What is Goods and Service Tax (GST) and How to calculate it

Goods and Service Tax

What is Goods and Service Tax (GST) and How to calculate it: India had a taxation system with a 3-layer hierarchy which consists of central government, state government and regional municipal bodies. This triad was there for the collection of both direct and indirect taxes.

However, on 29th March 2017, the Government of India passed GST Act to simplify this tax regime, bracketing all indirect taxes in the country.

What is GST?

Goods and Service Tax is a destination tax which integrates central and state taxes to alleviate double taxation.

Current Taxation System

Imposition of GST is the biggest reform in India’s indirect tax structure. The primary purpose of this system was to introduce a single tax on supply of goods and services to the ending consumers.

With a motive of ‘one country, one tax, one market’ India is on a successful ride eradicating the obsolete tax system to improve its economy.

To know some tax saving tips for small business owners.

How has GST affected the current economic scenario of India?

After the employment of GST for over a year, it’s time to assess the impact of this destination tax.

 

  • Unified market

Subsuming various indirect taxes, GST has simplified the tax regime, making it easier for the taxpayers to pay uniformly. Smoothening the tax law and barriers, GST has created a unified market across the nation.

Note: With a GST calculator available online, individuals can calculate the GST imposed on any product.

 

  • Increased tax revenues

Good and Service Tax by encouraging the compliances expands the tax base of the country. This is because, with easy tax structure, there is a direct increase in the number of taxpayers generating higher revenues. Moreover, a GST calculator further aids individuals in calculating the amount of GST imposed.

 

  • Eradication of cascading tax effect

Double taxation used to create higher tax revenues when compared to a single stage tax. With rolling out of GST, there is an elimination of the cascading tax effect, i.e. tax on tax. So, consumers now no need to take the load of paying of multiple taxes.

 

  • Greater threshold for registration

Under the GST regime, exemption threshold is fixed at Rs. 20 Lakh. This is one of the major benefits for many small traders and service providers.

 

  • Defined action for E-commerce

Prior implementation of GST, there was no defined treatments for e-commerce sectors. However, with this new tax law, there are no more snags regarding the supply and inter-state movement of goods by e-commerce operators.

 

  • Regulation of unorganised sectors

India is a country, where a lot many industries and working sectors are unorganised and so are its regulations. In the post GST era, however, there are implications of appropriate provisions bringing accountability and parameters to these sets of industries.

How to calculate GST?

Here comes a breakdown for calculating GST with a GST calculator in a few easy steps:

  1. The very first step in calculating GST requires finding of GST rate applicable for the particular goods or services. One should take the aid of HSN or SAC code respectively to figure out the rate.
  2. Next step includes determination of the applicability of IGST or CGST and SGST. However, one needs to determine the place of supply of goods or services which also include e-commerce or OIDAR services.
  3. Sometimes GST is chargeable on reverse charge basis where recipients are liable to pay GST instead of the suppliers. Therefore, it is essential to know whether a transaction includes reverse charge or not.
  4. In accordance with new rules, one should check whether a supplier has an enrolment under GST Cosmopolitan Scheme.
  5. Lastly, the final step includes determination of the type of transaction which includes: B2B and B2C.

It is undeniably a fact that GST has brought a change in the façade of indirect tax regime of India. Experts believe GST will impart a long term positive effect leveraging the country’s economy around the globe.

Load More Related Articles
Load More By anujkrpandey10
Load More In Finance

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also

Necessary Requirements to Take a Loan for Land Purchase

  Requirements of Loan Land Purchase: Many people who want to live in their own home …