GST refers to the goods & services tax. It is called the largest indirect tax reform of the country. This law has replaced many indirect taxes that previously existed in India. The History of GST goes back years ago in 2006 when the then finance minister of our country proposed the idea of introducing it. GST is implemented on 1st July 2017. It is more transparent and self-policing tax regime that also helps to boost the economic growth of a country.
GST is basically an indirect text to be imposed on sale, manufacture, consumption of goods and services. It is a single text that is to be imposed on the supply of goods and services that is supplied from suppliers to the consumers. With the establishment of this new Jurisdiction. India has become a unified market with one indirect tax only.
GST has become a good advantage for consumption as it lessens the effect of the older tax regime. It also reduces the overall tax burden and also transparent to the consumer. Goods & services tax in India is a comprehensive, Multistage, destination-based tax that is imposed on every value addition.
There are multiple changes of hands in supplying a product from manufacturers to the suppliers and then to the consumer.
- Buying a Raw Material
- Production and Manufacturing of that raw material.
- Warehousing of the finished good.
- After that selling to the wholesaler.
- Sale the product to the retailer.
- At last sale to the consumer.
Let us take an example of Chips. The manufacturers first buy the potatoes and other materials required. The value of the inputs increases when potatoes and other ingredients are added and baked into chips.
The manufacturers then sell the chips to the warehousing agent who packs large quantities of chips and labels it. That is value addition after which the warehouse sells it to the retailer. The retailer packages the chips in smaller quantities and increases its value by marketing. GST is imposed at each stage of value addition to achieve the final sale to the end customer.
Imagine goods are manufacture in Delhi and are a sale le to the final consumer in Uttrakhand. Since Goods & Services Tax is imposed at the point of consumption. So, the entire tax revenue will go Uttrakhand and not Delhi.
History of Goods and Services Tax
In 2006-7 the then Union finance minister proposed the Idea of GST in his budget speech. The first discussion paper was introduced in November 2009 after a discussion between the committee of Finance Ministers and central government. The paper then became the medium of all future discussions On GST.
The 122nd constitutional amendment introduces in the 16the Lok Sabha to introduce a new institutional mechanism to ensure that decisions for structure, design, operations of GST are taken jointly by the center and stage. After introduced in December 2014, the bill passed on May 2015 by Lok Sabha. The bill submitted in July by Rajya Sabha and also passed in Rajya Sabha with certain alterations and after that in Lok Sabha. The bill receives the assent of the president on the 8th of September after being accepted by the required number of state, It is approved as the constitution act according to the 101st Amendment finally on 16th September 2016.
Components of GST
Since GST is a tax based on a destination like an end-user consuming a tax are liable to pay the goods and services tax. The Tax will be paid by the state who will receive the goods and services. The state that manufactures the goods & services will not have to pay the Tax. In the case of Exports, the seller of the goods and services is free from paying the tax. GST removes the bads effect of tax i.e. tax on tax and that’s exactly where the idea of CGST, IGST, and SGST came into the picture.
CGST, SGST, and IGST are the components of GST. Earlier there were many taxes impose such as Central Excise, service tax, and state VAT, etc. Under GST there is just one tax, Now GST is categorized into CGST, SGST or IGST depending on whether the transaction is within the same state or out of state.
What determines CGST, SGST AND IGST are applicable?
To know whether CGST ( Central Goods & Services Tax), SGST ( State
Goods & Services Tax ) and IGST (Integrated Goods & Services Tax) is
applicable you first have to know if the transaction is intra-state or inter-state supply. Intra-state supply of Goods & Services Intra-state supply of Goods & Services when the location of the supplier and location of buyer are in the same state. In that case, a seller has to collect both CGST and SGST from the buyer. The CGST gets a posit to the central government whereas SGST gets a deposit to the state government.·
Inter-state supply of Goods & Services
Inter-state supply of goods & Services is when the location of the supplier and location of buyer are in different states. The transaction is as an interstate transaction when the supply of goods & services are made. In that case, the seller has to collect GST from the buyer.
What is Central Goods and Services Tax (CGST)?
