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What is GST?

The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. It has replaced a complex system of multiple indirect taxes and aims to simplify the taxation structure, promote transparency, and eliminate the cascading effect of taxes.

Key Components of Indian GST:

Central Goods and Services Tax (CGST):

CGST is the portion of GST that is collected by the Central Government on intra-state supplies of goods and services.

The revenue collected under CGST goes to the central government.

State Goods and Services Tax (SGST):

SGST is the state-level counterpart of CGST and is collected by the State Government.

It is applicable on intra-state transactions, and the revenue generated is retained by the respective state.

Integrated Goods and Services Tax (IGST):

IGST is applicable on inter-state supplies of goods and services.

It is collected by the Central Government, and the revenue is apportioned between the center and the destination state.

GST Calculation Formula:

The formula for calculating GST is straightforward and involves applying the GST rate on the taxable value of the goods or services. The formula is as follows:

GST Amount = (Taxable Value × GST Rate) / 100

The total amount payable by the consumer is the sum of the taxable value and the GST amount.

Frequently Asked Questions (FAQs):

Q1: What is the GST Rate in India?

A1: The GST rates in India vary depending on the type of goods or services. There are four main GST rates: 5%, 12%, 18%, and 28%.

Q2: How is IGST Calculated for Inter-State Transactions?

A2: For inter-state transactions, the IGST rate is applied to the taxable value. The total IGST collected is then divided between the Central and State Governments.

Q3: Can I Claim Input Tax Credit (ITC) under GST?

A3: Yes, businesses can claim Input Tax Credit for the GST paid on purchases. This helps in avoiding the cascading effect of taxes.

Q4: What is the Composition Scheme under GST?

A4: The Composition Scheme is designed for small businesses with a turnover below a specified limit. They can pay a fixed percentage of their turnover as GST and are subject to lower compliance requirements.

Q5: Is GST Applicable on Exports?

A5: No, exports are considered as zero-rated supplies under GST. This means that the goods or services exported are not subject to GST, but businesses can claim a refund for the input taxes paid.

Q6: How Often Should GST Returns be Filed?

A6: GST returns need to be filed monthly, quarterly, or annually, depending on the type of business and its turnover. Regular compliance is essential to avoid penalties.