SignatizeWhat is GST and How it Works?1
GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. GST paid on Purchase can be adjusted against GST collected on Sales and the balance needs to be paid to the Government.
For example, A Retailer purchased plywood from a Manufacturer worth INR 1,00,000 and paid GST @18% of INR 18,000 (ITC). Then he sold plywood (after adding a 20% margin) to the customer at INR 1,20,000 and collected GST @18% of INR 21,600 (Output). Retailers will pay INR 3,600 to the government as GST ( Output – ITC ). The retailer has to pay GST on the profit margin that he has added while selling Plywood to customers. The retailer has added a profit margin of INR 20,000 and has paid GST of INR 3,600 (@18% on Profit added).
GST has replaced many indirect taxes that were previously levied by both the Central and State Governments in India. GST is a comprehensive tax that is levied on almost all goods and services, except for a few exempted items. The tax is levied at different rates, which are determined based on the type of good or service.
In India, GST is administered by the GST Council, which is chaired by the Union Finance Minister and comprises the Finance Ministers of all the States and Union Territories. The Council is responsible for making decisions on issues such as the rates of tax, the threshold for registration, and the division of tax revenue between the Central and State Governments.
The State Government charges the Central Government and SGST charges CGST on all transactions done within the State. IGST is charged and shared between Governments and levied on all transactions done with other States or outside India.
