GST - Goods and Services Tax
GST is a multi-stage tax system which is comprehensive in nature and applied on the sale of goods and services. The main aim of this taxation system is to curb the cascading effect of other Indirect taxes and it is applicable throughout India.
What is GST & how it works?
GST stands for Goods and Services Tax. It is an Indirect tax which introduced to replacing a host of other Indirect taxes such as value added tax, service tax, purchase tax, excise duty, and so on. GST levied on the supply of certain goods and services in India. It is one tax that is applicable all over India.
Given below is how will GST works:
- Manufacturer: The manufacturer will have to pay GST on the raw material that is purchased and the value that has been added to make the product.
- Service Provider: Here, the service provider will have to pay GST on the amount that is paid for the product and the value that has been added to it. However, the tax that has been paid by the manufacturer can be reduced from the overall GST that must be paid.
- Retailer: The retailer will need to pay GST on the product that has been purchased from the distributor as well as the margin that has been added. However, the tax that has been paid by the retailer can be reduced from the overall GST that must be paid.
- Consumer: GST must be paid on the product that has been purchased.
History Of GST
On July 1st 2017, the Goods and Services Tax implemented in India. But, the process of implementing the new tax regime commenced a long time ago. In 2000, Atal Bihari Vajpayee, then Prime Minister of India, set up a committee to draft the GST law. In 2004, a task force concluded that the new tax structure should put in place to enhance the tax regime at the time.
In 2006, Finance Minister proposed the introduction of GST from 1st April 2010 and in 2011 the Constitution Amendment Bill passed to enable the introduction of the GST law. In 2012, the Standing Committee started discussions about GST, and tabled its report on GST a year later. In 2014, the new Finance Minister at the time, Arun Jaitley, reintroduced the GST bill in Parliament and passed the bill in Lok Sabha in 2015. Yet, the implementation of the law delayed as it was not passed in Rajya Sabha.
GST went live in 2016, and the amended model GST law passed in both the house. The President of India also gave assent. In 2017 the passing of 4 supplementary GST Bills in Lok Sabha as well as the approval of the same by the Cabinet. Rajya Sabha then passed 4 supplementary GST Bills and the new tax regime implemented on 1st July 2017.
Tax Laws Before the Implementation of GST
- The Centre and the State used to collect tax separately. Depending on the state, the tax regimes were different.
- Even though import tax was levied on one individual, the burden was levied on another individual. In the cases of direct tax, the taxpayer must pay the tax.
- Prior to the introduction of GST, direct and indirect taxes were present in India.
Types of GST
The four different types of GST are given below:
- Central Goods and Services Tax : CGST is charged on the intra state supply of products and services.
- State Goods and Services Tax : SGST, like CGST, is charged on the sale of products or services within a state.
- Integrated Goods and Services Tax : IGST is charged on inter-state transactions of products and services.
- Union Territory Goods and Services Tax : UTGST is levied on the supply of products and services in any of the Union Territories in the country, viz. Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh. UTGST is levied along with CGST.
Who is Eligible for GST?
The below mentioned entities and individuals must register for Goods And Services Tax:
- E-commerce aggregators
- Individuals who supply through e-commerce aggregators
- Individuals who pay tax as per the reverse change mechanism
- Agents of input service distributors and suppliers
- Non-Resident individuals who pay tax
- Businesses that have a turnover that is more than the threshold limit
- Individuals who have registered before the GST law was introduced
Registration of GST
Any company that is eligible under GST must register itself in the GST portal created by the Government of India. The registered entities will get a unique registration number called GSTIN.
It is mandatory for all Service providers, buyers, and sellers to register. A business that makes a total income of Rs.20 lakhs and more in a financial year must be required to do GST registration. It takes 2-6 working days to process.
Know the GSTIN – GST Identification Number
A 15-digit distinctive code that is provided to every taxpayer is the GSTIN. The GSTIN will be provided based on the state you live at and the PAN. Some of the main uses of GSTIN are mentioned below:
- Loans can be availed with the help of the number.
- Refunds can be claimed with the GSTIN.
- The verification process is easy with the help of the GSTIN.
- Corrections can be made.
GST Certificate
A GST Certificate is an official document that is issued by the concerned authorities for a business that has been enrolled under the GST system. Any business with an annual turnover of Rs.20 lakh or more and certain special businesses are required to be registered under this system. The GST registration certificate is issued in Form GST REG-06. If you are a registered taxpayer under this system, you can download the GST Certificate from the official GST Portal. The certificate is not issued physically. It is available in digital format only. GST Certificate contains GSTIN, Legal Name, Trade Name, Constitution of Business, Address, Date of liability, Period of Validity, Types of Registration, Particulars of Approving Authority, Signature, Details of the Approving GST officer, and Date of issue of a certificate.
