Top 10 Features Of Goods And Services Tax Gst In India

The Goods and Services or GST is a unified tax system introduced to substitute multiple indirect taxes levied by the central and state governments. It is a single tax charged on the complete product lifecycle of goods and services. It is levied at every stage in the process of production. It is then reimbursed to the various parties in different phases of production except for the final consumer.  

GST in India encompasses three distinct types: State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Integrated Goods and Services Tax (IGST). CGST and SGST are levied by the Central and State governments respectively. Integrated GST (IGST) is imposed on interstate supplies and imports. This is collected by the Central Government but assigned to the destination state.

Key Features of GST: Top 10 Highlights

1. Single Indirect Tax

GST has been launched as a single unified tax reform. It has helped in making goods and services more reasonable for customers. It has also eradicated other indirect central and state taxes like central value-added tax, VAT, service tax, and special additional duties of customs. The elimination of these taxes has made compliance simpler for businesses.

2. Input Tax Credit System in GST 

Registered taxpayers can claim credit for the GST payments made on resources or inputs  (i.e. capital goods, raw materials, and services) that are used to manufacture or supply goods and services. The tax is charged at each stage of the supply chain from the manufacturer to the retailer, and it is borne by the final consumer at the end. The tax paid at each stage is called input tax credit (ITC) in the next stage (Except for businesses that choose the composition scheme). 

For instance, a manufacturer, Mr. A pays Rs. 8,000  as GST on obtaining tyres to manufacture a car. He can claim this input tax credit at the time of paying GST on the sale of the final product, which is the car. If his GST liability on the car is Rs. 36,000, then he can deduct Rs. 8000 from his overall tax liability and pay only Rs. 28,000 to the government. Hence the GST on raw materials, resources, and capital goods can be reimbursed, thus preventing double taxation.

3. Registration exemption for small businesses: Small businesses with a low turnover are exempted from GST, thus reducing their burden of taxation.

4. Multiple tax slabs: 

GST comes with a 4-tier structure that allocates 4 different rates across various categories of goods. The tax structure is as below: 

Apart from these, there are

Nil rates: For essential goods such as food grains, milk, buttermilk, vegetables, fruits, etc. 

A GST rate of 0.25% for all cut and semi-polished stones.

A GST rate of 3% for pearls, diamonds, gold, etc.          

Under the composition scheme, there are special rates for taxpayers. 

Multiple tax slabs were introduced to bring uniformity in taxation rates across the country. 

5. Consumption-Based Tax 

The GST collected on goods and services is not received by the manufacturer’s state but by the state where the supplies are consumed.  GST is levied at every stage, however, whenever value is added to the goods and services, the supplier of the goods and services deducts the GST by claiming input tax of the  GST already paid. Eventually, the final dealer transfers the GST to the final consumer of the goods and services. The tax is passed on to each stage of the supply chain and integrated by filing GST returns. 

6. Anti-Profiteering Measures 

This salient feature is laid down to ensure that no business does unfair pricing. The benefits of the GST are passed on to the National Anti-Profiteering Authority (NAA), which monitors the activities of businesses. 

7. Competitive Advantage

The introduction of GST has enabled the removal of the cascading effect and the launch of ITC successfully. This has helped Indian businesses reduce their cost of compliance and the cost of production. It has provided Indian businesses with a competitive advantage in the international market, making them more desirable to foreign buyers and investors. 

8. Boost to the Economy

A more robust interstate supply chain and the increased collection in tax have lent resilience and a boost to the economy. This is true, especially for the less developed states that can benefit from the GST amount which is distributed across the country. 

9. Digital compliance and payments  

GST compliance and payments are mostly digital. Right from registration to filing of returns to payments, everything can be done online on the official website of GST. GST can be paid online via internet banking, National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), and debit or credit cards. Applications for refunds can be done online. When errors or mismatches are found, automated notices are sent to taxpayers with a message and provision to respond and rectify the same. 

10. Invoice Matching

The GST system verifies whether the details of the invoices filed by the supplier match those of the invoices filed by the recipient. If the information provided by both matches, then it is considered that the data reported by both the supplier and the recipient are correct. However, if there are mismatches or differences in the details, then the GST portal sends out automatic reminders to the concerned taxpayer. The discrepancies should be corrected by the parties involved, otherwise, they cannot claim input tax credit. 

FAQs On Features of GST

1. What is the aim of GST in India?

GST aims to simplify taxation. It aims to smoothen the indirect tax system by replacing multiple taxes, such as excise duties, value-added tax (VAT), service tax, and a single comprehensive tax. 

2. What are some of the limitations of GST?

Some of the downsides of GST include increased costs, higher tax liability of SMEs, fines, impact on the unorganized sector, etc. 

 

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