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BENEFITS OF GOODS AND SERVICES TAX

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Reduction in multiplicity of taxes. Mitigation of cascading/ double taxation. More efficient neutralization of taxes especially for exports. Development of common national market

BENEFITS OF GOODS AND SERVICES TAX

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BENEFITS OF GOODS AND SERVICES TAX (GST)

 

TO TRADERS

  • Reduction in multiplicity of taxes
  • Mitigation of cascading/ double taxation
  • More efficient neutralization of taxes especially for exports
  • Development of common national market
  • Simpler tax regime
  • Fewer rates and exemptions
  • Distinction between Goods & Services no longer required

 

TO CONSUMERS

  • Simpler Tax system
  • Reduction in prices of goods & services due to elimination of cascading
  • Uniform prices throughout the country
  • Transparency in taxation system
  • Increase in employment opportunities

 

WHAT IS MAIN FEATURES OF GST LAW

 

1. Taxable event

  • Tax on supply of goods or services rather than manufacture / production of goods, provision of services or sale of goods

2. Determination of nature of supply

  • Intra-State supply of goods or services - where the location of the supplier and the place of supply are in the same State
  • Inter-State supply of goods or services - where the location of the supplier and the place of supply are in different State

3. Composition Scheme

  • Provision for levy of tax on fixed rate on aggregate turnover up to a prescribed limit in a financial year (Composition scheme) without participation in ITC chain

4. Time & Value of supply
Elaborate principles devised for determining the time of supply of goods or services with following being crucial determinants with certain exceptions:

  • Date on which supplier issues invoice
  • Date on which supplier receives the payment, whichever is earlier
  • Tax is to be paid on Transaction value (TV) of supply generally i.e. the price actually paid or payable for the supply of goods or services

5. Input Tax Credit

  • ITC is available in respect of taxes paid on any supply of goods or services used or intended to be used in the course or furtherance of business (i.e. for business purposes)
  • ITC of tax paid on goods or services used for making taxable supplies by a taxable person allowed subject to four conditions:
    i) possession of invoice
    ii) Receipt of goods or services
    iii) Tax actually paid by supplier to government
    iv) Furnishing of return
    c) Full ITC allowed on capital goods in one go
    d) ITC cannot be availed after filing of return for the month of September of next Financial Year or filing of Annual Return

6. Registration

  • PAN based Registration
    i) required to be obtained for each State from where taxable supplies are being made
  • A person having multiple business verticals in a State may obtain separate registration for each business vertical
  • A person, though not liable to be registered, may take voluntary registration
  • Certain suppliers liable for registration without threshold
  • Deemed registration after three common working days from date of application unless objected to

7. Returns

  • Normal taxpayers, compositions taxpayers, Casual taxpayers, non-resident taxpayers, TDS Detector, Input service Distributors (ISDs) to file separate electronic returns with different cut-off dates
  • Annual return to be filed by 31st December of the following Financial Year along with a reconciliation statement
  • Short-filed returns not to be treated as a valid return for matching & allowing ITC and fund transfer between Centre and States

8. Payment

  • System of electronic cash ledger and electronic ITC ledger
  • Tax can be deposited by internet banking, NEFT / RTGS, debit/credit card and Over The Counter
  • Date of credit to the Govt. account in the authorized bank is the date of payment for credit in electronic cash ledger
  • Payment of Tax is made by way of the debit in the electronic cash or credit ledger
  • Cross-utilization of ITC between CGST & IGST, between SGST/UTGST & IGST allowed
  • Provision for TDS on certain entities
  • E-Commerce Operators, facilitating supplies by other suppliers, to collect Tax at source (TCS), at the time of supply, out of payments to be made to such suppliers

9. Refund

  • Time limit for refund of tax or interest is two years
  • Refund of accumulated ITC allowed in case of exports or where the credit accumulation is on account of inverted duty structure
  • Refund to be granted within 60 days from the date of receipt of complete application
  • Interest is payable if refund is not sanctioned within 60 days
  • Refund claim along with documentary evidence to be filed online without any physical interface with tax authorities
  • Immediate provisional sanction of 90% of refund claim on account of zero-rated supplies
  • Tax refund will be directly credited to the bank account of applicant

10. Miscellaneous

  • Advance ruling mechanism
  • Comprehensive transitional provisions for smooth transition to GST
  • Provision for Job work provided
  • System of GST Compliance rating provided

Anti-profiteering provision made to dis-incentivize nonpassing of price reduction benefits to consumers

 

OBJECTIVES OF GST

Goods and Service Tax (GST) is one of the most significant tax reforms introduced in the history of the Indian fiscal evolution. With a singular impact on the economic growth of the country and the way business is done in India, it is expected to achieve the following:

  • Convert India into one market by seamless flow of tax credits – today some taxes are not creditable when goods move outside an Indian State, service tax credit is not available to a trader or a services unit cannot claim credit of Value Added Tax (VAT) paid on goods
  • Multiple taxes to be replaced by singular tax making compliance easier
  • Number of tax rates to be reduced substantially making life easier and disputes lesser
  • Compliance process to become uniform due to singular IT portal where business and government agencies interact – this can also reduce human interaction and bring transparency in operations
  • Business decisions may not be driven by tax considerations as most of the taxes will be creditable, bringing in overall efficiency in business operations spurring economic growth
  • Electronic filing and online credit matching would substantially reduce non-compliance and tax frauds – this may provide significant boost to honest businesses.
BENEFITS OF GOODS AND SERVICES TAX
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