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GST (जीएसटी) – Goods and Services Tax in India

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Goods and Services Tax

What is GST?

The Goods and Services Tax or GST is a system of indirect tax which is generally imposed on the services offered and on goods supply. This system is multi-stage with a destination-oriented tax system that is imposed at every level. It is used for replacing various taxes that were imposed indirectly such as excise duty, VAT, services taxes, and others. Services and goods are included under a single domestic taxation law for the whole country. This scheme was introduced under one country one tax scheme. Through this regime, the GST is charged for each stage of the sale.

History of Goods and Service Tax or GST

In 1954, France was the first country which implemented the GST which was later adopted by different countries like Canada, Australia, United Kingdom, South Korea, Spain, Monaco and Vietnam among others. 

In our country, the GST or Goods and Service Tax was brought into the discussion of the Parliament in 2000 post the set up of a committee by the Prime Minister. Later, the task force which was headed under the advisor of the Finance Ministry came to the conclusion that this taxation system might improve the structure of tax in India.

Later in 2006, the Union Ministry of Finance introduced the GST which was approved on April 1, 2010, under Prime Minister, Dr. Manmohan Singh. Finally, with the help of the Constitution Amendment Bill, the GST introduction law was finally introduced in the year 2011. But 4 other supplementary GST bills were passed in the Lok Sabha and later which was approved by the Cabinet. Later, the GST amendment bill was passed on July 1, 2017.

Removal of other taxes

After the implantation of the GST that has replaced the below mentioned other central taxes:

  • Duties of excise
  • Service tax
  • Cesses and surcharge
  • Central excise duties
  • Other duties of customs
  • Other duties of excise
  • Special additional customs duty 

GST has included the below-mentioned state taxes:

  • Purchase Tax
  • Entry Tax
  • State VAT
  • Luxury Tax
  • Entertainment Tax
  • Central Sales Tax
  • Surcharges and state cesses 
  • Taxes on advertisements
  • Taxes on lottery and  gambling 

It must be noted that the taxpayers that have a yearly turnover of below Rs.20 lakh are generally exempted from the GST or Goods and Services Tax. The same cut-off for some special categories of states has been below Rs.10 lakh. GST law has also extended this option of opting for a compounding scheme and also for a threshold exemption.

GST: Objective and Meaning

The GST’s definition defines it as a tax that has actually replaced various indirect taxes, such as – service taxes, VAT, excise, and others in the country. One must note that getting a better insight into the objectives of the GST tax aids us in understanding it in a better way.

For example, one of the main objectives of the GST tax includes the following mentioned below –

  • Eliminating the effect of tax cascading: Through the GST bill, the taxes that are generally levied for the net value added portion helps in eliminating the tax on the tax regime which, in turn, also lowers the cost of the goods.
  • Inclusion of different indirect taxes: Most of the indirect key taxes which are under the central government and the state governments are included in the GST or goods and services tax. This makes it easier for the taxpayer.
  • Increasing any tax to the GDP ratio and also surplus in revenue: Additionally, it must be noted that a higher tax to the GDP ratio states a high tax collection. This is another sign of a very strong economy. A spread-out tax base and also an increase in tax compliance will likely result in much higher revenue for any country’s government using the GST services.
  • Decrease tax evasion and corruption level: The GST bill is expected to be quite transparent in any tax system and it is expected that there are very few instances for the false input credit tax. But unfortunately, this is not the case in most countries. 
  • Increase in tax compliance: The GST online intends to enhance tax compliance, generally in very unorganized and small businesses through the simplification of returns and registrations through a simpler process of filing tax on some of the GST platforms.
  • Enhancing the efficiency and overall productivity: The GST or the Goods and Services Tax in India wants the removal of some of the constraints which are related to the lengthy claim process and logistics of the input tax credit. Additionally, through subsuming this entry tax hence total productivity of any enterprise would increase.

Advantages and disadvantages of GST

The GST is supposed to be the biggest reform of tax in India. Let’s look at the advantages and disadvantages of GST:-

Below mentioned are some of the advantages of GST:-

  • The implementation of the GST has led to the inclusion of different indirect taxes under a single umbrella, thus successfully reducing the cascading effect of tax thus gradually lowering any number of the GST compliances that one needs to consider. For instance, the VAT and service tax have their own respective compliances and returns, but after the introduction of GST tax, any person needs to pay only one tax in return. This simplifies the tax process a bit.
  • Eliminating the effect of tax cascading. Through the GST bill, the taxes that are generally levied for the net value added portion helps in eliminating the tax on the tax regime which, in turn, also lowers the cost of the goods.
  • Using GST throughout the country only one tax regime needs to be followed; this actually facilitates a uniform process, tax rates and laws across India. This leads to a simpler GST process
  • All services and goods tax processes which include GSTR filing and its registration can be done online. It made the process quite simple which has made it easier for different types of start-ups to get registered using the GST services without any problems in one place. 
  • The GST bill has streamlined all the processes that are also related to some of the payments, online compliances, and other claim processes. Additionally, this also aids in the development of the unorganized sector, thus bringing all of them under the regulation of the GST or goods and service tax norms. The GST also has extended its Composition Scheme for all the small businesses.

