UNDERSTAND THE BASICS OF GST AND ITS METHODOLOGY.HIGHLY USEFUL FOR UPCOMING EXAMS AS GST IS GOING TO COMPLETE 1 YEAR ON 1 JULY,2018

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HP

2. THE BIGGEST TAX REVOLUTION IN THE ECONOMIC
HISTORY OF INDIA
ONE NATION-ONE TAX
EK DESH-EK KAR

3. GOODS AND SERVICES TAX IS A MULTISTAGE,
DESTINATION BASED INDIRECT TAX LEVIED ONLY
ON THE VALUE ADDITION.
TERMS—
MULTISTAGE- ON EVERY STAGE OF VALUE
ADDITION, GST WILL BE APPLIED. LET US
UNDERSTAND WITH THE HELP OF AN EXAMPLE.
SUPPOSE WE STUDY THE LIFECYCLE OF A CAKE.
FARMER SOWS THE SEEDS
MILLER BUYS FROM THE FARMER
BAKER BUYS FROM MILLER
SHOPKEEPER
CONSUMER

4. EVERY COLURED SEGMENT IS THE STAGE OF VALUE
ADDITION AND GST HAS TO BE PAID ON EACH
STAGE.
DESTINATION BASED TAX-IF YOU LOOK ABOUT
,YOU WILL SEE THAT THE CUSTOMER FORMS THE
END SEGMENT OF THE LIFE CYCLE.THE ENTIRE TAX
BURDEN IS SHIFTED ON HIM.
INDIRECT TAX-THE BURDEN OF THE TAX IS BEING
SHIFTED FROM ONE STAGE TO ANOTHER AND THE
FINAL BURDEN IS ON THE CUSTOMER.IN CASE OF
DIRECT TAXES, THE LIABILITY TO PAY THE TAX LIES
ON THE POINT OF INCIDENCE.
GST WILL BE SUBSUMING MANY TAXES AND WILL
REPLACES ALL BY A SINGLE TAX i.e. GST.
HOW IT DIFFERS FROM VAT?
VAT AND GST ARE BOTH APPLIED ON THE VALUE
ADDITION ITSELF AND THUS REPLACE THE TAX
REPETITION.HOW EVER, VAT WAS STREAM SPECIFIC.

5. LET US SEE HOW?
 THE INPUT OF VAT LEVIED ON SERVICE TAX IS
AVAILABLE AGAINST SERVICE TAX
ONLY.SIMILARLY, INPUT VAT AGAINST EXCISE
WAS AVAILABLE AGAINST EXCISE ONLY.
 DELAY IN GETTING THE INPUT CREDITS
 MULTIPLICITY OF TAXES.
 AMBIGOUS TAX ENVIRONMENT
 FARCRY TO UNDERSTAND FOR COMMON
CONSUMERS.
GOODS AND SERVICES TAX SHALL BE A SINGLE TAX
THAT WILL GIVE HOMOGENOUS INPUT CREDIT TO
ALMOST ALL TYPE OF INDIRECT TAXES PAID.

6. GST SHALL BE APPLIED IN THE FOLLOWING
MANNER—
1.IF THE TRANSACTION i.e. sale and purchase
TAKES PLACE WITHING THE STATE, THEN
CENTRAL GST (CGST) AND STATE GST(SGST)
SHALL BE APPLIED.
2.IF THE TRANSACTION i.e. sale and purchase
TAKES PLACE BETWEEN THE STATE i.e.
INTERSTATE TRANSACTION THEN INTEGRATED
GST (IGST) SHALL BE APPLIED.

7. CASE #1—WHEN TRANSACTION TAKES PLACE
WITHIN THE STATE
IN THE EXAMPLE ILLUSTRATED BELOW,
GOODS ARE MOVING FROM MUMBAI TO PUNE.
SINCE IT IS A SALE WITHIN A STATE, CGST
AND SGST WILL BE LEVIED. THE COLLECTION
GOES TO THE CENTRAL GOVERNMENT AND
THE STATE GOVERNMENT AS POINTED OUT IN
THE DIAGRAM. THEN THE GOODS ARE RESOLD
FROM PUNE TO NAGPUR. THIS IS AGAIN A
SALE WITHIN A STATE, SO CGST AND SGST
WILL BE LEVIED. SALE PRICE IS INCREASED SO
TAX LIABILITY WILL ALSO INCREASE. IN THE
CASE OF RESALE, THE CREDIT OF INPUT CGST
AND INPUT SGST (RS. 8) IS CLAIMED AS
SHOWN; AND THE REMAINING TAXES GO TO
THE RESPECTIVE GOVERNMENTS.

9. CASE#2: SALE TAKES PLACE IN ONE STATE
AND RESALE IN ANOTHER STATE.
In this case, goods are moving from Indore to Bhopal. Since it
is a sale within a state, CGST and SGST will be levied. The
collection goes to the Central Government and the State
Government as pointed out in the diagram. Later the goods
are resold from Bhopal to Lucknow (outside the state).
Therefore, IGST will be levied. Whole IGST goes to the
central government.
Against IGST, both the input taxes are taken as credit. But we
see that SGST never went to the central government, still the
credit is claimed. This is the crux of GST. Since this
amounts to a loss to the Central Government, the state
government compensates the central government by
transferring the credit to the central government.

11. CASE #3:: SALE OUTSIDE THE STATE AND
RESALE INSIDE THE STATE
IN THIS CASE, GOODS ARE MOVING FROM DELHI TO
JAIPUR. SINCE IT IS AN INTERSTATE SALE, IGST
WILL BE LEVIED. THE COLLECTION GOES TO THE
CENTRAL GOVERNMENT. LATER THE GOODS ARE
RESOLD FROM JAIPUR TO JODHPUR (WITHIN THE
STATE). THEREFORE, CGST AND SGST WILL BE
LEVIED.
AGAINST CGST AND SGST, 50% OF THE IGST, THAT
IS RS. 8 IS TAKEN AS A CREDIT. BUT WE SEE THAT
IGST NEVER WENT TO THE STATE GOVERNMENT,
STILL THE CREDIT IS CLAIMED AGAINST SGST.
SINCE THIS AMOUNTS TO A LOSS TO THE STATE
GOVERNMENT, THE CENTRAL GOVERNMENT
COMPENSATES THE STATE GOVERNMENT BY
TRANSFERRING THE CREDIT TO THE STATE
GOVERNMENT.

13. NUMBER OF TAX SLABS IN GST-
 0 %
 5 %
 12 %
 18 %
 28 %

14. HOW VAT OR GST CHANGE THINGS?
BEFORE GST
AFTER GST