Goods and Services Tax (GST)

The Goods and Services Tax (GST) is a comprehensive indirect tax reform aimed at unifying India’s complex tax structure. Below is a concise summary of its major features:

One Nation, One Tax: Replaced multiple central and state taxes, such as VAT, excise duty, and service tax, ensuring a uniform tax structure and removing the cascading effect.

Dual GST Structure:

1. CGST: Collected by the Centre

1. SGST: Collected by States

1. IGST: Collected by Centre and shared with States, for inter-state and import transactions

Destination-Based Tax: This tax ensures that the tax burden falls on the end consumer by charging at the place of consumption.

Input Tax Credit (ITC): Businesses can claim credit for GST paid on inputs, reducing overall tax liability and preventing double taxation.

Applicability:

1. Applies to all goods and services except alcohol for human consumption.

1. GST on petroleum products (like petrol, diesel, etc.) to be notified later.

1. Tobacco is taxed under GST plus Central Excise.

1. Exports are zero-rated.

Threshold Exemption:

1. GST not applicable to businesses below turnover limits of Rs.20 lakh for services and Rs.40 lakh for goods (intra-state)

1. Lower thresholds (Rs.10 lakh to Rs.20 lakh) apply to special category states, except J&K, HP, and Assam.

Composition Scheme:

1. For small businesses with turnover up to Rs.1.5 crore (Rs.75 lakh for special states)

1. A fixed percentage of turnover to be paid as GST with simplified returns

Online Compliance (GSTN): GST processes like registration, return filing, and payments are done through a centralized online portal, making compliance easier.

Anti-Profiteering Measures:

1. National Anti-Profiteering Authority (NAA) ensured GST benefits reach consumers.

1. Since 1 Dec 2022, such complaints are handled by the Competition Commission of India (CCI).

Increased Transparency: Promote transparency and reduce tax evasion via digital records, e-invoicing, and return filings.

Sector-specific Exemptions: GST is exempted or taxed at reduced rates for accessibility for healthcare, education, and essential items such as food grains.

Settlement Between Centre and States:

1. Centre and States share GST revenue based on taxpayer filings.

1. Funds are transferred to ensure fair distribution from exporting to importing states and for B2C IGST collections.

Advantages of GST

The following are the advantages of goods and services tax in India:

• Elimination of the Cascading Tax Effect : The introduction of GST has removed the need for filing several tax returns.
• Regulation of the Unorganised Sector: The online compliance, payment, and claim processes are all streamlined by the GST bill.
• A Uniform Tax System:  It makes it easier for laws, procedures, and tax rates to be consistent throughout India. Businesses can lower their taxes through the GST composition scheme.
• Streamlined GST Online Process: This has greatly streamlined the procedure and allowed startups to easily register for GST services in one location.

Objectives of GST

The objectives of GST are given below:

1. One Nation, One Tax: GST replaced multiple indirect taxes, bringing uniform tax rates across states and simplifying tax administration.

1. Subsumed Multiple Taxes: Merged major indirect taxes into one unified system, reducing compliance burden.

1. Removed Cascading Tax Effect: GST eliminating double taxation at different supply chain stages by allowing input tax credit across goods and services.

1. Curbing Tax Evasion: Reduced fraud and improved compliance through strict rules, invoice matching, e-invoicing, and centralized monitoring have.

1. Widened Tax Base: Unified thresholds and stricter laws have brought more businesses, including unorganised sectors, into the tax net.

1. Ease of Doing Business: Simplified compliance for taxpayers by end-to-end online processes (registration, filing, refunds, etc.).

1. Better Logistics and Distribution: E-way bills and removal of checkpoints have sped up transport, cut costs, and improved supply chain efficiency.

1. Competitive Pricing and Higher Consumption: Reduction in prices, boosted consumption, and increase in indirect tax revenue due to uniform GST rates.

How Does GST Work?