Types of GST

The below mentioned are four different types of GST

  • SGST or State Goods and Services Tax – The SGST is the GST that is charged by the state government for intrastate services and goods transactions. Generally, this revenue is given to the state.
  • CSGT or Central Goods and Services Tax – CGST is also charged for any kind of intrastate transaction of services and goods and it is collected by the central government. This body is generally responsible for getting the revenue that is generated using this tax.
  • IGST or Integrated Goods and Services Tax – The GST is generally charged on some of the inter-state transactions of services and goods and is applied on exports and imports. It must be noted that both State and Centre governments share this revenue which is collected using the IGST according to the GST bill.
  • UGST or Union Territory Goods and Services Tax – The UGST is the tax that is taxed by the Union Territories and it is charged on any kind of transactions which is done under any Union Territory in India. It is the same as SGST for the payment rules under the GST platform and in distribution.

Transaction Type

Old Regime

New Regime

Distribution of Revenue 

Sale in any particular state (For example – Sale in West Bengal)

Excise or Service Tax + VAT + Central Excise

State GST and Central GST

It is generally shared between the Centre and the State Governments 

Sale that takes place between two or more states (or example – Sale in West Bengal to Tamil Nadu)

Excise or Service Tax + VAT + Central Excise

Integrated GST

Centre shares it with the State revenue according to the destination of the goods’ 

GST Registration

Procedure for GST Registration

According to the GST taxation laws, any business which is liable for paying any service tax, central excise or VAT needs to register for the GST or the goods and service taxes by the process mentioned in the GST online registration. Any applicant can register for GST through its GST. After the application gets submitted, the portal would generate an ARN.

Using this ARN, any applicant can easily check the status of the application. Further, applicants can also get their queries answered if required. Generally, the taxpayers will get their GST Registration Certificate as well as the GSTIN in a span of 7 days for their generation of the ARN.

GST Registration: Documents Required 

Below is the list of documents required for GST registration for completing the registration process –

A. Documents essential for completing the process of online registration for GST by an individual or sole proprietor are as follows:-

B. Documents essential for completing the process of online registration for GST by partnership firms that include LLP

  • Address proof of both partners 
  • Address proof of the place of business
  • PAN of both partners
  • Partnership deed copy
  • Bank account details
  • Board resolution (for LLP)
  • Registration certificate
  • Photographs of both the partners and all the authorized signatories
  • Appointment of authorized signatory proof

C. Documents essential for completing the process of online registration for GST by HUF

  • Address proof
  • PAN card of HUF
  • Owner’s photograph 
  • Bank account details
  • Aadhaar card of Karta
  • PAN card of Karta

D. Documents essential for completing the process of online registration for GST by any company (both foreign and Indian be it private or public)

  • Bank details
  • PAN of the company
  • Proof of address proof with the business’s principal place
  • Aadhaar card of the authorized signatories
  • PAN of the authorized signatories
  • PAN of the directors of the company
  • Address proof of the directors of the company
  • Memorandum of Association 
  • Article of Association
  • Authorized signatory appointment proof
  • Photographs of the authorized signatory
  • Photographs of the directors of the company
  • Certificate of incorporation given by Ministry of Corporate Affairs

GST Registration Fees

One must note that the government doesn’t change any fees for registering through GST if any person chooses to register for the GST portal. But there are many sites that ask for fee payment and cheat people. One should only use GST’s official portal for registering.

For professional help, the fee is charged for the help offered. One should only use trusted websites for professional help. They are much better than a CA as such a website has a team of CAs to help the person.

Logging in GST for already existing users

The existing users may easily access the GST services by just simply logging in to the official portal of GST. The portal provides easy access to the different aspects of the details of any business like orders, notices and allotted GSTIN. One must note that a person requires a username and password for logging in to GST. Below mentioned are the steps to follow details of the GST portal:-

Step 1: Go to the official website of the Goods and Service Tax portal or GST website

Step 2: Go to the right-hand corner of the website

Step 3: Select the ‘Login’ option

Step 4: Input your password, username, and the CAPTCHA code and select the ‘Login’ button

After logging in to the portal, the taxpayer would get redirected to their dashboard, where a person can find the GST credit summary, ‘File Returns’ tab, ‘Pay Tax’ tab, AATO or Annual Aggregate Turnover, notices received,  saved forms, and others.

