GST Blogs

Central Goods and Services Tax (CGST) Act, 2017 Section 10: Composition Levy: Summary: Section 10 allows small businesses to pay taxes at a lower, fixed rate instead of the regular GST rates. This simplified tax scheme is called the “Composition Levy.”   Key Points: Eligibility: Businesses with a turnover up to 50 lakh rupees in the previous financial year can opt for this scheme. The government can increase this limit up to 1.5 crore rupees. Tax Rates: Manufacturers: 1% of turnover. Special Suppliers: 2.5% of turnover for certain supplies. Other Suppliers: 0.5% of turnover. Conditions: Businesses must follow specific conditions and restrictions to qualify. They can also provide some services, but the value should not exceed 10% of their turnover or 5 lakh rupees, whichever is higher. Income from interest on deposits, loans, or advances is excluded from turnover calculation. Restrictions: Businesses opting for this scheme cannot supply services (except certain allowed ones). They cannot make inter-state supplies of goods or services. They cannot supply goods or services through e-commerce operators who collect tax at source. They cannot be manufacturers of certain notified goods. They cannot be casual or non-resident taxable persons. Additional Points: If more than one business is registered under the same PAN, all must opt for the scheme. If turnover exceeds the limit during the year, the scheme is no longer applicable. Businesses using this scheme cannot collect tax from customers or claim input tax credit. Penalties: If a business is found ineligible but still uses the scheme, they must pay the appropriate taxes and penalties. Forms and Procedures: Various forms are used to apply for, manage, and withdraw from the Composition Levy scheme. Specific forms are also used for filing returns and declarations. Explanation: Who can use it? Small businesses making up to 50 lakh rupees last year. What does it do? Offers a simpler way to pay taxes by charging a fixed rate on sales. How are the rates? Different rates for manufacturers (1%), certain suppliers (2.5%), and others (0.5%). What are the limits? Businesses can provide some services but within specific limits, and certain types of income (like interest) are excluded. Restrictions to follow: No inter-state sales, no sales through e-commerce operators, and some businesses are entirely excluded. Additional rules: If businesses under the same PAN opt for the scheme, all must opt for it. If a business exceeds the turnover limit, it must leave the scheme. Penalties: Ineligible businesses using the scheme will face penalties. This section helps small businesses by simplifying tax payments, reducing the burden of compliance, and making tax calculations straightforward.

GST rates in India are categorized into five main slabs, each applicable to different goods and services. These rates are set by the GST Council, which revises them periodically based on the economic needs and feedback from various stakeholders. The current GST rate structure includes the following slabs: 0% GST (Nil Rate) This category includes essential goods and services, which are exempt from GST to make them affordable for the general public. Examples: Fresh fruits and vegetables, milk, bread, salt, education services, healthcare services.   5% GST This rate is applied to common use items and services that are essential but not as critical as those in the 0% category. Examples: Household necessities (sugar, tea, edible oil), branded cereals, spices, footwear below ₹1000, small restaurants, transport services (railways, air travel in economy class).   12% GST This rate is applied to processed foods, intermediate goods, and some consumer goods. Examples: Processed food (packaged dry fruits), cell phones, umbrellas, hotel accommodation costing between ₹1,001 to ₹7,500 per night, business class air travel.   18% GST This is the standard rate applied to most goods and services, considered neither essential nor luxury. Examples: IT services, financial services, restaurants (other than small restaurants with 5% GST), telecom services, industrial intermediaries, and products like soaps, toothpaste, and refrigerators.   28% GST This rate is applied to luxury items and products deemed non-essential or harmful. Examples: Luxury cars, high-end motorcycles, aerated drinks, cigarettes, and tobacco products, five-star hotels, AC and large restaurants, entertainment services like movie tickets costing above ₹100.     Special Rates: Gold, Jewelry, and Precious Stones: A special rate of 3% is applied. Real Estate: GST on under-construction property is 5% without ITC (Input Tax Credit) for residential properties (1% for affordable housing).   Recent Updates: The GST Council periodically reviews the rates and may introduce changes to balance fiscal policy and inflation control. It is important for businesses to stay updated with the latest notifications from the GST Council regarding rate changes.   GST Rate Type of Goods/Services Examples 0% Essential goods and services Fresh fruits, vegetables, milk, healthcare, education 5% Common use items Edible oil, tea, small restaurants, economy class travel 12% Processed foods and some consumer goods Packaged dry fruits, cell phones, hotel accommodation 18% Standard goods and services IT services, financial services, soaps, refrigerators 28% Luxury and non-essential items Luxury cars, aerated drinks, five-star hotels 3% Precious metals and stones Gold, silver, jewelry 1% to 5% Composition scheme for small businesses Manufacturers, traders, small restaurants