Under GST, CGST is a Tax imposed by Central Government on Goods &
Services within a common state also known as intra-state supplies. It is governed by the CGST Act. on the other hand, SGST will also be imposed on the same intranet supplies but it will be governed by the State Government.
This means that both the central and state government is ready to impose their acts with a suitable proportion for revenue sharing between them. However, Taxes impose on all intra-state supply will not be exceeding 14% each that is mention in Section 8 of the GST Act.
What is State Goods & Services Tax (SGST)?
SGST is a Tax impose on Intra-state supplies of both Goods & Services by State The government in the same way CGST is a Tax impose on Goods & services supply in the same state but will be governed by the Central government.
Let us take an example of CGST and SGST
Suppose Shivam is a dealer in Delhi who sell his goods to Saurabh who is in Maharashtra worth Rs 10000. GST rate is 18% Comprising of CGST and SGST with a rate of 9% Respectively. Then, in that case, the dealer collects Rs 1800 in which 900 will go to the Central government and 900 will go to Kerala Government.
What are Integrated Goods & Services (IGST)?
Under GST, IGST is a tax imposed on Goods & Services that are supply at the inter-state level and will be governed by the IGST Act. IGST will be applicable in both cases whether the importing of Goods & services in India and exporting of Goods & Services out of India.
Example Suppose Shivam is a dealer in Delhi who sell Goods & Services to the supplier in Maharashtra worth Rs. 10,000. GST rate is 18% comprising of 18% IGST. In that case, the dealer will charge Rs. 1800 as IGST.
Why split into SGST, CGST, and IGST?
India is a Confederate country Where both central and state governments have powers to impose and collect taxes. Both Central and State governments have different jobs to perform different responsibilities as per the constitution. The three types of tax structure are implemented to help the payers of tax to take the credit against each other.
Let’s look at how CGST, SGST, and IGST is imposed with the help of an example.
Suppose Manufacturer A from Delhi Sold goods worth Rs. 10,000 to Manufacturer B in Delhi. Manufacturer B sells further to Manufacturer C in Maharashtra for Rs. 16,000 Manufacturer C finally sells to end-user D in Maharashtra for Rs. 30,000. Since A is selling to B in Delhi itself so it is an intra-state supply so SGST imposes will be 9% and CGST impose by 9%.
B in Delhi is selling to C in Maharashtra so it is an inter-state supply IGST will be imposed 9% + 9% = 18% Manufacturer C is selling to End User D in Maharashtra itself so CGST 9% and SGST 9% will be applied.
Who is Liable to pay GST?
As GST is a consumption-based tax. The end consumer will pay GST. But for
businesses, it would be compulsory to collect GST from consumer and pay to the Government. Consequently, businessmen will impose GST tax on the consumer in addition to the cost of products. As soon as the GST is Collect the businesses are required to submit the GST return each month and suspend the GST tax collect before the 20th of Next Month.
What is the difference between Goods and Services Tax & Income Tax?
GST is basically a Consumption-based tax. It applies to a person engaged in business and his annual turnover exceeds more than Rs. 40 lakhs is considered a normal taxable person.
It applies to the consumers who purchase goods & services at the same rate in India. For example, vegetable do not rely under GST on the other hand Televisions will attract 16% GST Therefore, any person buying a TV whether a poor or rich he will charge GST 16% but in case of vegetables neither a rich nor a poor will be charged GST.
Whereas, income tax is a tax imposed on the income of a person. When a person is earning more than 2.5 lakhs annually he is liable to pay income tax and can do ITR filling. On the contrary, if a person is doesn’t have any income or income less than 2.5 lakhs then there is no need to pay income tax. Income tax is only payable when the income of a person is above a certain limit that is fixed by the Government.
Need for GST in India?
In today’s world, GST (Goods & Services Tax ) is taking a significant step to make changes in the indirect taxation system in India. Previously, Nation was dealing with the trouble of double taxation system, taxable events, cascading, classification issue, etc but combining various state and central taxes into a single tax help the country to get rid of all of them.
Gst has brought a uniform tax system in all states whereas the VAT rates differ from state to state. VAT ( Value added Tax): A value-added tax is a consumption tax placed on the products in which values are added in each stage of the supply chain starting from the production to the sale of a product.
