Updated: Oct 7
Charishma Sekhar K (Jr. associate editor)
Yash Sahu (Jr. associate editor)
The Clear Tax has created a GST eBook to help you in understanding the new taxation system in India. As the name suggests, GST will be applicable for both goods and services. The author emphasized that India will follow a dual system of GST to keep both centre and state-independent to each other. This book provides basics of GST, essential terminologies, and concepts to make us understand what is GST and why we need to know about it. Initially, the book conveys the difference between the current indirect tax structure and GST (Goods and Services Tax) plans to include the most indirect taxes under a single taxation regime.GST is an enormous reform for indirect taxation in India, the fondness of which the country has not seen post Independence.
The author also said that GST will simplify indirect taxation, reduce complicatedness, and remove the cascading effect. Specialists acknowledge that it will have a massive impact on businesses both enormous and tiny and changes the functions of economic. This is believed to enable the tax base, increase tax compliance, and reduce economic distortions caused by inter-state variations in taxes. This introduction of GST in India's financial system has led to an idea of "One Nation One Tax". It also elaborated on the components of the GST i.e. CGST (central goods and services tax), SGST (state goods and services tax), and IGST (Integrated goods and services tax) with instances.
The author gives an unquestionable explanation on tax levied under GST, products will no longer have multiple taxes, and will not incur excise duty as well as VAT at different points of time. The most significant provisions and procedures for registration in GST are crystal clearly illustrated in this book. The author also relatively elaborated on the concepts of the harmonized system of nomenclature. On the other hand, the book delivers the significance of world customs and international trade. It provides information for the mainstream analysis of harmonized system nomenclature. The text is largely based on good and services tax identification numbers which give the importance of a single platform for all taxpayers. The author had made use of specific scenarios, examples, diagrams, and presentations to make the reader understand the basics of GST.
Commencing with the most concerning part of the book I.e GST vs Current indirect structure tax. It clearly examines it is necessary to understand the current indirect tax system to understand GST. This directs the explanation of the book towards the Indirect taxes, the tax burden cannot be shifted to anyone else other than the liable person. And it also showed that it means shifting the tax burden. The book says that Gst falls in this category. The author has explained in which basis the GST falls in current indirect tax structure; thus, it can be classified as Central taxes are levied by the central government. It further includes central government sales taxes, excise duties, etc. State taxes are levied by various state governments i.e. VAT (Value-added Tax), service tax, octroi. The author also brings out the major problem in current indirect taxes which is known as the cascading effect. The cascading effect is a crucial problem in the system of imposing loads of tax on the product at each stage of the transaction from raw material to consumer. The author shows the objective of GST to solve this crisis by establishing the Input Tax Credit (ITC). Basically, ITC means to reduce the taxes paid on input from taxes to be paid on output. The ITC is the backbone of GST. GST gets two-pronged benefit via ITC. It decreases the cascading effect of taxes. It will reduce the burden of taxes and hopefully prices. The author also clarifies the dilemma in GST registration by providing a procedure and eligibility to register. The author also gives positive as well as negative impacts of voluntary registration in GST. And it also provided certain exemptions and important points to remember during registration. This book also resolves many difficult questions in simple terms. It also gives an explanation for GST based on three terms such as destination, comprehensive, and methodology. It is interpreted in an understandable way that all the current indirect taxes across the country in a unified system. In an extensive stage, it also assures that there are no more arbitraries in tax rates. Starting from the manufacturing stage to the final scale of a consumer, the product goes through multiple changes of hand changes along the chain. The authors have implied that GST is destination-based and in absolute terms, exports are not taxable, imports are taxable. Besides all this, this book also describes the provisions on GST. The author elucidated that each tax is subjected to multiple taxes such as excise, VAT (Value Added Tax), CST (Central service tax). But under GST, the product will not have multiple taxes and will not include excise duty as well as VAT at different points. In GST there will be no longer any distinction between goods and services in terms of Taxation. The important provisions of GDT are Time of supply of goods and services, Place of supply of goods and services, Value of supply of goods and services. The author has given prominence to how to determine the time of supply, place of supply, and value of supply.
The author has also elaborated the importance of economies regarding their customs tariff and for the international trade statistics, the author has also made several connections with the trade procedures and non-documentary trade data exchange interchange which is relating to the internet.
In the Indian context, it has also elaborated on the HSN codes which are to be followed by the taxpayers between various classes of income how the 8-digit code is important when we talk about the export and import of goods and services under the goods and services tax regime. The book also focuses on the codes which are different in the Indian context that is the 8-digit code in India and a different number of codes in various countries around the globe. The book apprises the rate at which the taxpayer has to file the return and how it differs under the composition scheme. As the chapter entitled the book also notes the GST in and how each digit in the code has different significance like the state code, registration, PAN number, and the check code.
