Goods and Services tax -As Indians, we all know already about direct tax and indirect tax in India and we are paying tax as per demand but on 01 July 2017 GST is implemented in India in the place of indirect tax.
Contents of this post
What is the definition of GST?
GST is an Indirect Tax that has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Service Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India. Further GST is one indirect tax for the entire country.
What is GST in India?
GST is known as the Goods and Services Tax. It is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017.
In other words, Goods and Service Tax (GST) is levied on the supply of goods and services. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.
Why should understand Goods and Services Tax?
You should understand the Goods and Service Tax because now GST is levied on the supply of goods and services. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.
What are the benefits of GST?
These are the benefits to the citizen of India
- Simpler tax system
- Uniform prices throughout the country
- Reduction in prices of Goods and Services due to the elimination of cascading
- Transparency in Taxation System
- Increase in Employment opportunities
These are the benefits to the Trade/Industry
- Simpler tax regime-fewer rates and exemptions
- Development of a common National Market
- More efficient neutralization of taxes especially for exports
- Mitigation of cascading/double taxation
- Reduction in Multiplicity of taxes
These are the benefits to the Central/State Government
- Reduction in compliance costs as no requirement of multiple record-keeping
- Uniform SGST and IGST rates to reduce the incentive for tax evasion
- Improving the overall investment climate in the country will benefit the development of states
- Boost to export/manufacturing activity, generation of more employment, leading to reduced poverty and increased GDP growth
- A unified common national market to boost Foreign Investment and the “Make in India” campaign
What is Goods and Services Tax history?
The idea of a Goods and Services Tax (GST) for India was first mooted sixteen years back, during the Prime Ministership of Shri Atal Bihari Vajpayee. Thereafter, on 28th February 2006, the then Union Finance Minister in his Budget for 2006-07 proposed that GST would be introduced from 1st April 2010.
The Empowered Committee of State Finance Ministers (EC), which had formulated the design of State VAT was requested to come up with a roadmap and structure for the GST.
Joint Working Groups of officials having representatives of the States as well as the Centre were set up to examine various aspects of the GST and draw up reports specifically on exemptions and thresholds, taxation of services, and taxation of inter-State supplies.
Based on discussions within and between it and the Central Government, the EC released its First Discussion Paper (FDP) on GST in November 2009. The FDP spelled out the features of the proposed GST and has formed the basis for the present GST laws and rules.
In March 2011, Constitution (115th Amendment) Bill, 2011 was introduced in the Lok Sabha to enable the levy of GST. However, due to a lack of political consensus, the Bill lapsed after the dissolution of the 15th Lok Sabha in August 2013.
How does GST have a long history?
On 19th December 2014, The Constitution (122nd Amendment) Bill 2014 was introduced in the Lok Sabha and was passed by Lok Sabha in May 2015. Then the Bill was taken up in Rajya Sabha and was referred to the Joint Committee of the Rajya Sabha and the Lok Sabha on 14th May 2015.
The Select Committee submitted its report on 22nd July 2015. Thereafter, the Constitutional Amendment Bill was moved on 1st August 2016 based on political consensus. The Bill was passed by the Rajya Sabha on 3rd August 2016. And by the Lok Sabha on 8th August 2016.
After ratification by the required number of State legislatures and assent of the President, the Constitutional amendment was notified as Constitution (101st Amendment) Act 2016 on 8th September 2016. The Constitutional amendment paved the way for the introduction of the Goods and Services Tax in India.
After GST Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill), these Bills were passed by the Lok Sabha on 29th March 2017.
The Rajya Sabha passed these Bills on 6th April 2017 and were then enacted as Acts on 12th April 2017. T 2015. 6 on 08.09.2016
Thereafter, State Legislatures of different States have passed respective State Goods and Services Tax Bills. After the enactment of various GST laws, GST was launched with effect on 1st July 2017 by Sh. Narendra Modi, Hon’ble Prime Minister of India in the presence of Sh.Pranab Mukherjee, the then President of India in a midnight function at the Central Hall of Parliament of India.
How does GST work?
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.
What are the objectives of GST?
Objectives Of GST
1. To increase the taxpayer base (Goods and services tax)
GST has helped in widening the tax base in India. Previously, each of the tax laws had a different threshold limit for registration based on turnover. As GST is a consolidated tax levied on both goods and services both, it has increased tax-registered businesses. Besides, the stricter laws surrounding input tax credits have helped bring certain unorganized sectors under the tax net. For example, the construction industry in India.
2. To achieve the ideology of ‘One Nation, One Tax’
GST has replaced multiple indirect taxes, which were existing under the previous tax regime. The advantage of having one single tax means every state follows the same rate for a particular product or service. Tax administration is easier with the Central Government deciding the rates and policies. Common laws can be introduced, such as e-way bills for goods transport and e-invoicing for transaction reporting. Tax compliance is also better as taxpayers are not bogged down with multiple return forms and deadlines. Overall, it’s a unified system of indirect tax compliance.
3. An improved logistics and distribution system
A single indirect tax system reduces the need for multiple documentation for the supply of goods. GST minimizes transportation cycle times, improves supply chain and turnaround time, and leads to warehouse consolidation, among other benefits. With the e-way bill system under GST, the removal of interstate checkpoints is most beneficial to the sector in improving transit and destination efficiency. Ultimately, it helps in cutting down the high logistics and warehousing costs.