The amount of VAT what a customer pays depends on the cost of the product. It is used by 160 countries all around the world. Value-added taxation is based on the consumption of a consumer and not based on their income. It is stated that income tax will impose more on higher-level earners where VAT will apply equally to all.
History of VAT
Value-added tax is a new tax design by two people in the early 20th century independently A German businessman Wilhelm von Siemens, VAT was a way to resolve cascading problems that arose in implementing sales taxes and turnover taxes. To an American Thomas S Adams, it was a better version of corporate income taxes. The VAT was implemented by the government largely to improve sales. Many countries especially European countries have used VAT to reduce and eliminate other taxes.
Many European countries have enacted it in the 1960s and 1970s. Other countries adopted it after that. VAT expert from Maastricht University in the Netherlands said it the most important event in the evolution of tax structure in the last of the 20th century. Police makers of us found it tempting to consider VAT but no one got the courage to call it by a real name ” destination-based tax flow that is proposed by a house speaker Paul Ryan and Ways and means committee chair Kevin Brady in 2016.
VATs are embedded in Ryan’s ”business consumption tax”,” fair and flat tax,
Republican Senator Ted Cruz’s ”Business flat tax and ” 2012 Republican presidential candidate Herman Cain’s ”9-9-9” proposal. They all viewed the VAT for three reasons creates few negative economic incentives, it raises lots of money and its administratively feasible.
Impact of GST on the Indian Economy?
A nation’s competitiveness in foreign markets will increase the lower
cost of the transaction.
Boost in the foreign investment and Make in India campaign also
created a unified common national market GST will add to the government revenues by expanding the tax base. Boosting factor to manufacturing activity and export and leads to the growth of the country.
The transparency of the system will be more as the customers know
how much taxes they are a charge.
Reducing Poverty in the country by generating more employment SGST and CGST rates are Constant that reduce the incentive for tax
What is the Impact of GST on Consumers?
Due to the elimination of cascading it reduces the prices of goods and
services Prices of goods & services remain constant throughout the country.
Transparent taxation system.
Simple Tax system
Employment opportunities increase.
What is the Impact of GST on Traders?
Simple tax rule. A common national market is develop.
Neutralization of Taxes efficiently and effectively especially for exports. Fewer rates.
No need for the distinction between goods & services
Multi Taxes are reduced.
Get Your GST Certificate within *7 Days. Call: +91 8586806283.
Advantages of GST
- Wider the tax base, lower the tax rates: The number of taxes and duties are imposed on the item when it is production state to when it is consumed. These are imposed in the form of VAT, excise duty, service tax, etc. The total of these taxes is around 35 to 40% while the rate of GST does not exceed 16 to 18%. This is one of the important aspects of introducing GST.
- Resolution of classification related disputes: One major thing to do is the classification of goods & services whether the particular item/activity is goods for which excise tax is imposed or services for which service tax is imposed. All these problems came to an end after the implementation of GST.
- Removing cascading effects: GST plays an important role in removing the cascading effect of tax that imposes earlier.
Let us consider this with the help of an example.
Suppose a consultant if offering his services for Rs. 50,000 and charged a
service tax of 15% i.e. Rs. 7500. After that, he will be going to buy office supplies for Rs 20000 and has to Pay 5% Tax as VAT i.e. Rs. 1000. In total, he has to pay Rs 8500 without getting any deduction of Rs. 1000 as
This was before GST was imposed now, Let’s see what amount does the consultant has to pay under the GST regime.
GST imposed on services of Rs. 50,000 will be no more than 18%. Therefore,
let’s say GST of 18% will be charged i.e Rs. 9000. 5% GST imposed on office supplies will be deducted. Thus, the consultant only has to pay an amount of Rs. 8000.
- Reduction in duplicity of information: In the VAT structure, the Same
information is stored in various places for the same goods & services. As result duplicity of information increases because the information is stored in various places. This ultimately results in info inefficient utilization of the nation’s resources. On the contrary, in GST structure it is vice versa.
- Unorganized sector regulations under GST
Regulations with continuous accountability of unregulated and unorganized sectors like textile and construction industries are created.
