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A Beginner's Guide to Goods and Service Tax (GST)

To know the basics of GST, here is a begginer's guide to GST. Read more on the basic terms, norms and implementations of GST. https://www.bajajfinservmarkets.in/loans/business-loan.html

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A Beginner's Guide to Goods and Service Tax (GST)

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  1. A Beginners Guide to Goods and Service Tax (GST) India has been edging up by leaps and bounds on the ‘Ease of Doing Business’ Index, compiled by the World Bank. Its implementation of the Goods and Services Tax (GST) system has helped increase compliance and bring many hundreds of traders and small businesses within the tax net. Additionally, the new system is meant to ensure lesser complications at the time of setting up new businesses or if existing businesses wish to apply for business loans. With the GST implemented, businesses can save time by providing their GSTIN (Goods and Services Tax Identification Number) which can aid faster processing of business loans. However, this overhaul of the taxation system has given rise to a lot of confusion for people regarding which are the taxes which will no longer be applicable, the rate of taxation that will be applicable to goods, and which authorities will be collecting the taxes. Read on below to understand the 10 most basic facts about implementation of the GST. 1.What are the GST rate slabs? GST rate slabs refer to the different rates at which goods and services will be taxed. It is four-tier tax structure, with rates at 5%, 12%, 18% and 28%. Aside from this, some essential food and non-food items which are consumed on a daily basis will be taxed at 0%. 2.What’s the difference between CGST, SGST and IGST? Previously in India, different taxes were collected by the Centre and state governments. This led to some goods and services being subjected to double taxation by both authorities. Now with the GST rolled in, the tax will be halved with the Centre drawing in the Central GST and the state government levying State GST. Each good and/or service will be taxed just once at the place of supply. 3.What are the taxes that will no longer be levied? The GST has subsumed several taxes within its ambit, namely the Central Excise Duty, the Central Sales Tax, Value Added Tax, Luxury Tax, Purchase Tax, Advertisement taxes, Service Tax, Countervailing Duty, Octroi, Entertainment Tax and all taxes applicable on lottery. 4.Which are the items excluded from GST? While construction of a new building is taxed under GST, the sale of land and sale of building is not taxed. GST is also not charged for employment, where employees are still required to pay income tax on salary earned. There are also taxes for funeral services, or for duties performed by most government elected representatives.

  2. 5.What’s the turnover threshold for businesses on which GST would be levied? Businesses reporting a turnover of upto Rs. 40 lakh would be exempt from paying GST. For the north eastern and hill states, this exemption is for businesses reporting a turnover of upto Rs. 20 lakh. 6.Will GST be levied on business loan repayments? Business loans availed from banks and financial institutions will not be subject to GST. You can get a small business loan and use it to meet your working capital requirements, without worrying about the repayment becoming more expensive due to GST. Apply for business loan on Finserv MARKETS today, and you can have loans upto Rs. 30 lakh approved in less than 3 minutes. This business loan does not require any collateral, and can be repaid over a flexible tenure ranging from 12 to 60 months. 7.What is the e-Way Bill? The Electronic Way Bill (or e-Way Bill) is a unique document generated specifically for the specific consignment or movement of goods from one place to another. The bill is generated for both intra-state and inter-state trade, and for goods valued at more than Rs. 50,000. Registered persons, whether the sender or the recipient, can generate the e-Way Bill. 8.What happens if I don’t comply with GST? GST has been implemented to ensure maximum compliance from taxpayers. As a result, several provisions have also been made for those failing to comply. A total of 21 offenses have been recognised under GST, which include not registering under GST, supplying goods or services without generating invoices, issuing invoices using GSTIN of other taxpayers, and obtaining refund by fraud. 9.What are the documents required for goods in transit? Any vehicle that is carrying goods that exceed the value of Rs. 50,000 must carry an invoice or bill of supply, as well as a copy of the e-Way Bill. 10.Will there be inspection under GST? If the recognised authority has reasons to believe that a person has suppressed transactions or claimed excess input tax credit in order to evade tax, they can authorise inspection of the premises of the business of the concerned person. The GST has already begun showing results in its aim to form a single unified system of taxation in the country. Compliance is expected to increase, with more number of taxpayers being brought into the net. Additionally, businesses are expected to thrive through implementation of the GST with lesser documents and paperwork required for compliance. Businesses looking to get a small business

  3. loan can now do so easily online, without worrying about GST being implemented on repayment of these loans. 10 pieces of jargon to understand GST better While the GST promised to be an easier system of taxation than was previously operational in India, it was important for Suresh to learn some terms that cropped up while paying his taxes. Read on below to learn the most important GST-related jargon. 1.Types of GST: GST has been segregated into CGST(Central Goods and Services Tax), SGST(State Goods and Services Tax) and IGST(Integrated Goods and Services Tax). While CGST refers to the portion of the taxes that go to the Centre, SGST refers to the share that goes to the state government. Integrated GST or IGST is the tax levied on supply of goods during inter-state trade. 2.Double Taxation: GST is supposed to eliminate double taxation, which refers to the same good or service being taxed twice by different authorities. 3.GST Network: The GST Network is an organisation which shares a portal for different shareholders to discuss matters relating to the GST. It is a portal where the government, taxpayers and other shareholders can interact and hold discussions regarding the new taxation regime. 4.Taxable Person: This term makes mention of all the entities that are liable to taxation under the GST. Taxable persons include all businesses that have an annual turnover of over Rs. 20 lakh. The annual turnover eligibility is set lower for businesses operating in the North East and hill states, at Rs. 10 lakh. Since Suresh had already realised that his business’ turnover made it a taxable person, he was keen to learn about the implications this brought. 5.Composite Supply: This refers to multiple goods that are supplied as a composite unit. For goods that form a part of composite supply, tax will only be charged on the main ingredient or product.

