5 Interview Questions About GST You Need To Know
As you know, a major tax reform has been implemented in India from 1 July 2017. The Goods and Service Tax (GST) has impacted almost every earning person in the country, and has been a subject of discussion for many months.
If you are going for an interview you may be tested for your general knowledge, and this means you may be asked about GST. Are you ready to answer these basic GST questions? Find out.
What is GST?
GST is a tax on consumption of goods and services, which is a replacement for certain service taxes, excise duties, customs duties, VAT, entertainment taxes, etc. GST has been implemented after many years of planning by the government, with the purpose of unifying many taxes into one for better implementation.
This is an indirect tax, meaning it is collected from the customer and deposited by the seller to the government. Only businesses earning below 20 lakh rupees per annum (10 lakh rupees in some states) are liable to pay GST. However, there are some exceptions to this rule, such as some goods that are fully exempt from GST, some which have to register for GST even if their earnings are below this limit, etc.
What is Input Tax Credit?
One of the major changes under the GST is the concept of Input Tax Credit (ITC). As a vendor you may have purchased some input goods and services from another vendor. When doing so you have already paid some amount as GST. Under the ITC system, when you then go on to sell your product, you can deduct the GST already paid from the GST value for the final product.
For example, you sell a product for Rs 1000, which attracts a GST of Rs 180. But you have paid Rs 100 as GST when buying raw materials. This amount can be claimed as ITC (based on proper documentation) and the GST on your product will go down to Rs 80.
Which goods are exempt under GST?
The government has kept some items outside the scope of GST. This means that any sale of these products, no matter what the value, is not taxable under GST.
A few of these items are – cereals, unprocessed fruits and vegetables, unprocessed meats, handloom items, books, raw silk and jute, agricultural implements, postal services, stamp paper, hearing aids, contraceptives, certain cultural programmes, highway tolls, etc.
Some items, like petroleum and alcohol, are neither under GST nor exempt. These are taxable exactly as before with no change so far.
The exempted items are considered to be of mass consumption and are basic needs, therefore have been kept outside GST
What is the difference between CGST and SGST and IGST?
GST has been discussed for a long time by the governments (central and states) because the taxes it replaces were a mix of central and state taxes. For instance, Service Tax was collected by the central government, while the state governments collected tax on the sale of goods.
To maintain the autonomy of the states, under India’s federal structure of government, there are 3 kinds of GST – Central GST (CGST), State GST (SGST), and Integrated GST (IGST).
On most items there is a CGST and SGST, equally divided. IGST come in when there is inter-state supply/sale of goods and services, i.e. when something is made in one state and sold in another.
The legislature in fact had to amend the constitution of the country to accommodate GST. The 101st amendment allows the centre and states to simultaneously collect taxes.
What will be the benefits of GST?
The first and major benefit is that a common national GST makes the national market uniform and more competitive. This means that the same goods and services will cost the same across the country.
Secondly, by having a uniform tax that is collected under a clear federal structure, monitoring tax collection will be more efficient, and tax evasion will become more difficult.
Thirdly, by introducing concepts like ITC, the overall tax collected will be lesser on a good or service (because duplicate tax payments will be removed). This should bring the cost down on many goods, which will be a relief for the public.
For similar interview questions, read our article on Budget questions at this link.
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