- Ease of doing business
With the help of GST difficulties in doing business is reduced. Earlier companies faced problems concerning VAT registration, Dealing with tax authorities, etc. The benefits of GST has companies to carry out business with ease.
Disadvantages of GST
- Common National Market
GST helps in creating a common national market and facilitates in eliminating economic distortion. It led to a uniform tax law among different sectors in indirect taxes.
- Tackling corruption: The taxpayers can directly make payments without interacting with tax authorities. A mechanism has been developed to match the invoices of the supplier and buyer. This will bring more business in the economy and also keeps a check on tax frauds and evasion.
- Online taxation system: Unlike other taxes that were imposed most
invoicing was done using pen and paper. It might be difficult for smaller businesses to adopt this technological change. it might be needed for the businesses to upload their return forms and invoices.
- Short term business challenges: Adaptation of GST can interrupt the
working capital of a business in the starting phase due to input credit lock-up.
What is the GST registration?
Businesses whose turnover exceeds Rs. 40 lakhs is required to consider as a
normal taxable person. For opening a certain business registration of GST is mandatory. if the business is carried out without registering under GST, it will lead to penalties and will be an offense under GST. GST registration takes usually, 2-6 days working for the process of registration.
Who should register for GST?
Individuals who are registered Under Pre-GST law i.e. Excise,
VAT, Service tax, etc.
- Businesses whose turnover exceeds the limit of 40 lakh Input service distributor.
- Agents of a supplier.
3. A person who is supplying online information and retrieval services
to a person in India from a person Outside India.
4. Every person who supplies e-commerce aggregate.
5. Casual taxable person.
What is the GST Registration process in India?
GST registration will be done online through a portal maintained by the central government of India. The government also provides experts for businesses to help in GST registration.
Step1. The applicant will need to submit his mobile number email address PAN in part A of GST REG-01 through the facilitation center on the GSTN portal.
- A PAN is verified on the GST portal also the email and mobile number are verified by OTP (one-time-password ). once the verification is the complete applicant will receive an application number on the mobile number that is registered
- Now after that Applicant needs to fill part - B of form and specify the application reference number then afterward form can be submitted after attaching required documents.
if in case any additional information is required, Form GST REG-03 will be issued.
The applicant needs to respond form GST REG -04 Within 7 days for required information from the date of receipt of Form GST REG-03.
If you have provided all information via Form GST REG-01 or form GST REG-04. The registration certificate in Form GST REG-06 for the principal place of business or for every additional place of business will be issued to the applicant. In case an applicant has many businesses within a state he can also file a separate registration in form GST REG -01. If the details provided are not mandatory application would be rejected using Forn REG-05.
What are the documents required for GST registration?
Pan card of the applicant
Address proof of Directors along with the photograph
Proof of business registration.
Letter of Authorization.
Bank account statement or a canceled check.
ONLINE GST REGISTRATION
GST ( Goods & Services Tax) was implemented to remove various indirect taxes in India. Online GST registration was passed on 29th March 2017 in the parliament but it became effective on 1st July 2017 in India. The threshold limit of GST registration is 40 lakhs for the supplier of goods and 20 lakhs for the supplier of services as per the changes in The 32nd council meeting also with that the North-Eastern states have an option to choose between 20 lakhs to 40 lakhs.
GST registration can be done online by visiting the Online GST portal.
Though it is easy to fill the form on GST online portal yourself but on the
another hand, you require the experts to fill the information accurately and
submit the documents accordingly. All the initial state GST registration is
done with the help of experts because few terms cannot be understood
Benefits of GST
It expands your business through various channels like
· You can apply easily for various and central government
tenders are you have GST registration.
· Business becomes 100% tax adapted.
· You can collect taxes from customers legally and pass on the
tax benefits to suppliers.
· GST number is used for using mobile payment methods
· GST certificate can also be used while opening a business
account or current account.
Types of GST Registration
- Registration under composition Scheme.
This scheme is for the small taxpayers to make ease of tax compliance
for them. This scheme is eligible for a small retailer, trading
businesses. They have to pay a particular amount from their yearly
revenue as tax. This will relieve the taxpayers/businesses from
collecting taxes from the customers directly.
This also gives some benefits like
· pay lower tax which gives advantage in competition.
