What are the 10 types of GST?

What are the 10 types of GST?

The Goods and Services Tax (GST) has become an important component of the taxation system in India. It is a single tax levied on goods and services from the producer to the final consumer group. It is necessary for the general public to understand the various structures of GST registrations so that everyone including business owners can have a clue of what to expect. This guide shall assist you comprehend the ten types of GST in plain language.

1. Central Goods and Services Tax (CGST):

CGST is a tax levied and administered by the central government on an intra-state supply which occurs when a supply is made within a state. The revenue that is collected from CGST is an avenue that is used to support the central government.

2. State Goods and Services Tax (SGST):

SGST is similar to CGST but is levied by the state government and is equally divided by the central and the state government. It also applies to intra-state sales. For example, the revenue that is generated for SGST is then utilized by the concerned state government.

3. Union Territory Goods and Services Tax (UTGST):

Like SGST, UTGST is also an integrated tax that is levied and collected in the Union Territories like Delhi, Chandigarh, etc. This is through revenue collected by the Union Territory Government.

4. Combined Goods and Service Tax (CGST) & State Goods and Service Tax (SGST):

IGST is an integrated tax that has been implemented on the supply of goods and services between different states. IGST is received by the central government and then the same is divided between the central and the state government.

5. Composition Levy

Another is the Composition Levy, whereby small businesses with turnovers of up to 1 can afford to pay GST without so much of a hassle. 5 crore rupees. Hence, instead of filing detailed returns and paying an amount of tax, as in the case of direct taxes, they are allowed to pay tax at a fixed percentage of their turnover. This also helps to minimize the paperwork and compliance aspect.

6. Reverse Charge Mechanism (RCM)

In most cases the seller is responsible for charge and payment of GST, however under the Reverse Charge Mechanism the buyer is charged and pays GST. This applies to an indicated good and service and can also apply to sale with other dealers who are not registered.

7. Input Tax Credit (ITC)

Input Tax Credit is a process where a business can offset tax on inputs against the tax on outputs in order to reduce the amount that is paid to the authorities. For instance, if you incurred GST on the purchase of raw materials for your products, you will be allowed to offset it against the GST charged on the product.

8. Mechanism of Mixed Supply and Mechanism of Composite Supply

The GST law also has provisions with regard to the distinction to be made between mixed supply and composite supply. Upselling is a mixed supply where at least two goods or services are bundled in a single price, but each can be sold individually. Composite supply refers to a situation where the supply is a combination of goods or services that are inextricable and are usually supplied together, and one of them is a principal supply.

9. Exempt Goods and Services

Some products and services are within the GST zero-rated category, which means they are not subjected to the tax. This means that the purchase of these items is exempted from the payment of GST. For instance, necessities such as fresh produce, personal care, health care facilities, and educational institutions. Certain categories of businesses that are only involved in the sale of goods and services that are excluded from GST do not require to register under it.

10. Zero-Rated Supply

It is important to note that zero-rated supplies do not mean they are exempt supplies. Although these goods and services are exempted from the charge of GST, the supplier is allowed to recover the GST charged on the inputs. This is normally used in cases of exportation and supply of goods to Special Economic Zones (SEZs).

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