfare Expenses during the company tour or any visiting Expenses, of which tax comes under the ineligible ITC. 


                                                                                                                ----------------------

                                                                                                                  Ajith K M.com, DCM.

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