Those who forgot their username or password can click on the ‘forgot username’ or ‘forgot password’ button below the login button on the sign-in page. On the next page, the user is asked for their personal details related to GST.

GST Rates Slabs

Overall there are 4 tax slabs of GST in India. GST rate slabs have been designed so as to make sure that essential services and food items are kept in the lower rung in the ladder of tax brackets, whereas items and services falling under luxury are kept in brackets that are higher.

Over 1,300 goods and more than 500 services have been categorized under 4 goods and service tax slabs. These slabs are – 5%, 12%, 18%, and 28% – depending on their type. But the GST on the precious metal gold does not come under these categories as it is kept at a special slab of 3%. Likewise, rough precious stones and semi-precious stones are included under the GST services slab of 0.25%.

GST Rates in India

In India, the GST rates can be categorized as follows –

Under the slab of 5% 

Goods – The goods covered under this slab are

  •  cashew nuts
  • apparels upto Rs.1000 
  • fish filler
  • agarbatti
  • court mat
  • Braille items (paper, watches, typewriters)
  • domestic LPG
  • fertilizers
  • edible oils,
  • floor covering, 
  • frozen vegetables
  • first-day covers
  • footwear up to Rs.500
  • Insulin
  • hearing aids
  • milk food for babies
  • matting
  • medicine
  • packed paneer
  • pizza bread
  • packaged food items
  • postage stamps
  • revenue stamps
  • roasted coffee beans
  • rusk
  • stent
  • sugar
  • sabudana,
  • stamp-postmarks
  • tea
  • skimmed milk.

Services – The services under 5%  slab are – 

  • road transport by radio taxis and motor cabs
  • air travel by economy class
  • supply of tour operators’ services
  • restaurants with a turnover of a maximum of Rs.50 lakh
  • sale of advertisement space
  • transport services such as airways and railways.

Under the 12% slab

Goods – The goods categorized under this slab cover the following list of goods and services

  • ayurvedic medicines
  • butter
  • apparel above Rs.1000
  • animal fat sausage
  • bhujia
  • chess boards
  • chutney
  • carrom board
  • cake server
  • raising agents and diagnostic kits
  • fruits
  • exercise books
  • frozen meat products
  • forks
  • fish knives 
  • fruit juice
  • ghee
  • glasses for corrective spectacles 
  • jam
  • jelly
  • namkeen
  • mobile phones
  • notebooks
  • pickles
  • non-AC restaurants
  • packed coconut water
  • tongs
  • sewing machine
  • tooth powder
  • work contracts.

Services – Services under this slab includes- 

  • hotels
  • guest houses
  • air travel by business class
  • inns with a tariff slab between Rs.1000 and Rs.2500 each night.

Under the 18% slab

Goods –

  • aluminum foil furniture
  • bamboo
  • biscuits
  • branded clothing
  • cakes
  • camera
  • CCTV
  • curry paste
  • corn
  • envelopes
  • footwear priced above Rs.500
  • all types of hair oil
  • ice creams
  • instant food mixes
  • mineral water
  • monitors
  • mayonnaise
  • pasta
  • paddling pools
  • printers
  • soaps
  • preserved vegetables, soups
  • salad
  • dressing
  • tissues
  • steel products
  • tampons
  • toothpaste
  • weighing machines (both non-electronic and electronic variants), etc.

Services – Services under the 18% slab – 

  • telecom services
  • IT services 
  • AC hotels that serve alcohol to patrons
  • hotels with room tariffs between Rs.2500 and Rs.5000 per night.

Under the 28% slab

Goods – 

  • Aerated water
  • after shave
  • aircrafts for personal use 
  • automobile motorcycles
  • chocolates without cocoa
  • ceramic tiles
  • deodorants
  • dishwasher
  • dye
  • paan masala
  • hair shampoo
  • paint
  • shavers
  • shaving cream
  • water heater
  • vacuum cleaners
  • washing machines.

Services – Services attracting 28% GST are-

  • 5-star hotels
  • betting and gambling in race clubs
  • hotels with room tariff of Rs.5000 and above per night
  • cinema 
  • entertainment.

GST Calculation

How to Calculate GST?

Goods and Service Tax (GST) in India is derived as a sum total of GST that is payable on reverse charge, output and inward supplies. This total is calculated individually for each month and then one has to pay the amount derived while filing GST returns on a say monthly, quarterly basis as the case may be.

As a taxpayer, one has to consider all charges and aspects like reverse charge, inter-state sales along with eligible and non-eligible ITC, exempted supplies, etc. while calculating GST. Determining the right GST amount will assist one in evading the 18% interest that will be levied in case one’s payment falls short of one’s actual obligation.

