GST basics: 7 misconceptions cleared

The rumour mills have gone on an overdrive mode since the launch of GST. 

Here’s a reality check for both GST supporters and its detractors. 

1. Now it’s one nation one tax 

Myth : Since GST will replace all other taxes on all goods and services, we are in a single tax regime.

Reality : Though this was the original idea, petroleum products—petrol, diesel—are still outside GST’s ambit and, therefore, their tax rates vary significantly across states. 

For example, petrol is still sold in Mumbai at Rs 74.30 per litre (as on 5 July) compared to Rs 63.12 in New Delhi. Similarly, some other items, such as liquor have also been kept out of GST for now.

2. Small businesses will suffer

Myth : The life of small businessmen will become difficult under GST because of computerised billing, need for Internet connectivity. 

Reality : Shops can do manual billing under GST and Net connectivity is needed only at the time of filing monthly return and can be managed from a cyber cafe. 

3. Prices will shoot up 

Myth : Personal expenses will go up on account of GST making it inflationary because tax rates have been fixed at higher levels—18%, 28%. 

Reality : Though the GST rates seem high, it is only because the entire tax is now visible to the consumer. Earlier most taxes—central and state excise, additional excise, purchase tax, etc.—did not reflect on your bill. If one adds up all the taxes, it would . have been more for most items (ie effective tax rates will be lower for most products).

For example, the price of chicken dish in Kerala should fall because there was a 14.5% tax on live chicken earlier, which has come down to zero now under GST.

4. Corporates may try to profiteer but govt won’t

Myth : Business will try to rob you of the GST benefits, but the government won’t make money at your expense. 

Reality : Some state governments are also acting greedy and not passing on the GST benefits to consumers. For example, the Maharashtra government has increased the vehicle registration tax by 2% after auto firms passed on the GST benefit by cutting prices by 2-3 %.

5. No tax other than GST is now a reality

Myth : For every good or service that has been brought under GST, there won’t be any additional tax. 

Reality : GST only subsumes central and state taxes and the levies charged by local bodies are still outside its ambit. Using this loophole, the Tamil Nadu government has allowed its local bodies to charge 30% tax on movie tickets over and above GST. GST is 18% for movie ticket up to Rs 100 and 28% for tickets that cost more than Rs 100.

But because of local body levies, tax in Tamil Nadu will be 48% for tickets up to Rs 100 and 58% for tickets that cost more. Not surprisingly, the cinema hall owners in the state went on strike. “Action of the Tamil Nadu government is against the spirit of the GST and the GST council should take action against it,” says Amit Sarkar, Partner and Head.

6. Economic growth will rise

Myth : GST will push up the economic growth. 

Reality : Real economic growth comes from both organised and unorganised sectors. Tax evasion becomes difficult in GST, so cost advantage of unorganised sector goes and this will result in some businesses shifting to the organised sector. So, what happens will not be an in increase in ‘real’ economic growth but an increase in ‘recorded’ economic growth. However, there will be a small uptick in ‘real’ economic growth due to the improvement in the ease of doing business.

7. Pay GST twice for card payments 

 .. 
Myth : GST will be charged twice, if you make payments via credit card.

Reality : There is no additional GST for credit card payments and the confusion arose only because there is GST on additional fees—convenience charges—levied by companies. For example, you make a Rs 10,000 payment and a company charges Rs 50 as convenience fee for helping you make the payment via the credit card, you have to pay 18% GST on that fee too—earlier you paid a 15% tax on it. So the 3% increase is very small—just Rs 1.5 on Rs 50.

Why is GST Registration Important?

Why is GST Registration Important?

GST registration is critical because it will enable you to avail various benefits that are available under the GST regime. One such benefit is to avail seamless input tax credit. Multiple taxes are being clubbed under GST and thus the cascading of taxes that is prevailing currently will no longer be the case.

Also, timely registration will help you avoid any kind of interface with tax authorities.

Benefits of GST to the Indian Economy

Benefits of GST to the Indian Economy

·         Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise.

·         Less tax compliance and a simplified tax policy compared to current tax structure.

·         Removal of cascading effect of taxes i.e. removes tax on tax.

·         Reduction of manufacturing costs due to lower burden of taxes on the manufacturing sector. Hence prices of consumer goods will be likely to come down.

·         Lower the burden on the common man i.e. public will have to shed less money to buy the same products that were costly earlier.

·         Increased demand and consumption of goods.

·         Increased demand will lead to increase supply. Hence, this will ultimately lead to rise in the production of goods.

·         Control of black money circulation as the system normally followed by traders and shopkeepers will be put to a mandatory check.

·         Boost to the Indian economy in the long run.

Transition of Input Tax Credit

            Transition of Input Tax Credit

Input tax credit claimed in the return filed under previous laws for the period prior to the appointed day (1 July 2017) would be transferred to the electronic credit ledger. Existing manufacturers/dealers can claim the CENVAT credit in respect of input held in stock, semi-finished or finished goods held in stock if the following conditions are satisfied-:

• Such inputs and/or goods are used or intended to be used for making taxable supplies under GST;
• The said taxable person passes on the benefit of such credit by way of reduced prices to the recipient;
• The said taxable person is eligible for input tax credit on such inputs under GST;
• The said taxable person is in possession of invoices and/or other prescribed documents evidencing payment of duty under the earlier the law in respect of such inputs;
• Such invoices and/or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day;
• The supplier of services is not eligible for any abatement under GST.

GST Advantages

   GST Advantages

·   GST is a transparent tax and also reduce number of indirect taxes.

·       GST will not be a cost to registered retailers therefore there will be no hidden taxes and the cost of doing business will be lower.

·       Benefit people as prices will come down which in turn will help companies as consumption will increase.

·       There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa.

·       In the GST system, when all the taxes are integrated, it should make possible the taxation burden to be split equitably between manufacturing and services.

·       GST will also help to build a transparent and corruption free tax administration.

·       GST is backed by the GSTN, which is a fully integrated tax platform to deal with all aspects of GST.

GST Council gives relaxation of 2 months for filing of GST returns

India’s tryst with its most comprehensive indirect tax reform, the goods and services tax (GST), will begin on July 1. The GST Council, the apex decision body for the new tax, has stuck to the scheduled rollout. 

GST seeks to bundle state and central levies into one and create a seamless national market throughout the country. But the norms for filing returns have been relaxed until September to ensure that the transition doesn’t hurt small traders and others who may not be ready for the new regime. It set the rate on lotteries at 12% of face value for those run by state governments and at 28% for those authorised by state governments but run by private entities. It revised the levy for restaurants inside five-star hotels to the standard rate of 18% from 28%. 

GST for consumers: What you should know before paying when the new tax regime kicks in

Much has been talked about the Goods and Services tax (GST) implementation starting next month, its impact on industries and how it will benefit the consumer. Just to reiterate, Goods and Services Tax is one indirect tax reform, which will make the country one unified common market for industries to pay taxes.

What should the consumer be It is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off aware of with regard to GST.