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u ACCOUNTING PROCESS : SUBSIDIARY BOOKS, LEDGER AND TRIAL BALANCE
I-6
CONTENTS
CHAPTER 12
u COMPUTERIZED ACCOUNTING SYSTEM
PREVIOUS YEAR PAPERS MARCH, 2021 B.COM. (HONS.), CBCS MARCH, 2022 B.COM. (HONS.), CBCS
Page
105
120 127
CHAPTER
10
ACCOUNTING FOR GOODS AND SERVICES TAX
Learning Objectives
After studying this chapter, the learners will be able to understand:
Meaning of Goods and Services Tax Major Defects in the Earlier Structure of Indirect Tax Objectives and Advantages of Goods and Services Tax Characteristics of Goods and Services Taxes Legal Provisions Regarding Alcoholic Liquor, Tobacco Products and Petroleum Products Categories of Goods and Services Tax Meanings of Goods, Services and Supply Meaning of Intra-State Supply and Inter-State Supply Composition Scheme Levy or Charging of GST Accounting Treatment of GST Set-off of Input GST (i.e. Manner and Order of Utilisation of Input Tax Credit)
In India, Goods and Services Tax, (in short, GST), came into effect on July 1, 2017. Goods and Services Tax was introduced to avoid the cascading effect of indirect tax. GST Council was constituted to fix the rates of Goods and Services Tax. Union Finance Minister is the Chairman of the GST Council. Other members of the GST Councils are: (i) Union Minister of State-in-charge of Revenue or Finance, and (ii) Minister-in-charge of Finance or Taxation or any other minister nominated by each state Government and Union Territory.
MEANING OF GOODS AND SERVICES TAX
As per Article 366 (12A) of the Constitution of India, Goods and Services Tax means a tax on supply of goods or services, or both, except taxes on supply of alcoholic liquor for human consumption. For the time being, GST is not levied on petroleum products.
10.1
TAXMANN®
10.2
ACCOUNTING FOR GOODS AND SERVICES TAX
It is an indirect tax levied on supply of goods and services, except on exempted goods and services. The word used in Article 366(12A) is ‘supply’ and not ‘sale’. Thus, stock transfers, branch transfers will also get covered under GST net. GST is a consumption or destination based tax. It is payable in the State in which goods and services are finally consumed. Most of the indirect taxes have merged into Goods and Services Tax. States can levy tax on sale, within the state of alcoholic liquor for human consumption and on petroleum products. Every registered person/tax payer who makes supply of goods or services or both which were leviable to tax and his aggregate turnover in a financial year exceeds the prescribed limit is required to register himself in the State or Union Territory where he makes a taxable supply. Goods and Service Tax is chargeable by a registered person/tax payer at the prescribed rates until goods and/or services reach their final destination, i.e. the consumer. After reaching the final destination, i.e., the consumer, they are not further supplied.
Following were the major defects in the earlier structure of indirect taxes: 1. Central Sales Tax was payable for every movement of goods from one state to another. Even in case of stock transfers and branch transfers, there was incident of tax and input tax credit was not fully available. (Note: Input tax credit has been explained later in this chapter). Thus, cascading effect of taxes could not be avoided due to Central Sales Tax. 2. Millions of man-hours and truck-hours used to be lost at check costs. 3. The Central Government could not impose tax on goods beyond manufacturing level. Central Sales Tax was collected by the Central Government and retained by the State Government only.
1. To make tax rate uniform throughout the country: Only of the main objective of GST is to have uniformity of indirect tax rates throughout the country. GST rates are same throughout the country. Earlier there were different rates of Sales Tax/Value Added Tax in the States. Its motto is One Nation, One Market. The main objective or advantage of GST is single tax structure right the manufacturing.
