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How does GST Work? Explained in 10 Points

Destination-Based Tax: GST is a destination-based tax as against the earlier principle of origin-based taxation. The new tax regime follows a multi-stage collection mechanism wherein tax is collected at every stage and the credit of tax paid (input tax credit) at the previous stage is available as a set-off at the next stage of transaction. This helps to eliminate ‘tax on tax’ or the cascading impact of tax. GST benefits the industry through better cash flows and better working capital management. From consumer point of view, GST helps to bring down overall tax. Input Tax Credit: The biggest game changer in GST is input tax credit, where credits of input taxes paid at each stage of production or service delivery can be availed in the succeeding stages of value addition. This means that the end consumer will thus only bear the GST charged by the last point in supply chain, with set-off benefits at all the earlier stages. For example, a manufacturer's total tax on output co...
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GST : Transitional Provisions (Section 140 of CGST Act)

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CENVAT Credit that can be carried forward and allowed as Input Tax Credit [Section 140(1)] This transition provision enables a taxable person to carry forward unutilized input credit under the CENVAT Credit Rules, 2004 . The following table illustrates how a registered person other than one opting for composition scheme can carry forward the CENVAT Credit as Input Tax Credit. Particulars CGST & SGST Credit to be carried forward CENVAT Credit Relevant law CENVAT Credit Rules, 2004 Laws to be subsumed and the relevant credit Central Excise Service Tax Input Tax Credit to be carried forward •        Central Excise paid on Inputs/Capital goods •        Countervailing duty paid on Inputs/Capital goods •     Special Additional Duty paid on Inputs/Capital goods in case of manufacturers •        ...
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Applicability of GST on Services Provided in June

Goods and Services Tax (GST) has been rolled out from July 1, and most of the services attract a higher tax slab of 18 per cent compared to around 15 per cent service tax charged earlier. GST replaces service tax, excise, VAT and many other local levies. All goods and services are now classified under four tax slabs of 5, 12, 18 and 28 per cent.  However, a government official clarified GST would be levied on any bill that is generated from July 1 even if the service has been consumed prior to that, provided that no advance payment was made by the consumer as per NDTV Reports. In case billing cycle ends on June 25, invoice is generated on July 10 and payment was not made in advance. So when invoice is issued the liability is of GST because under law the date of providing of service is the date of issue of invoice. Under existing rules, service tax is levied on the date of issue of invoice or date of making of payment, whichever is earlier. Invoice for services has to be g...
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