Basic principles of Goods and Service Tax
- This is a tax on supply of goods and services where the distinction between goods and services will be mostly eliminated.
- GST is a consumption based tax, i.e. tax is payable in the State where goods / services are finally consumed.
- It is based on the VAT concept of allowing Input Tax Credit to avoid cascading effect of taxes.
- The law covers an area of upto 200 nautical miles inside sea for levy of tax.
- There are three categories of taxes under this law:
State Government GST (SGST) / Union Territory GST (UTGST)
Central Government GST (CGST)
Interstate GST (IGST)
- For supplies within State or Union Territory the taxpayer is liable to pay:
CGST to Central Government and
SGST/ UTGST to State Government or Union Territory
Area upto 12 nautical miles inside sea is India (to determine area within the State/UT)
- For inter-state supplies, IGST will be payable to Central Government. IGST is payable if supply is beyond 12 nautical miles, but upto 200 nautical miles.
- In addition, GST compensation cess is payable on the following items:
These items, however are broad categories and contain many sub categories and different rates for the sub categories.
Click here to go to the official notification of the various rates. Contact us for any queries.
- On import of goods:
Basic customs duty + Education and S&HE cess + IGST + GST compensation cess (where applicable).
- Though tax is payable to both State and Central Government, authority will be exercised by either one.
- Word used by the law is supply and not sale and therefore stock transfers and branch transfers will also get covered.
- For stock and branch transfers within the State, SGST and CGST is payable only where taxable person has more than one registration within the State. For a single registration within the State, Bill of Supply is sufficient.
- IGST is payable on inter-state stock and branch transfers.
- GST is payable on free supplies made to related persons and input tax credit will have to be reversed on free gifts to unrelated persons.
- GST is currently not payable on supply of alcoholic liquor for human consumption and petroleum products.
- GST council is the apex body.
- Existing registered persons under CGST Act to be provided with provisional registration.
- Unavailed Cenvat and VAT credit allowed to be carried forward.
- Excise duty and VAT paid on stock allowed to be carried forward if they were earlier exempt but taxable under GST for a period of 12 months.Click here to read more on Input Tax Credit
GST on Fringe Benefits
- Employer and Employee are related persons.
- Fringe benefits provided to employees will be subject to GST.
- Gifts upto ₹50,000 to employees may be exempted, but ITC should be reversed.