Popularly known as the "One Nation-One Tax" regime, it eliminated a host of indirect taxes such as central excise duty, service tax, and more to make indirect taxation more transparent. While it has been around two years since the implementation of GST, a large number of people are still mostly unaware of its basics.
If you want to understand GST, here are a few essential things that you should know:
1. What is GST?
First and foremost, it is essential first to know GST meaning. GST is a multi-stage indirect taxation system where tax is levied at every value addition that goods and services go through. In other words, tax is applicable at every point-of-sale such as raw material purchase, manufacture or production, warehousing finished goods, sale of the product to a wholesaler, sale to retailer, and final sale to the consumer.
2. What are the Components of GST?
There are three components of GST- IGST, CGST, and SGST. In case if the sale of goods or service is between two states or inter-state, IGST or Integrated GST is applicable. If the sale is within a state or intra-state, CGST or Central GST and SGST or State GST are applicable.
3. What is GST Registration?
As per the GST mandate, business with an annual turnover of more than Rs. 40 lakhs need to register themselves as a taxable entity. This limit in the North-Eastern states is Rs. 10 lakhs. This process of registration is known as GST registration. There are different types of businesses where the registration is mandatory. Continuing business without registering is an, and severe penalties are applicable.
4. Is GST Beneficial?
A large number of people still believe that the previous tax regime was better than GST. However, GST has many benefits, which are:
- Eliminate the cascading effect of taxation
- Lesser compliances
- Regulation of the unorganised sector
- Easy online procedure
- More efficient logistics
The government also regularly makes changes to the GST laws to make taxation more transparent for businesses and affordable for the end consumer.
Now that you know GST definition and other essential details, it should be easier for you to understand how it impacts your business. Follow the GST laws and pay the applicable taxes on time to run your business legally and avoid non-compliance and penalties.
* Terms & conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
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