Under the pre-GST tax system, a product is taxed multiple times at different stages, increasing the final price for the consumer. GST introduces a unified tax system where tax is applied only on the value added at each stage, and businesses can claim input tax credit. Here's a simplified illustration using apparel manufacturing with updated numbers:

Stage 1: Manufacturer

1. Buys raw materials worth Rs.600 (includes Rs.60 GST at 10%).

1. Adds Rs.60 value during manufacturing, making product value Rs.660.

1. GST on output = Rs.66 which is 10% of Rs.660).

1. Input tax credit = Rs.60, so final GST payable = Rs.6 (66 – 60).

Stage 2: Wholesaler

1. Goods purchased at Rs.660 (includes Rs.66 GST).

1. Adds Rs.60 margin, new value = Rs.720.

1. GST on final value = Rs.72 which is 10% of Rs.720.

1. Input tax credit = Rs.66, so final GST payable = Rs.6 (72 – 66).

Stage 3: Retailer

1. Purchased at Rs.720 (includes Rs.72 GST).

1. Adds Rs.60 margin, final selling price = Rs.780.

1. GST on final price = Rs.78 which is 10% of Rs.780.

1. Input tax credit = Rs.72, so final GST payable = Rs.6 (78 – 72).

Final Impact on Customer: The customer pays Rs.780 (Rs.702 + Rs.78 GST). 

Total GST collected = Rs.78. Without GST and input credit, the tax at each stage would stack up, significantly increasing the final price.

GST Registration

Here are the details mentioned about GST registration:

1. Businesses must register under GST if they are a turnover above Rs.40 lakh, Rs.20 lakh or Rs.10 lakh (as applicable).

1. Small businesses under CGST Sec 10 (Composition Scheme) have limits of Rs.1.5 crore or Rs.50 lakh.

1. Regardless of turnover, some businesses must register under GST.

1. GST registration is the process of obtaining a GSTIN (GST Identification Number).

1. It is an offense to run a business without mandatory GST registration and it attracts penalties.

1. GST registration typically takes two to six working days.

Who Should Register for GST?

The below mentioned entities and individuals must register for Goods and Services Tax:

1. Businesses with turnover above Rs.40 lakh, Rs.20 lakh, or Rs.10 lakh (as applicable)

1. Making interstate supplies

1. Casual or non-resident taxable persons

1. Supplier’s agents and input service distributors

1. Liable to pay tax under reverse charge

1. Supplying through e-commerce platforms (except under CGST Sec 9(5))

1. E-commerce aggregators (as per CGST Sec 52)

1. Liable under CGST Section 9(5)

1. Government bodies required to deduct TDS (CGST Sec 51)

1. Supplying online data services from outside India to unregistered persons in India

1. Supplying online money gaming from outside India to persons in India

GST Rates

The GST rate is the percentage of tax applied to the sale of goods or services. It plays a key role in calculating the tax payable on each transaction.

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%, 12%, 18%, and 28% GST.

Overview of GST Rate Structure in India

GST in India is structured into multiple slabs to accommodate different categories of goods and services. Here's a simplified breakdown of the key GST rates and special cases:

Standard GST Rates for Regular Taxpayers:

1. Common slabs: 0%, 5%, 12%, 18%, and 28%

1. Lesser-used rates: 0.25% and 3%

Rates for Composition Scheme Taxpayers:

1. Lower or nominal rates, such as 1.5%, 5%, or 6% on turnover

TDS and TCS under GST:

1. TDS: 2%

1. TCS: 0.5% (Earlier 1% before 9 July 2024)

GST Compensation Cess:

1. Applied on specific items like cigarettes, tobacco, aerated drinks, petrol, and motor vehicles

1. Cess rates vary from 1% to 204%, in addition to regular GST

GST Rates on Common Consumables:

1. Specific rates apply to items, such as toiletries, packaged food, electronics, etc.

1. To check rates for any product, use the HSN Code and GST Rate Finder.

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. The payments can be made both online and offline. Once the payment has been made, a challan must be generated.

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.

How do I Calculate GST?

Making sure you pay the correct amount towards GST is important since failing to do so could result in you being charged an 18% interest penalty on the shortfall. The GST Calculator makes it easy for taxpayers to determine how much GST must be paid. You must enter all necessary information for better results.

The formula to calculate GST is mentioned below:

GST amount = (Price x GST%)

Net price = Cost of the product + GST amount

Here is an example showing how you can calculate your GST liability:

What are the Goods Exempted from GST?

