3 basics of GST (Goods and Service Tax)
AbhiRa | On 29, Nov 2017
The Government of India has rolled out a new taxation system from 1st of July 2017 and since then there has been a lot of confusion regarding the new law. As an introduction to GST this blog will answer 3 basic questions and simultaneously give fundamental information regarding GST which everyone needs to know about.
1) What is GST?
GST is a consumption based indirect tax. It is a value addition tax levied on manufacturing, sales and consumption of goods and services. Basically the government collects taxes on the purchase of raw materials, sale of finished goods and services, from various middlemen when they make sale and from the retailer when the final purchase is made by the consumer. Only the tax paid on final consumption which is paid by the consumers will be the tax which will be utilised by the government the rest of the tax is paid back to the businessmen in the form of input tax credit.
2) Who needs to pay GST?
GST needs to be paid by every Manufacturer/Trader/Business that had an Annual turnover of ₹20 Lakhs in the preceding financial year. Every trader who has a annual turnover of ₹10 Lakhs or more is liable to pay GST in the special category states of Manipur, Meghalaya, Mizoram, Arunachal Pradesh, Assam, Nagaland, Jammu Kashmir(once it gets applicable), Sikkim, Himachal Pradesh, Uttarakhand, Tripura.
3) How does GST works? /What is Electronic Cash Ledger (ECL)?
Electronic Cash Ledger (ECL) is the basic component of GST. Every registered trader needs to maintain an Electronic Cash Ledger with the GST portal. ECL is like a mobile wallet in which you can transfer money through internet banking, debit/credit card, RTGS, NEFT and other prescribed modes in order to pay GST. One can even claim and avail for Input Tax Credit (ITC) through ECL.
This was a blog post introducing one to the basics of GST. Future blogs will explain other aspects and concepts of GST in detail.