  Goods and Services Tax (GST)   GST is an indirect tax introduced in India on 1st July 2017. It is a value-added tax levied on the manufacture, sale, and consumption of goods and services.   Who does GST apply to?   GST typically applies to: Businesses: Required to register for GST if their annual turnover exceeds a certain threshold set by the government. Consumers: Pay GST on goods and services purchased, usually included in the final price. Importers and Exporters: GST applies to imported goods and services, while exported goods and services are usually exempt or eligible for refunds. Certain Transactions: Some transactions may be exempt or subject to special rules depending on the nature of the goods or services and jurisdiction regulations. GST aims to streamline the tax system by combining various indirect taxes into a single tax, thus reducing the cascading effect of taxes on the final price of goods and services.   Types of GST?   Goods and Services Tax (GST) in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. The implementation of GST subsumed multiple indirect taxes that were previously levied by both the central and state governments. GST in India is categorized into four main types:   Central Goods and Services Tax (CGST) CGST is levied by the Central Government on intra-state supplies of goods and services. It is governed by the Central Goods and Services Tax Act. The revenue collected under CGST goes to the central government.   Example: If a product is sold within a state, both CGST and SGST (State Goods and Services Tax) are levied. If the rate of GST on a product is 18%, it is divided into 9% CGST and 9% SGST.   State Goods and Services Tax (SGST) SGST is levied by the State Government on intra-state supplies of goods and services. It is governed by the State Goods and Services Tax Act. The revenue collected under SGST goes to the respective state government. Example: Following the same instance as above, if a product is sold within a state, SGST is levied at 9%, along with 9% CGST.   Integrated Goods and Services Tax (IGST) IGST is levied by the Central Government on inter-state supplies of goods and services, including imports. It is governed by the Integrated Goods and Services Tax Act. The revenue collected under IGST is shared between the central and state governments as per the rates fixed by the authorities.   Example: If a product is sold from one state to another, say from Maharashtra to Gujarat, IGST is levied. If the rate of GST on a product is 18%, the entire 18% is charged as IGST.   Union Territory Goods and Services Tax (UTGST) UTGST is levied by the Union Territory (UT) government on intra-UT supplies of goods and services. It is similar to SGST and is applicable to Union Territories without legislature, such as Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu, and Chandigarh. The revenue collected under UTGST goes to the respective union territory.   Example: If a product is sold within a Union Territory, UTGST and CGST are levied. If the rate of GST on a product is 18%, it is divided into 9% UTGST and 9% CGST.   Key Points to Note:   Intra-State Supply: When goods and services are supplied within the same state, CGST and SGST are levied in equal proportions. Inter-State Supply: When goods and services are supplied from one state to another, IGST is levied. Import of Goods and Services: IGST is applicable on imports. Importers have to pay IGST along with customs duty. Export of Goods and Services: Exports are treated as zero-rated supplies. No tax is payable on exports, but input tax credit can be claimed.   Example of GST Calculation   Let’s consider an example of an intra-state sale where a manufacturer in Maharashtra sells goods worth ₹10,000 with a GST rate of 18%.   CGST: 9% of ₹10,000 = ₹900 SGST: 9% of ₹10,000 = ₹900 Total GST: ₹900 (CGST) + ₹900 (SGST) = ₹1,800 In this example, the buyer pays a total of ₹11,800, which includes the original price of ₹10,000 and the GST of ₹1,800. The ₹900 collected as CGST goes to the central government, and the ₹900 collected as SGST goes to the Maharashtra state government.    

Tax is a mandatory financial charge or levy imposed by a government on individuals, businesses, or other entities to fund public expenditures and government functions. Taxes finance public services and goods such as roads, schools, healthcare, defense, and social welfare programs.   Types of Taxes Taxes can be broadly categorized into two main types: Direct Taxes and Indirect Taxes.   Direct Taxes Direct taxes are levied directly on individuals and businesses by the government. These taxes are typically based on income or profits and are paid directly to the government. Examples include:   Income Tax: Imposed on individuals or entities based on the income earned. Corporate Tax: Levied on the profits of corporations or businesses. Property Tax: Assessed on the value of real estate or tangible personal property. Capital Gains Tax: On the profit earned from the sale of assets like stocks or real estate. Inheritance Tax or Estate Tax: Imposed on the transfer of wealth from a deceased person to their heirs.   Indirect Taxes Indirect taxes are imposed on goods and services rather than directly on individuals or businesses. These taxes are usually collected by intermediaries (such as retailers or manufacturers) and passed on to consumers through the price of goods and services. Examples include:   Sales Tax: Imposed on the sale of goods and services at the point of sale. Value-Added Tax (VAT): Levied on the value added at each stage of production or distribution. Excise Tax: Imposed on specific goods such as alcohol, tobacco, and gasoline. Customs Duties: Taxes on goods imported or exported between countries. Goods and Services Tax (GST): A comprehensive indirect tax levied on the supply of goods and services, incorporating elements of both sales tax and VAT.    Direct vs. Indirect Taxes: A Comparison   Aspect Direct Taxes Indirect Taxes Definition Taxes levied directly on individuals or businesses Taxes levied on goods and services Examples Income tax, corporate tax, property tax, capital gains tax, inheritance tax Sales tax, VAT, excise tax, customs duties, GST Taxpayer Paid directly by individuals or businesses Collected by intermediaries and passed to consumers Collection Collected by government agencies Collected by businesses and remitted to government Incidence Falls directly on the taxpayer Passed on to consumers through prices Purpose Redistributing wealth, promoting social equity, funding public services Generating government revenue, influencing behavior Progressivity Can be progressive or proportional Generally regressive Economic Impact Can affect behavior and economic growth Impacts consumer spending patterns