  4. 6.GSTIN: A 15-digit GST Identification Number (GSTIN) has been issued to all taxable persons for making transactions more transparent. All company purchases and sales now must compulsorily mention GSTIN details. When you apply for business loan, you will be asked to provide GSTIN details by the lender. If you opt for the best small business loans such as those available on Finserv MARKETS, you can easily avail Rs. 30 lakh in under 3 minutes. With a GSTIN, applying for a business loan will take less time because the lender is assured of your tax compliance immediately, and it is much easier to access your credit score. 7.Composition Dealer: A composition dealer refers to a small businessperson who can afford to pay taxes at concessional rates, and does not have to collect it from customers. 8.Reverse Charge: The reverse charge refers to the onus that lies on customers to pay taxes. This liability to pay GST rests with the customer, and not the supplier of the good or service. Businesses are required to pay GST each time they make a purchase from factories or even dealers and vendors. 9.Distinct Persons: Distinct persons refers to the branches of an organisation, that have been registered under separate GSTINs. Since they are distinguished by different GSTINs, their GST payments also remain separate. 10.Zero Rating: Zero rating refers to goods and services that have been placed at the ‘zero’ tax slab in the GST. Purchase of these products includes zero payments in the form of GST. Several essential food items which see regular consumption have been placed under this bracket, including fresh fruits and vegetables, buttermilk, curd, milk, flour, besan, natural honey, bread, all types of salts, eggs, hulled cereal grains and even fresh meat. Non-edible items included in the zero rating slab of GST include sindoor, kajal, drawing and colouring books and even stamps. Having understood these terms, Suresh set about streamlining his business in line with the GST guidelines. He enrolled his business and received his GSTIN, which he was then able to share with his vendors and customers. His dealers and clients were also grateful for the manner in which business operations became smoother. The GST system is still in the process of achieving full implementation in the country. Traders and business bodies are yet to significantly begin seeing the impact of GST. The taxation system upheaval

  5. is aimed at easing compliance and bringing all businesses within the tax net in the country. It is supposed to make operations simpler for businesses, including in terms of availing business loan. When you apply for business loans you can simply mention your GSTIN to ensure faster processing. What is input tax credit in GST? Input tax credit (ITC) is the difference between the tax you have paid on purchases and the tax you pay on sale of the final product. If your business is under the purview of GST and you are a manufacturer, e-commerce seller, aggregator, e-commerce operator and supplier, you are eligible for ITC. Input tax credit can be better understood with this simple illustration. Say for example that you are a manufacturer and you purchased raw materials for making a product from three different vendors and paid total GST of Rs. 300. However, after you created the product, you had to pay a tax of Rs. 450 on selling that product. Since, you have already paid Rs. 300 as input tax on the product, you only have to pay the difference of Rs. 150 now as GST (Rs. 450 – 300 = Rs. 150). So, your input tax credit here is Rs. 300. UNDERSTANDING INPUT TAX CREDIT Source: ClearTax [1] Who can claim input credit under GST? You must fulfil the following conditions to avail or claim input credit under GST:  You must have a tax invoice of your purchases from a registered dealer.  In case of the goods received in instalments, credit will only be available after the receipt of the last instalment.  You must have received the goods or services.

  6. In case the assessee does not pay for the value of the goods/ services or the tax amount within 3 months of invoice and avails input tax credit, the credit will be added to his tax liability along with interest.  The supplier must have deposited the tax charged on your purchases to the government as tax or claimed as input credit. If you have a business and you pay GST on the goods and services received from suppliers, it’s mandatory that your suppliers are GST-compliant as well. Only then you will be able to receive input tax credit. What has changed with input tax credit recently? The new ITC rules are stricter when it comes to availing input credit. As mentioned above, your supplier has to be GST compliant. In case, if there is a mismatch between the details given by you and what the supplier has uploaded to the GST portal, you will only be eligible for 20% of the input credit. Going forward, GST compliance or non-compliance of your suppliers will have a significant impact on your cash flow. Business will have to ensure that their suppliers are totally GST-compliant before they do business with them. This new rule introduces another set of compliance work on a monthly basis for GST filers. Previously, businesses could carry out self-assessment of ITC claims on the basis of suppliers’ invoice copy with them and there were no such restrictions on mismatch. However, things have now changed and businesses will have to chase down their vendors every month to timely and correctly upload their invoices.

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