4. To subsume a majority of the indirect taxes in India
India had several erstwhile indirect taxes such as service tax, Value Added Tax (VAT), Central Excise, etc., which used to be levied at multiple supply chain stages. Some taxes were governed by the states and some by the Centre. There was no unified and centralized tax on both goods and services. Hence, GST was introduced. Under GST, all the major indirect taxes were subsumed into one. It has greatly reduced the compliance burden on taxpayers and eased tax administration for the government.
5. To eliminate the cascading effect of taxes
One of the primary objectives of GST was to remove the cascading effect of taxes. Previously, due to different indirect tax laws, taxpayers could not set off the tax credits of one tax against the other. For example, the excise duties paid during manufacture could not be set off against the VAT payable during the sale. This led to a cascading effect of taxes. Under GST, the tax levy is only on the net value added at each stage of the supply chain. This has helped eliminate the cascading effect of taxes and contributed to the seamless flow of input tax credits across both goods and services.
6. To curb tax evasion
GST laws in India are far more stringent compared to any of the erstwhile indirect tax laws. Under GST, taxpayers can claim an input tax credit only on invoices uploaded by their respective suppliers. This way, the chances of claiming input tax credits on fake invoices are minimal. The introduction of e-invoicing has further reinforced this objective. Also, due to GST being a nationwide tax and having a centralized surveillance system, the clampdown on defaulters is quicker and far more efficient. Hence, GST has curbed tax evasion and minimized tax fraud from taking place to a large extent.
7. Online procedures for ease of doing business
Previously, taxpayers faced a lot of hardships dealing with different tax authorities under each tax law. Besides, while return filing was online, most of the assessment and refund procedures took place offline. Now, GST procedures are carried out almost entirely online. Everything is done with a click of a button, from registration to return filing to refunds to e-way bill generation. It has contributed to the overall ease of doing business in India and simplified taxpayer compliance to a massive extent. The government also plans to introduce a centralized portal soon for all indirect tax compliance such as e-invoicing, e-way bills, and GST returns filing.
8. To promote competitive pricing and increase consumption
Introducing GST has also led to an increase in consumption and indirect tax revenues. Due to the cascading effect of taxes under the previous regime, the prices of goods in India were higher than in global markets. Even between states, the lower VAT rates in certain states led to an imbalance of purchases in these states. Having uniform GST rates has contributed to overall competitive pricing across India and on the global front. This has hence increased consumption and led to higher revenues, which has been another important objective achieved.
Who is Eligible for Goods and Services Tax?
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 charge 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
How GST Certificate helps you?
A GST Certificate is an official document in the GST regime 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.
Types of GST Components?
The four different types of GST components 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.
Types of Goods and Services Tax 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 3% GST, 5% GST, 12% GST, 18% GST, and 28% GST. GST rates for goods and services have been changed a few times since the new tax regime was implemented in July 2017. And the rates are getting amended from time to time as types of goods and services.
How will you pay Goods and Services Tax?
Currently, the GST must be paid every month as per the liability to pay. 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 been made, a challan must be generated.
What are the New Compliances Under Goods and Services Tax?
Apart from online filing of the GST returns, the GST regime has introduced several new systems along with it.
GST introduced a centralized system of waybills by the introduction of “E-way bills”. This system was launched on 1st April 2018 for inter-state movement of goods and on 15th April 2018 for intra-state movement of goods in a staggered manner.
Under the e-way bill system, manufacturers, traders, and transporters can generate e-way bills for the goods transported from the place of their origin to their destination on a common portal with ease. Tax authorities are also benefited as this system has reduced time at check -posts and helps reduce tax evasion.
The e-invoicing system was made applicable from 1st October 2020 for businesses with an annual aggregate turnover of more than Rs.500 crore in any preceding financial years (from 2017-18). Further, from 1st January 2021, this system was extended to those with an annual aggregate turnover of more than Rs.100 crore. And further, As per notification No. 1/2022 Dated:24-02-2022, e-Invoicing is mandatory for the taxpayers with an annual turnover of more than 20 crores from 01 April 2022.
These businesses must obtain a unique invoice reference number for every business-to-business invoice by uploading it to the GSTN’s invoice registration portal. The portal verifies the correctness and genuineness of the invoice. Thereafter, it authorizes using the digital signature along with a QR code.
e-Invoicing allows interoperability of invoices and helps reduce data entry errors. It is designed to pass the invoice information directly from the IRP to the GST portal and the e-way bill portal. It will, therefore, eliminate the requirement for manual data entry while filing GSTR-1 and helps in the generation of e-way bills too.
How is GST Council relevant to GST?
Any recommendations that are made to the State and Union Government regarding any issues that are related to GST are done by the GST Council. The chairman of the GST council is the 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.
How does GSTN – Goods and Service Tax Network helps in GST?
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.
Features of GSTN
- 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
- It is responsible for handling the invoices
- It is responsible for handling the registrations
- And It is responsible for handling the payments and refunds (if any)
- It is responsible for handling different types of returns.
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.
What is GST Helpline?
Taxpayers who have any confusion 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 – email@example.com. However, it should be noted that this email ID has been discontinued.
The GST Helpline details are as follows:
- Toll-Free Phone Number 1800 1200 232
- Self Help Portal https://selfservice.gstsystem.in/
- GST Login- Safe ideas to Login GST Portal
- List of GST appeal forms- types of forms for appeal
- GST demand and recovery forms-List of GST forms
- List of GST ITC forms- Types of form GST ITC
- List of GST assessment forms- Types of assessment
- List of GST refund forms- Types of refund forms
An Accountant, GSTP, GST blogger, Website Creator, SEO Builder & Co-founder of the website https://gstportalindia.in for the help of GST Taxpayers of India. Having a perfect accounting experience of more than 10 years in a Private Ltd Company.