GST Invoice and basics of Taxes associated to Indian GST Billing Software.
Medium and small enterprises are the corner stone of the Indian economic growth. The government has always taken important steps to help grow these MSME’s and create jobs for Indian youth and contributing to GDP growth. The one thing which is common in all the trading and Enterprise business or even in small business who are registered under GST are invoices.
Invoice is very important proof of sale that contains the details with regards to the goods and services supplied, quantity or value of goods, tax charged, etc. It enables the supplier to collect payment from the buyer and works as binding agreement of sale between both of them. We are going to analyze the basic things which you need to know before making an invoice.
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What is the difference between regular GST registration and composition GST registration?
There are two types of GST registration composition and regular. Those who come under regular GST they can only issue tax invoice and those who come under composition can only issue bill of supply. Regular GST registered business collect tax from their client and they are eligible for ITC. Composition scheme users do not collect tax from their clients and they are not eligible for ITC. Regular GST registered business file GST under GSTR 1 in monthly basis and quarterly basis depending on the selection of owner and GSTR 3B on quarterly basis. While composition users file GSTR 4 reports on quarterly and yearly basis. Composition users can avail benefits up to 75 lakh rupees.
What are different types of tax slabs in GST?
There are 4 types of tax slabs in GST currently which are 5%, 12%, 18% and 28%. Different products are placed in different tax slabs . GST is structured in a way that essential products such as food items and papers are placed in lower slabs and luxurious services and products are placed in higher tax slabs. This aside the tax on gold is kept at 3% and rough and precious stones are placed in 0.25% category. There are items which are placed in 0% tax category. Some examples of tax slabs and products under them are given below.
· 0 % — Milk, Eggs, Papers, Food, Grains, etc.
· 5 % — Domestic LPG, Tea, Coffee, Edible oil, etc.
· 12 % — Butter, Ghee, Processed foods, Textiles, etc.
· 18 % — Hair oil, Toothpaste, Soap, Computers, etc.
· 28 % — Air Conditioner, Fridge, Cars, Aerated drinks, etc.
What is CGST, SGST, IGST and UTGST and how they are applied in an invoice?
Taxes are applied in 3 ways in an invoice. Those are CGST/SGST, CGST/UTGST and IGST. CGST/SGST is applied when both buyer and seller belong to same state. CGST(Central Goods and Services Tax) is collected by central government and SGST (Stae Goods and Services Tax) is collected by that respective state government. Similarly CGST/UTGST is applied when both buyer and seller belong to the same union territory. UTGST(Union Territory Goods and Services Tax) is collected by that respective union territory.
IGST is applied in two cases. First is when buyer and seller belong to different state or union territory and second case is when product or service is supplied to a client who is located in Special Economic Zone. IGST is Integrated Goods and Services Tax. IGST is collected by the central government but the respective state government collect their share of taxes after taxes are collected. IGST is also applicable for any supply of Goods and Services in both cases of import into India and export from India. The breakdown of taxes in an invoice is done in following way.
Suppose A and B are two traders registered under GST. A is seller and B is buyer then
Case 1: A and B belongs to same state and A sells goods to B which comes under 18% tax slab then tax will be applied in this way,
18 % = 9 % + 9%
Total tax = CGST + SGST
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Case 2: A and B belongs to same union territory and A sells goods to B which comes under 18% tax slab then tax will be applied in this way,
18 % = 9 % + 9%
Total tax = CGST + UTGST
Case 3: A and B belongs to different states or union territories and A sells goods to B which comes under 18% tax slab then tax will be applied in this way,
18 % = 18 %
Total tax = IGST
Case 4: A supplies goods to B and B is located in SEZ (Special Economic Zone). A sells goods to B which comes under 18% tax slab then tax will be applied in this way,
18 % = 18 %
Total tax IGST
What is Input Tax Credit?
Input Tax Credit is a tax that a business pays on a purchase and that it can use to reduce it’s tax liability when it makes a sale. Let’s understand this with an example:-
Suppose there are 3 traders named A, B and C from 3 different states,
Case 1: A bought goods from B worth 5,00,000 rupees. Tax levied on those goods is 18%, then the total amount A paid to B will be 5,90,000 rupees including taxes. Here A paid 90,000 in taxes.
Case 2: Now A sells those goods to C with 10 % profit margin. Then the total amount C paid to A will be 6,49,000 in which 99,000 is tax amount which A has to pay to government.
But in Case 1 A already paid 90,000 in taxes. So he will be eligible for ITC and he will not be taxed twice. He will then only pay 9,000 to government in the form of taxes.
This is known as Input Tax Credit.
What is export invoice in GST? How do you create it?
Export invoice is created by the business for exporting goods and services outside of India. There are few types of export invoice which are explained as follows:
i. Export Under Bond or LuT without paying IGST:
This was done to encourage exports from India and to create a hassle free environment for exporters. LuT is abbreviation of Letter of Undertaking. It is basically a guarantee that a bank allows exporter to raise short term credit from a foreign branch of any other Indian bank and that bank will pay in foreign currency if that exporter fails to do so.
Bond is a financial instrument whereby the issuer of a bond is indebted to the holder of any such instrument. He is liable to pay the amount on the future date to the beholder of that bond.
ii. Export by paying GST and claiming tax refund later:
The exporter can choose to export supplies by paying IGST at the time of export and claim a refund of exports of tax paid at a later date in GSTR 3B. Amount collected from buyer is without tax.
iii. Zero Rated Supplies:
In order to give boost to Indian exporters the government under GST tax regime made all exports zero rated or tax free. It is covered in section 16 of IGST where zero rated supplies means
· Exports of goods or services or both.
· Supply of goods or services or both to a Special Economic Zone(SEZ).
These are all the basic things you need to know before making a invoice. Invoicing is also made easier by various GST invoicing or GST billing software available on internet. This software are popular among trading business as they are much easier to use and can also keep track of their data and maintain their inventory. If you are planning to go digital in your business go and have look on the internet and you will find many helpful GST billing software.
Hope this article helps all Indian small business to know how to generate the GST invoices / Bills. For any doubts contact to writer or visit the site https://www.vkcontrol.com/