· Under GST norms it is easy to maintain Books of
Accounts and Records.
· File single quarterly returns instead of multiple monthly
Eligibility criteria to register under GST composition scheme
· Annual turnover would not be more than Rs 1 crore.
· Manufacturers of Goods, dealers, and restaurants can apply for this scheme. In the GST Regime.
· Must be a registered tax-payers
- Registration as a casual taxable person:
A person is a Normal taxable person who supplies taxable goods
and services occasionally like an event management company
that has events in various states that need to register as a
A casual taxable person for that particular state before supplying
any goods & services. for example, Mr. Raj has a business of
providing services in different states, then he needs to register
as a normal taxable person so that his business adapt the tax
norms of that particular state.
Goods & Services tax law in India is a Multi-stage, comprehensive and destination-based tax that is imposed on every value addition. In other words, Goods & Services Tax is an indirect tax imposed on the supply of goods & services. It would replace many indirect tax laws that were previously existed in India. Under the GST regime Tax will be imposed at every point of sale. For the intrastate supplies, CGST ( Central Goods & services tax) and SGST ( State Goods& Services Tax ) is imposed. For inter-state supplies, IGST (Integrated Goods & Services Tax ) is imposed.
- Customers will be able to find out exactly how much tax is paid on the products and services.
- It will reduce the number of indirect taxes.
- It will bring transparency in all taxes, there will be no hidden taxes and costs
involved in doing business.
- In GST system prices of some manufactured goods & services will go down
which will benefit the middle class.
- What is GST ( Goods & Service Tax)?
GST ( Goods & Services Tax) is an indirect tax imposed on Goods & services as the name signifies. The Tax will be levied on all stages from the production of products to the final consumption stage.
- What are the types of GST?
GST ( Goods & Services Tax ) is categorized in three different taxes i.e CGST (Central Goods & Services Tax), SGST ( State Goods & Services Tax ) and IGST ( Integrated Goods & Services Tax).
- What is IGST?
Under GST, IGST ( Integrated Goods & Services Tax ) is a tax imposed on
Goods & Services that are supplied at the inter-state level and will be governed by the IGST Act. IGST will be applicable in both cases whether the importing of Goods & services in India and exporting of Goods & Services out of India.
When did GST come into effect?
GST came into effect on 1st April 2017.
What is Input Tax Credit?
The Tax paid on Input Goods & Services can be used as an Input Tax Credit ( ITC ) against all Output Tax liabilities. What is the concept of Multistage In the GST regime? There are multiple changes of hands in supplying a product from manufacturers to the suppliers and then to the consumer. Buying a Raw Material Production and Manufacturing of that raw material. Warehousing of the finished good. After that selling to the wholesaler.Sale the product to the retailer. At last sale to the consumer.
How does GST apply to business?
GST will apply to those businesses whose turnover exceeds 20 lakhs but in the case of North-Eastern states Nagaland, Manipur, Assam, Arunachal Pradesh, Tripura likes Uttrakhand, Himachal Pradesh, Sikkim the limit is 10 Lakhs.
Is the Address proof required for GST registration?
Yes, Address proof is necessary for GST registration.
Is GST registration mandatory for small retailers to buy from wholesalers/Dealers?
No, for small retailers there is no such requirements.
What is the Registration process of GST in India?
There are three steps to do it.
Registered GST number.
Who is a Casual Taxable Person?
A person is a Normal taxable person who supplies taxable goods and
services occasionally like an event management company that has events in various states that need to register as a casual taxable person for that
particular state before supplying any goods & services.
What are the reasons for GST cancelation?
It can be canceled in a few cases such as when the business constitution is
updated and changed and secondly when the business is terminated.
Can a person with No GST registration collect GST?
No, he cannot collect GST if he doesn’t have GST registration.
Is it Necessary to take GST registration in the Multiple States?
If you have introduced your business in different states then you need to take GST registration in Different states.
is it Necessary to take GST registration in the Multiple States?
If you have introduced your business in different states then you need to take GST registration in Different states.
Can I sell without having GST registration?
If a person’s turnover is less than 20 Lakhs then you can sell the products without GST registration but if in case your turn exceeds the limit of 20 lakhs then you have to take GST registration.