What is Payment of Tax under GST

Posted on 10 June 2022 Category : GST terms

Meaning of term Payment of Tax under GST

The details about Payment of Tax under GST are explained here.

Payment Committee

Overview

The GST Council, appointed by the government of India, has an uphill task of setting the rates so that the tax revenues of both the center and state are not affected. The first step towards decoding the rates under GST was to decide on the revenue neutral rate (RNR). Revenue neutral rate is calculated on the basis of total revenue desired and the total consumption expenditure of the country.

The Subramanian committee studied three different approaches in order to figure out the revenue neutral rate. According to the recommendation from the Subramanian committee, the revenue neutral rate should be fixed around 18%. Currently, there are four different tax rates expected under GST depending on the type of good/service. The four rates are 5%, 12%, 18%, and 28%.

There is a significant change in the calculation of tax under GST. CGST, SGST, IGST are the three new terms which are introduced under the new tax laws. CGST refers to Central Goods and Service Tax, SGST refers to State Goods and Service Tax, and IGST is the Integrated Goods and Service tax, which would be charged on the inter-state goods/services. Goods/services sold or resold within the state would be liable to pay only CGST and SGST.

Payment of Tax under GST

Currently, companies pay VAT tax on a monthly/quarterly basis depending on the state and their turnover. CST is paid when crossing state borders and it is not allowed as input tax credit under the current tax laws. Excise duty is also levied on the capital goods.

GST would subsume all the above-mentioned taxes. Tax payment would be due at the time of supply of goods under GST. As per the updated GST model law “Every deposit made towards tax, interest, penalty, fee or any other amount by a taxable person by internet banking or by using credit/debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by any other mode, subject to such conditions and restrictions as may be prescribed in this behalf, shall be credited to the electronic cash ledger of such person to be maintained in the manner as may be prescribed”. It states that the taxpayer can pay the tax due through electronic modes and it will be automatically debited to his electronic cash ledger.

Electronic cash ledger, electronic input tax credit ledger, and tax liability ledger have to be maintained by each person registered under GST.

Electronic cash ledgers will record data of tax, interest, penalty, fees paid and payment under CGST, SGST, and IGST. Details of the input tax credit available under all heads would be available in the Electronic Input Tax credit ledger. Tax liability ledger is to be also maintained electronically for any outstanding liability arising out of the regular return, notices, and penalties.

Credit available under the electronic input tax credit ledger can be utilized in the following ways:

1. Fulfilment of liability arising due to a regular return under GST.

2. Credit reversed due to a mismatch in invoice or amount of credit.

3. Payment of any liability which arose due to receipt of demand notices.

Input tax credit not claimed for up to one year from the date when tax invoice was raised shall be considered as expired.

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