One can also take the help of the GST calculator available online with the government’s  GST portal to calculate one’s total tax liability by filling in the necessary amount mentioned under the various heads such as current ledger balance, return filing month, tax liability under RCM, etc.

GST Calculation Formula

GST Amount = (GST Rate x Original Price ) / 100

Net Price = GST Amount + Original Price.

GST Return Filing

When to File GST Returns?

A GSTR return or GST is a document that has to be duly filed by taxpayers and submitted to the concerned tax administrative authority. This document consists of details of a person’s income/sales and/or purchase/expense and hence, proves helpful in computing an entity’s tax liability.

Under the GST tax regime, registered dealers have to file the following GSTR, which includes:

  • Sales
  • Output GST
  • Purchase
  • Bank account details
  • Input tax credit

As per GST norms, all businesses having an annual aggregate turnover of over  Rs.5 crore have to necessarily file one annual return and two monthly returns, i.e., a total of 25 returns each year at the online GST platform.

Form for return

Due Date

Frequency

GSTR 1

11th of every month for which the returns are filed for the preceding month

11th of every quarter

Monthly/Quarterly

GSTR-3B

20th of every month for which the returns are filed for the preceding month

20th of every quarter

Monthly/Quarterly

GSTR-4

18th of every quarter for which the returns are filed for the preceding quarter

Quarterly

GSTR-5

20th of every month for which the returns are filed for the preceding month

Monthly

GSTR-6

13thof every month for which the returns are filed for the preceding month

Monthly

GSTR-7

10th of every month for which the returns are filed for the preceding month

Monthly

GSTR-8

10th of every month for which the returns are filed for the preceding month

Monthly

GSTR-9

31st December for every year for which the returns are filed for the preceding year 

Annually

New Compliances under GST

For easier filling of the goods and service tax or GST returns online, the following changes have been introduced. They are:-

  • E-way bills: The system for e-way has been launched for the interstate transport of goods from April 1, 2018 and the other one was introduced on April 15, 2018. Through this system, the traders, system, transporters and manufacturers can generate different e-way bills for the shipped goods. This is done to effectively check the goods at check posts. This is also done to reduce evasion of tax.
  • E-invoicing: This system of bill system generally applies to various businesses that have a yearly turnover of greater than Rs. 100 crore in the previous fiscal year. Such companies should get a new IRN or invoice reference number for their B2B transactions and must upload them on the online portal of GSTN.
  • HSN code requirements: This is compulsory for all businesses for mentioning the SAC or HSN code for all services or goods supplies on their tax invoices starting from April 1, 2021.

GST FAQs:

1. When is a business applicable for Composition Scheme under GST?

A business applicable for Composition Scheme under GST if it has a yearly turnover above Rs 20 lakhs but below Rs 75 lakhs.

2. What is the aim of Composition Scheme under GST?

The aim of Composition Scheme under GST is to aid the different businesses in reducing the taxes levied on them.

3. What is the full form of ARN?

The full form of ARN is Application Reference Number.

4. What is the use of ARN?

The ARN is used to track the status of different applications under GST.

5. What is GSTN?

GSTN is GST number which is a 15 digit code given to taxpayer.

6. Is GST compulsory for businesses with annual turnover below Rs 20 lakhs?

No, it is not compulsory for businesses with annual turnover below Rs 20 lakhs.

7. What happens if one has not filed GST after the due date?

The person will be charged at Rs 10/day for nil returns and Rs 25/day for non-nill returns.

8. What is nil return?

Nil returns means no business transaction in a particular month.

9. Is filing nil return mandatory?

Yes, filing nil return is mandatory within the due date.

10. Can I close my GST account?

Yes, you can close GST account by filing a request for the same. An ARN will be generated with which you can check its status.

GST News:

GST Collection Up By 41% in Odisha

The financial status of Odisha has brightened up. The latest GST collection data revealed that the state collected 41% more GST as compared to the previous year.

Odisha registered the GST collection of ₹3,316.55 crores in August 2021. The figure for the same month in 2020 was ₹2,348.28 crores. Among all the major states of India, Odisha ranks second in terms of the growth in GST collection for August 2021. In terms of GST collection in the current fiscal year till August, Odisha registered a figure of ₹16,977.92 crores as compared to ₹9,888,99 crores for the previous fiscal year till August 2020. The collection is commendable given the fact that most of the businesses were closed due to the lockdown imposed because of the Covid-19 pandemic.

In addition to GST, Odisha also earned a good amount of VAT through the sale of fuel and Liquor. The state accounted for the collection of ₹885.21 crores in terms of VAT. The figure for the previous year was ₹606.16 crores.

Updated Date: 14-09-2021

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