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GST with examples

June 11, 2015

GST India – Goods & Service Tax

Goods and Service Tax is being glorified as a system of taxation by which economy will take an upward swing and further it will ease the trade and industry with respect to the indirect tax system of the country. “Only one” indirect tax has to be paid by the trade and industry and all the other indirect taxes will be subsumed in GST.

What is GST?

GST is a consumption based tax levied on sale, manufacture and consumption on goods & services at a national level. This tax will be substitute for all indirect tax levied by state and central government. Exports and direct tax like income tax, corporate tax and capital gain tax will not be affected by GST. GST would apply to all goods other than crude petroleum, motor spirit, diesel, aviation turbine fuel and natural gas. It would apply to all services barring a few to be specified. With the increase of international trade in services, GST has become a global standard. The proposed tax system will take the form of “dual GST” which is concurrently levied by central and state government. This will comprise of:

• Central GST (CGST) which will be levied by Centre

• State GST (SGST) Which will be levied by State

• Integrated GST (IGST) – which will be levied by Central Government on inter-State supply of goods and services.

Many taxes has been subsumed under GST which are as under

Central Indirect Taxes & Levies State Indirect Taxes & Levies
Central Excise Duty VAT / Sales Tax
Additional Excise Duties Entertainment tax (other than the tax levied by local bodies)
Excise Duty levied under the Medicinal Preparations (Excise Duties) Act, 1955 Central Sales Tax
Service Tax Octroi and Entry Tax
Additional Customs Duty (CVD) Purchase Tax
Special Additional Duty of Customs Luxury Tax
Central Surcharge and Cess Taxes on Lottery
Betting and Gambling
State Cesses and Surcharges

Who will pocket taxes?

For Intra State Transactions : In case of Intra State transactions, Seller collects both CGST & SGST from the buyer and CGST needs to be deposited with Central Govt. and SGST with State Govt.

For Inter State Transactions : Integrated Goods and Service Tax (IGST) shall be levied on Inter State transactions of goods and services which are based on destination principle. Tax gets transferred to Importing state. More over it is proposed to levy an additional tax on supply of goods, not exceeding one percent, in the course of inter-state trade or commerce, to be collected by the Central Govt. for a period of two years, and assign to the States where the supply originates. Valuation of stock transfers to be determined. Exports and Supplies to SEZ units will be zero rated.

How to adjust the Credit?

Setoff of IGST, CGST & SGST will be as follows in the below mentioned chronological order only.

Credit of To be Adjusted with
2)   CGST
3)   SGST
2)   IGST
2)   IGST

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