Meaning and Scope of GST – Question Answers with CA (Chartered Accountant)

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Meaning and Scope of the Words Goods and Service under GST

Meaning and Scope of GST – Question Answers with CA (Chartered Accountant). The history of indirect tax has changed in the country. The Goods and Services Tax (GST) is being implemented on July 1, but it was laid out in the year 1999 by then Prime Minister Atal Bihari Vajpayee 18 years ago. These were advised by his Economic Advisory Board. The point to note here is that till then, neither computers nor computers were available in the country as of today, neither was the imagination of the Internet today. Still, the advice of the country’s history was changed and it was accepted. Now check “Meaning and Scope of GST – Question Answers with CA”

Meaning and Scope of GST

Mr AHello sir, Good day to you. How are you?
CAI am doing fine Mr. A, how about you?
Mr AI am fine and wanted to know about what actually GST is which everyone is talking about?
CASure, Mr. A, GST means Goods and Service tax and it is the new indirect taxation system which is being adopted in India.

 

Currently there are various types of indirect taxes like VAT, CST, Excise, Service tax, Entertainment tax, Entry tax etc which not only increase the compliance burden on a person, it also leads to double taxation, various hurdles in free flow of goods, setoff is not allowed for one tax with another i.e. you cannot take input of Service tax paid against your output VAT liability.

Hence, GST is being adopted to streamline the indirect taxation picture by eliminating various taxes and providing path for one tax in all over India.

Mr AOh, that’s great. But how the process will work in GST?
CAUnder GST, there will be 3 type of taxes i.e.

 

  • i) CGST which will be collected by Central Government
  • ii) SGST or UTGST which will be collected by State or Union Territory government respectively and
  • iii) IGST which will be levied on interstate transactions and it is managed by Central Government.
Mr AOhkey, but can you please provide more information that how the tax will be charged on invoices?
CASure.. Let us say you are selling your goods for transactional value of 100 within state. Assume the CGST rate is 9% and the SGST rate is also 9% then tax of Rs 9 (9% of Rs 100) for CGST and Rs 9 (9% of Rs 100) for SGST will be levied on your sale. You need to show CGST and SGST separately on the invoice and hence the invoice total comes to 100 + 9 + 9 = 118 Rs.
Mr AOk, and what about in case of interstate sale?
CAIn that case only IGST will be levied on your bill.
Mr AOk, but in CGST, central government takes the tax and in SGST, state government takes the tax. So who will take the tax in case of IGST?
CAThat’s a very good question.

 

Mr A. GST is a destination based tax and hence the state part of tax belongs to the state where the goods or services are lastly consumed or provided.

IGST would be broadly CGST plus SGST and shall be levied on all inter-State taxable supplies. The inter-State seller will pay IGST after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. This is how the tax will be ultimately transferred to importing state.

To understand this concept, please refer an example where Mr. X (Trader in Kerala) sold goods to Mr. Y (Trader in Kerala) and then Mr. Y sold goods Mr. Z (Trader in Gujarat) and lastly Mr. Z sold goods to Mr. A (Trader in Gujarat): 

Meaning and Scope of GST - Question Answers with CA

Here, we can find that the tax paid in Kerala will eventually migrate to Gujarat (Place of final consumption/destination).

Mr AOh, I understand. So IGST credit can be utilized against CGST and SGST liability?
CACool, I understand on what benefit your thinking as a businessman. The answer is yes and below is the summary of utilization of credit:

 

i) CGST input tax paid shall first be utilized for payment of CGST output liability and any amount remaining can be utilized towards payment of IGST.

ii) SGST input tax paid shall first be utilized for payment of SGST and any amount remaining can be utilized towards payment of IGST.

iii) IGST input tax paid shall first be utilized for payment of IGST and any amount remaining shall then be utilized first for CGST and then for SGST in that order.

  Can be Utilised for Output
Input Credit of First Second Third
CGST CGST IGST  
SGST SGST IGST  
IGST IGST CGST SGST
 Can be Utilised for OutputInput Credit ofFirstSecond ThirdCGSTCGSTIGST SGSTSGSTIGST IGSTIGSTCGSTSGST Can be Utilised for OutputInput Credit ofFirstSecond ThirdCGSTCGSTIGST SGSTSGSTIGST IGSTIGSTCGSTSGST
 Can be Utilised for Output
Input Credit ofFirstSecond Third
CGSTCGSTIGST 
SGSTSGSTIGST 
IGSTIGSTCGSTSGST
 Can be Utilised for Output
Input Credit ofFirstSecond Third
CGSTCGSTIGST 
SGSTSGSTIGST 
IGSTIGSTCGSTSGST
Mr AAmazing, so GST will streamline various taxes into one and therefore will allow setting off of the input tax paid even on interstate supplies. This can really lead to margin expansion. Cool, Many thanks Mr. A and I may take a leave now but I will be back tomorrow for my GSTbyte No. 2. J
CASure Mr. A.

Author Details

MJL & Co, Jaipur (Chartered Accountants)

Email – MJLco.jaipur@gmail.com (ph – 0141-4915113)

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Latest Comments

  1. If exporter is from Rajasthan ,and wooden pallet supplier location and delivery place is Kandla port for packing of export cargo…..which gst applicable…sgst/cgst or igst

    Reply

  2. If exporter is from Rajasthan ,and wooden pallet supplier location and delivery place is Kandla port for packing of export cargo…..which gst applicable…sgst/cgst or igst

    Reply

  3. Sir If I have purchased 10 Motorcycle tyres from Dealer & sold at another place by earning some amount.
    Exp: 10 Tyres X Rs.2000 = 20000/- & GST @ 18% = Rs.3600 Total billed by first owner = 23600/-
    So second buyer paid Rs.2360/- each tyre with GST bill/Invoice.
    He sold the tyres at another place for Rs.2500/- each tyre & get the some of Rs.1400/- profit for all 10 tyres.
    Then please advise that, how can GST applicable for second seller.

    Reply

  4. Sir If I have purchased 10 Motorcycle tyres from Dealer & sold at another place by earning some amount.
    Exp: 10 Tyres X Rs.2000 = 20000/- & GST @ 18% = Rs.3600 Total billed by first owner = 23600/-
    So second buyer paid Rs.2360/- each tyre with GST bill/Invoice.
    He sold the tyres at another place for Rs.2500/- each tyre & get the some of Rs.1400/- profit for all 10 tyres.
    Then please advise that, how can GST applicable for second seller.

    Reply

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