GST Returns
A GST Returns is a document that contains information about the income that a taxpayer must file with the authorities. This information used to compute the taxpayer’s tax liability. Under the Goods and Services Tax, registered dealers must file their GST returns with details regarding their purchases, sales, input tax credit, and output GST. Businesses are expected to file 2 monthly returns as well as an annual return.
GST Rates
The GST Council has assigned GST rates to different goods and services. While some products can be purchased without any GST, there are others that come at 5% GST, 12% GST, 18% GST, and 28% GST. GST rates for goods and services have been changed a few time since the new tax regime was implemented in July 2017.
|
| Mobile Phone | 18% |
| Sanitizer | 18% |
| Gold Jewellery | 3% |
| Two wheeler | 28% |
| Car | 28%
|
How do I calculate GST?
Calculating the amount that needs to be paid as GST when filing your returns can be quite tedious. Several aspects and factors must be taken into consideration, such as ITC, exempted supplies, reverse charge, etc. Failure to pay the entire GST amount can see you slapped with an 18% interest on the shortfall, thereby making it necessary to ensure that you pay the right amount towards GST.
The GST Calculator makes it simple for taxpayers to calculate the amount that needs to paid as GST. You will have to enter all the required details such as the month for which you are calculating GST, the due date for filing returns for the particular month, the actual date on which the returns are filed, the tax liability for the month, the purchases that attract Reverse Charge Mechanism, the opening balance of your cash ledger as well as your credit ledger and the eligible ITC.
Here is an example showing how you can calculate your GST liability:
|
| Overall value of interstate sales | Rs.20 lakh |
| Overall value of intrastate sales | Rs.25 lakh |
| Advance received | Rs.8 lakh |
| SGST | Rs.25 lakh x 9% = Rs.2.25 lakh |
| CGST | Rs.25 lakh x 9% = Rs.2.25 lakh |
| IGST | Rs.20 lakh x 18% = Rs.3.6 lakh
Rs.8 lakh x 18% = Rs.1.44 lakh
Total = Rs.5.04 lakh |
GST Payments
Currently, the GST must be paid every month. The GSTR-1 and GSTR-3B must be filed. In the case of refunds, the relevant forms must be submitted as well. GST payments can be made both online and offline. Once the payment has made, a challan must be generated.
GST E-Way Bill
An electronic document that is generated to show proof of goods movement is the E-Way bill. You can generate the bill from the GST portal.
Advantages of GST
The following are the advantages of goods and services tax in India
- Regulation of the unorganised sector
- E-commerce operators no longer suffer from differntial treatment
- Fewer complications
- Composition scheme
- Registration process and filing of returns are simple
- Higher threshold
- Elimination of the cascading tax effect
GST Council
Any recommendations that are made to the State and Union Government regarding any issues that are related to GST is done by the GST Council. The chairman of gst council is Union Finance Minister of India. The other members of the GST Council are the Union State Minister of Revenue or Finance of all the states.
GSTN - Goods and Service Tax Network
The GSTN is the Goods and Services Tax Network which is responsible for managing the IT system concerning the GST Portal. It is a non-profit, non-government organization and is the database for the official GST Portal.
The current structure of the GST Network can be summed up as follows:
- Central Government – 24.5%
- State Governments and EC – 24.5%
- LIC Housing Finance Ltd. - 11%
- 01ICICI Bank, HDFC, NSE Strategic Investment Co., and HDFC Bank – 10% each.
Features of GSTN
The salient features of the GST Network can be listed as follows:
- Keeping the information of all the taxpayers safe and secure.
- Maintaining confidentiality of the taxpayers’ information.
- It is a trusted National Information Utility (NIU).
Functions of GSTN
The main functions of the GST Network or GSTN can be summed up as follows:
- It is responsible for handling the invoices
- It is responsible for handling the regstrations
- It is responsible for handling the payments and refunds (if any)
- It is responsible for handling different types of returns.
GST Helpline
Taxpayers who have any confusions or doubts in regard to their GST filing can get in touch with the concerned authority through the GST Helpline. Earlier, taxpayers could get in touch through the helpdesk email ID – helpdesk@gst.gov.in. However, it should be noted that this email ID has been discontinued. The GST Helpline details are as follows:
GST App
There are a handful of GST applications which have been designed to run on smartphones. Out of all the apps, there is a Government-issued application as well which is called the CBEC GST. It can be downloaded from the Google Play Store for your Android smartphone.
In addition to that, there are a host of third-party applications as well. The main aim of these applications is to help taxpayers familiarise themselves with the idea of GST and in turn, ensure that they smoothly transit to the new taxation system.
Created & Posted By Ravi Kumar
CA Article at TAXAJ
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