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Meaning of GST

The full form of GST is Goods and Service Tax; there is no as such meaning of GST as it is an indirect tax. Let us understand what GST is and why it has been implemented in India along with other features.

 

1. What is GST?

GST is a consumption-based tax that has to be paid by every consumer in the supply chain. GST was passed by the government in the Parliament on 29th March 2017. Moreover, under GST the supplier can claim Input Tax Credit (ITC) to set off the output liability.

2. Why GST is implemented in India?

One Nation One Tax was the main pillar behind the introduction of GST in India as before the introduction of GST there were different types of indirect taxes. Some of the common indirect taxes before GST regime were:

  1. VAT (Value Added Tax)
  2. Luxury Tax
  3. Central Tax and so forth

These taxes were levied and collected by different authorities and due to this, there was a tax on tax before GST. However, after the introduction of GST, the image of indirect tax has been moved upside down.

Under the GST regime, the indirect tax structure has been simplified as now the supplier and consumer has to adhere to only one indirect tax. In addition to this, the government is now having greater control over the indirect tax structure in India as most of the other indirect tax department has been streamlined into a single authority.

3. Who is liable to pay GST?

Every person consuming the good is liable to pay GST until or unless it is not exempted goods. Howsoever, it shall be noted that the registered supplier has to collect GST from the end consumer and remit the same to the government through filing GST Return on or before 20th of every subsequent month.

4. What are the GST Components?

Under the GST system, there are 3 taxes applicable and they are:

  1. CGST (Central Goods and Services Tax) which is collected by the central government on intra-state supply of goods or services
  2. SGST (State Goods and Services Tax) which is collected by the central government on intra-state supply of goods or services
  3. IGST (Integrated Goods and Services Tax) which is collected by the central government on inter-state supply of goods or services

5. How to calculate GST?

Currently, there are four slabs under GST and they are:

0%, 5%, 12%, 18% and 28%

To determine the GST rate on particular goods or services you can use HSN or SAC code. You can then multiply this rate by the cost of goods or services to calculated GST.

Let us understand this with an example:

The cost of frozen peas is 100 and the applicable GST rate on the frozen item is 5%. Then the GST on the same will be 100×5÷100 i.e. 5 INR. This is how you can calculate GST.

However, you can use our online GST calculator for the same, which is easy to use.