GST – Goods and Service Tax

Hi seekers , I hope you doing great well everyone is tired now a days in this lockdown period. Well here I am with another common topic for you with some basic knowledge.

So let’s begin today I am going to talk about the GST tax which is applied to Indian public from 1st of July 2017. Well the GST basically stands for Goods and Service Tax as it’s a common knowledge to people.

There are also three types of GST i.e. CGST, SGST, and IGST which are applicable on different layers of transactions. Before we start getting into the GST let me tell you about the taxes applicable before 1st of July 2017 which are VAT, CST, and excise duty tax.

The tax before the GST were applied to the point of origin of the goods or services. Currently as well these taxes are applicable on alcohol. Petroleum, crude oil, natural gases products.

How GST is Calculated:

GST can be calculated simply by multiplying the Taxable amount by GST rate. If CGST & SGST/UTGST is to be applied then CGST and SGST both amounts are half of the total GST amount.

-        The fact is the GST is added on the transaction amount not on the MRP.

-        For calculating the GST we just need to multiply the Taxable amount by the rate of GST.

-        GST = Taxable Amount * GST Rate

-        Let’s say if we don’t know how much is the taxable amount on which GST is applicable. Then we can calculate it by using below formula :

Taxable amount : Total amount Paid(1+GST rate/100)

-        For Example we paid total 1254 for an item and the GST rate was 8% so the taxable amount is

= 1254(1+8/100) 1354.32

-        When the CGST and SGST is applied then the sum of CGST+SGST is equal to the GST applied to the taxable amount.

Type Of GST :

There is basically three types of GST present at the moment which are applicable based on different circumstances.

1)      1. CGST : Central Government Service Tax

-        As the name suggest the CGST is applied by the central government on the services and goods produced.

2)      2. GST : State Government Service Tax

-        As per the name the GST applicable by the state government on the services and goods provided by state and deal across the states.

-        CGST and SGST are intra state taxes.

3)      3. GST : Inter State Government Service Tax

-        The IGST is applied by the central government when an inter-state supply of services and goods.

-        If the transaction is done between the union territories the same tax will be applied but the name changes to UGST

Example for the taxes:

-        - IF a person in Mumbai did a transaction with the another person in Mumbai then the GST will applied is 18% which means in that (CGST+SGST)=18%.

In other words the CGST and SGST both are 9% which make the total GST applicable is 18%.

-        - If a person from Maharashtra made a deal with a person from Wes Bengal then the IGST is applied on the Deal. Which means if GST is 5% then the IGST also will be of 5%

The activity which are clearly identified as services and goods are applicable for GST taxation. For example if we are going to open a gaming café then below are the goods and services required for it.

Service : Internet connection, Power supply, Workers for installation etc

Goods : Monitor, Chairs, Mouse, Keyboards etc.

So whatever amount we pay for this goods and services will be applicable for the GST and the GST will be applied based on the percentage of it and whether the transaction is inter-state or intra state.

Advantages of GST in India :

  • -        It will provide the boost for the Indian economy in the long run.
  • -        Most important is that now common man have to pay less amount of tax as there is only one tax is applicable for everything.
  • -        Removal of cascading effect of taxes i.e. removes tax on tax.
  • -        The consumption of goods and services will increased.
  • -        Less tax compliance and simplified tax policies than the previous one.