The following are the goods that are exempted from Goods and Services Tax payments:

GST Council

Any recommendations that are made to the State and Union Government regarding any issues that are related to Goods and Services Tax are done by the GST Council. The Chairman of this Council is the Union Finance Minister of India. The other members of the Council are the Union State Minister of Revenue or Finance of all the states.

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.

Different Types of Goods and Services Tax

There are four different components of GST such as CGST, SGST, IGST, and UTGST.

1. Central Goods and Services Tax (CGST): It is charged on the intra-state supply of products and services.
2. State Goods and Services Tax (SGST): It is charged on the sale of products or services within a state.
3. Integrated Goods and Services Tax (IGST): It is charged on inter-state transactions of products and services.
4. Union Territory Goods and Services Tax (UTGST):  Itis 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.

History of Goods and Services Tax

The GST Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017. Given below is the history of how it came into effect:

1. In 2000, Atal Bihari Vajpayee, then Prime Minister of India, set up a committee to draft the GST law.
2. In 2004, a task force concluded that the new tax structure should be put in place to enhance the tax regime at the time.
3. In 2006, Finance Minister proposed the introduction of GST from 1 April 2010 and
4. In 2011 the Constitution Amendment Bill was passed to enable the introduction of the GST law.
5. In 2012, the Standing Committee started discussions about GST, and tabled its report a year later.
6. 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.
   1. Yet, the implementation of the law was delayed as it was not passed in Rajya Sabha.
7. GST went live in 2016, and the amended model GST law was passed in both the houses. The President of India also gave assent.

In 2017, 4 supplementary GST Bills in Lok Sabha was passed and the Cabinet approved the same. Rajya Sabha then passed 4 supplementary GST Bills and the new tax regime was implemented on 1 July 2017.

Tax Laws Before GST

The following central taxes have been replaced by GST:

1. Service tax
2. Central excise duties
3. Additional duties of excise
4. Additional duty of customs
5. Duties of excise
6. Cess and surcharge

The state taxes subsumed by GST are as follows:

1. Entry tax
2. Luxury tax
3. Central sales tax
4. Purchase tax
5. State VAT
6. Entertainment tax
7. State cess and surcharges
8. Taxes on advertisements
9. Taxes on gambling and lottery

1. The Centre and the State used to collect tax separately. Depending on the state, the tax regimes were different.
2. Even though import tax was levied on one individual, the burden was levied on another individual. In the case of direct tax, the taxpayer must pay the tax.
3. Prior to the introduction of GST, direct and indirect taxes were present in India.

How to Know Your 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 are mentioned below:

1. Loans can be availed with the help of the number.
2. Refunds can be claimed.
3. The verification process is easy.
4. Corrections can be made.

Verify GST Number Online by visiting GST official Page. Enter the GSTIN mentioned on the invoice in the search box or Search by PAN and followed by captcha, Next, click ‘Enter’ to view the details.

Official 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 Goods and Services Tax 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:

Updated GST Rules and Compliance Guidelines

Alongside the online filing of goods and service tax returns, the tax framework has introduced several new protocols.

1. E-way Bills: This centralised e-way bills system commenced for inter-state movement of goods on 1 April 2018 and for intra-state movement on 15 April 2018. This system enables traders, manufacturers, and transporters to generate e-way bills for transported goods easily. It has streamlined processes for tax authorities and reduced time spent at checkpoints, thereby curbing tax evasion.
2. E-invoicing: Applicable to businesses with an annual turnover exceeding Rs. 100 crore in the previous fiscal year, the e-invoicing system mandates obtaining a unique invoice reference number for all B2B invoices. These invoices are uploaded to the GSTN's online invoice registration portal, where their accuracy and authenticity are verified. Upon approval, businesses are issued a digital signature and QR code. E-invoicing minimises data entry errors, enhances invoice interoperability, facilitates instant transfer of invoice information between IRP and the GST platform, and eliminates the need for manual filing of GSTR-1.
3. HSN Code Requirements: Starting from 1 April 2021, businesses must include their SAC/HSN code on all supplies of goods or services in tax invoices. For instance, entities with an aggregated turnover of up to Rs. 5 crore in the preceding year must specify their 4-digit HSN code on invoices, while those with turnovers exceeding Rs. 5 crore must indicate their 6-digit HSN code. Changes in the 4/6-digit HSN or SAC code should be documented under Table 12 of the GSTR-1 form.