The book also gives the answer to the question with respect to the determination of the place of supply of services under the service tax laws. Different types of supply that are included are also mentioned like the composite supply and the newer concept to the field of the supply and services which is mixed supply is also premeditated very briefly and precisely including the examples in the simple course of action inscribed in the book.
It is difficult for the small and medium enterprises to fall in with GST, the book also addresses the complimentary explication for this kind of business. The book also proffered the answer for the questions like who can opt for composition scheme, the tax rate on composition scheme, composition dealers, and the concerns about the composition dealers, penalties for the composition dealers, payment of tax in the composition scheme, the transition provisions under the composition scheme.
The reasons why the service sectors are excluded from the composition scheme. The books also the necessary requirements for registering under the composition scheme, the concept of Business-to-business where one business makes a commercial transaction with another and the price distortion and cascading are also illustrated. Rate of the composition tax is kept at 1 % 2.5% and the taxpayer is not allowed to recover such tax from the buyer, the burden of such taxes should be made by the taxpayer himself and this must be paid out of his own pocket are such expounded and being broached upon.
There have to be the legal provisions and the regulation regarding everything around the globe, similarly, the book entails the legalities and the penalty in the composition scheme, how the taxpayer should be aware of the eligibility criteria to avoid penal provisions. The book engrosses the merits of the composition scheme which includes limited compliance, limited tax liability, and the high liquidity and the development in the working capital because of the composition scheme. While the book covers the merits on the one side, the book also enlightens the readers with the demerits of the composition scheme to show both the sides of the coin including the limited territory for business, No credits of input tax and no collection of tax, and some of the penal provision.
The book talks about the aggregate turnover which is closely cognitive with the composition scheme and provides a brief detailing about the aggregate turnover and the difference between them as aggregate turnover excludes the value of inward supplies on which tax is payable by a person on reverse charge basis and much more. The book gives various examples of the efficacious comprehension of the readers.
There is a special status which is assigned for various states where the aggregate turnover differs to assist in the development of those states that face geographical and socio-economic disadvantages, the book highlights the 11 states as well.
The books on how the aggregate turnover will attract the small business to register and to file a return as just registering will not have to pay taxes. The concept of the GST laws is also being brought up which has the power or authority to make small businesses register the GST.
The book surrounds every aspect of GST and explains the Input tax credit in detail. The utilization of the input tax credit is the mechanism connected with the buyer, dealer, and the government regarding the liability of tax. The book introduces the conditions which should be taken into cognizance for making use of the Input tax credit which includes like the input credit should be availed with a year, accounting principles should be followed, the purpose of business only, attributable to taxable supply, the proper tax invoice must be furnished.
The author has very succinctly delineated the input tax credit on job work and the liability of the tax in the contemporary scenario, and the liability of the tax under the GST establishment.
After the briefing about the input tax credit, the book also contemplates the diegesis that can influence the ITC on job work like the capital goods are sent for job work after the appointed day, Other goods are sent for job work after the appointed day, good was sent before the appointed day and are returned after the appointed day. The author has made use of certain figures and diagrams in order to make the reader understand the basic concepts of the ITC.
The books the cases where the ITC cannot be availed by the dealer and furthermore bestows the special circumstances for the transfers of the ITC like the retrospective relief, the corporate action, and the Taxation. The concept of the input service distributor which is known as the head office for the distribution of the input tax credit is also meticulously enunciated.
The reverse charge is common in many countries like Canada where the recipient is liable to pay taxes on the imports of services and the intangible properties. The book also talks about the reverse charge in the current context and when it is under GST, the registration regarding the reverse charge. The author has promulgated numerous examples in order to make the readers understand the concept of the reverse charge separately for goods as well as services.
GST compliance is a score given by the government to a business so that other businesses can see how compliant they are with the tax department. This score will be calculated based on parameters such as timely filing of monthly and annual returns, furnishing details of input credits used, taxes paid, etc. The answer to the question of why the GST compliance rating was introduced, how the rating system work, what are the benefits a complaint vendor can enjoy, how will the business be benefited by becoming GST compliant, the disadvantage of rating scheme, how a taxpayer can know the GST rating
In the end, the book elucidates the impact of the goods and service tax on the manufacturers and the fast-moving consumer goods industry. The development in the FMCG will benefit the GST by reducing the logistics cost, and the transferred stock.
Find the full PDF here:
Legit Originals, Volume 1, Issue 1 (September 2020)