How GST Will Work
The idea of Goods and Services Tax (GST) also known as Value Added Tax (VAT) is a tax on each financial contribute in the distribution chain. The taxable event is ‘supply of goods’ and ‘supply of services’. Any transmit of right to utilize goods will comprise supply of goods, and, any supply not engaging goods will treat as supply of service. On the other hand, the tax is exercised on the value-added component of the supply. This is accomplished by working tax on the full fundamental value of the goods or service and giving set off/credit of tax undergo at previous stage, identified as input stage, to keep away from cascading effect. Thus, the entire supply chain up to final consumer gets taxed with in-built mechanism of input stage credit. In this system, the final consumer ends up bearing the full burden of tax without any set off benefit.
The GST can be categorized in the following segments for better understanding.
Charging Tax:
The dealers including (Manufacturers, Wholesalers and Retailers and Service Providers) registered under GST need to charge GST on goods and services delivered to customers at the specified rate of tax. The GST payable is comprised in the price borne by the purchaser of the goods and the service buyer. The supplier including Seller and service provider should deposit this GST amount to the Government.
Getting Credit of GST:
If the recipient of goods or services belongs to a registered dealer (Manufacturers, Wholesalers and Retailers and Service Providers) and has got an appropriate tax invoice then he can claim a credit for the payment of GST amount. This “input tax credit” is setoff against any GST (Out Put), charged on goods and services by the dealer to his customers.
Ultimate Burden of Tax on Last Customer:
As the last and final consumer of the goods and services obtains no credit for the GST paid to the sellers or service providers, the ultimate burden of the tax drop to him.
Registration:
Dealers including the suppliers, manufacturers, service providers, wholesalers and retailers must be register for GST falling which he normally unable to charge GST and claim credit for the GST he pays. Besides he can not also issue a tax invoice.
Tax Period:
The tax period should be calculated by the respective law and normally for monthly and/or quarterly. The concerned dealer has to deposit the tax on a particular tax period applicable to him if his output credit is more than the input credit after considering the opening balance, if any, of the input credit.
Refunds:
The dealer is entitled to get refund subject to the provisions of law applicable in this respect if the input credit of a dealer is more than the output credit for a tax period. Depending on the provision of law the excess amount need to be brought forward to next period or should be refunded with immediate effect.
Exempted Goods and Services:
Some particular goods and services may be marked as exempted goods and services and the input credit should not be claimed on the GST paid for purchasing the raw material in this regard or GST paid on services used for providing such goods and services.
Zero Rated Goods and Services:
Normally, export of goods and services treated as zero-rated and the GST paid by the exporters of these goods and services is refunded in this regard. This is the fundamental distinction between Zero rated and exempted goods and services.
Tax Invoice:
Tax invoice is the most vital & basic document in the GST. A dealer registered under GST can issue a tax invoice and with that invoice the credit (Input) can be claimed. Usually a tax invoice should includes the name of supplying dealer, his tax identification nos., address and tax invoice nos. coupled with the name and address of the purchasing dealer, his tax identification nos., address and description of goods sold or service provided.
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