What is GST?
GST (Goods & Services Tax). what does it mean? and why should we know about it?
if you have a startup or a shop where you supply and purchase the goods. then it is very important to know about GST
let’s just go through what are the taxes we where paying to the government before GST. then it will be easy to understand how they have been replaced after GST.
usually, we use to give two types of taxes to the government. they are
this tax has to be paid directly to the central government.
as we can see there are 4 categories in it
- income tax
- corporation tax
- security transaction tax
- wealth tax
all these taxes have to paid directly to the central government.
the indirect taxes also consist of 4 categories.
- customs tax
- excise tax
- service tax
we pay this tax to the seller from where we are buying the goods and from there the tax goes to the central government
in the indirect tax, there are two types
goes to central government.
goes to the state government. all the money which comes to the state government is from our indirect tax only.
there is other tax also which we pay like toll tax, electrical duties etc.. we don’t even realize.
now all the direct and indirect taxes are combined together and made them one single tax which is GST.
it avoids to pay different taxes to different authorities and to have a single authority which is a central government.
what is GST?
as the name says goods and services tax. let’s first understand what are they.
they are the physical thing which you can carry and measure them.
this is just the benefits or service which you get along with them.
What are the types in GST?
it is mainly divided into three types
here the share goes to central government.
here it goes to the state government.
it is an integrated or interstate ( if any of the product goes from one state to another state then it is called interstate).
here what we need to understand is, now we have to pay only one tax which is GST.
then it automatically subdivides into parts and some share goes to state and some go to central.
What are the changes GST has brought?
let me give you an example.
before what use to happen was. if I live in Delhi and if I find any product cheap in Punjab then I use to go to that state and buy the product and come back to Delhi and sell the product here.
here the profit margin use to be very high.
Tax before Gst:-
let’s assume I bought a product which cost around 100.rs and has a 10% tax. now the total value of the product is 110.rs
now if I want to sell the same product in other states. then the tax I have to pay is for 110.rs (which includes the 10% tax)
here we are paying taxes on the taxes.
Tax After Gst:-
I bought a product which cost 100.rs. and I have paid 10% tax to it.
if I sell that product in other states then first the 10% tax will be taken off. and now I have to pay tax just for the product (which doesn’t include 10% tax)
here we are paying tax only on the product.
this is a very big plus point.
What are the items under GST?
there are 1211 items under the various tax.
all the items are divided into 4 categories
0% GST items:-
all the above items are under this category are will have 0% GST
in this category, there are only essential items like milk, rice, sugar, vegetable etc..
here if you use the services of the hotel or a restaurant and if the tariff is below 1000.rs you no need to pay.
5% GST items:-
under goods, there are life-saving drugs, cotton, fiber etc.
under services, there are mainly transport and also a small restaurant
12% GST items:-
under goods, there are packaged foods, live animals, meats, mobile phones etc.
under services, there are business class air tickets, work contract, fertilizers
18% GST items:-
under goods, there are hair oil, soaps, shampoos, ice creams, cake, electronic toys, etc
under services, there are telecom services, it services, room tariffs, five-star hotels etc.
28% GST items
this is the maximum GST you will have on your products
in this, there are atm, washing machine, motorcycles, automobiles etc..
so all these items have been divided into a different category so that the entire country has to pay one single tax.
who should pay GST?
if you have a small shop or if you have a startup can you apply for it?
there is a limit to it.
if you have a turnover up to 20,00000.rs in one financial year. then it is compulsory to take GST card.
if you don’t have that much of turnover then you no need to take it. BUT,
even if you don’t have the 20,00000.rs turnover and you do business like e-commerce or you sell goods from one state to other states.
then your turnover won’t be to consider and it is compulsory to pay GST.
is it difficult to pay or maintain GST?
paying the tax has been simplified. but at the same time, the return file is the most difficult process in it.
What is return file:-
it is a file which consists of all the transaction. you have paid for goods and the goods you have sold.
this return file has to submit three times for a month
1’st) all the transaction you have paid for the goods
2’nd) all the transaction of the goods which you have sold.
3’rd)you should match 1 and 2 and submit final return file.
it is not easy for a small shop owner or a startup company to submit three return forms for every month.
this means you have to hire a CA or a tax expert for the submission of the tax every month. and it is very costly.
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