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Introduction

Taxation system in India is categorized under two major categories namely direct taxes and indirect taxes. GST is an indirect form of taxation under the Income Tax Act, 1961. Earlier, the indirect taxes included a variety of taxes like excise duty, VAT, service tax, entertainment tax, entry tax, central sales tax, etc. All these taxes were replaced or clubbed under one single tax GST (Goods and Service Tax). This tax came into effect on 1st July 2017 after it was passed in the Parliament on 29th March 2017.

Goods and Service Tax is the tax that is levied on the manufacture, sale and consumption of goods and services. It is a tax based on value addition and is a comprehensive and destination based tax. India has adopted a dual GST model that is implemented by both States and Centre to levy tax on Goods and Services. The classification of GST is detailed below.

  • SGST – State GST, collected by the State Government
  • CGST – Central GST, collected by the Central Government
  • IGST – Integrated GST, collected by the Central Government

Pattern of tax structure under GST can be explained below,

TransactionNew RegimeOld RegimeRevenue Distribution

Sale within the State

CGST + SGST

VAT + Central Excise/Service tax

Revenue in such case will be shared equally between the Centre and the State

Sale to another State

IGST

Central Sales Tax + Excise/Service Tax

There will only be one type of tax (central) in case of inter-state sales. The Centre will then share the IGST revenue based on the destination of goods.

What is the need for GST?

The need for GST has been long felt in the country. The integration of various indirect taxes across the country and at State and Central levels is needed for many reasons like,

  • Mitigation of double taxes
  • Reducing or eliminating the cascading effect
  • Eliminating the multiplicity of taxes
  • Eliminating issues like correct classification of the taxable goods or service and rates thereof
  • Higher threshold for GST registration
  • Revised and simplified compliance procedure
  • Increase of efficiency

The Role of the GST Council

GST Council was set up to draft, supervise, review and recommend the necessary inputs, regulations and rates that are required to effective and efficient implementation of GST across the country. GST council is made up of the Finance Minister of the Central Government as well as from States Governments. This council is chaired by the Union Finance Minister.

GST Slab Rates

The GST Council has categorized all the goods and services to be taxed under GST in 5 slab rates. These rates are namely, NIL rate, 5%, 12%, 18% and 28%. Goods and services are classified under these rates based on the various factors like basic necessities (classified under Nil rate or lower rate) and high end or luxury products and services (taxed on higher slab rates), products that are specialized or imported, etc.

There are many products that are outside the ambit of GST. Such products like aviation turbine fuel, liquor for human consumption, petroleum products, etc. are governed by state tax laws and are subject to taxes as per state policies.

GST Registration

GST was introduced to consolidate all the indirect taxes in our country and to bring them under one umbrella to ease the process for the government as well as the taxpayers. A single registration under GST is better than getting registered under the various indirect tax laws.

The threshold limits for GST registration have been recently increased. The revised limits and their applicability have been mentioned below.

Total Turnover

Registration Required

Applicability

Previous Limits  (For the sale of Goods/Providing Services)

Exceeds Rs.20,00,000

Yes – For Normal Category States

Valid up to 31st March 2019

Exceeds Rs.10,00,000

Yes – For Special Category States

Valid up to 31st March 2019

Revised Limits (For Sale of Goods)

Exceeds Rs.40,00,000

Yes – For Normal Category States

Valid from 1st April 2019

Exceeds Rs.20,00,000

Yes – For Special Category States

Valid from 1st April 2019

New Limits – For Providing Services

The threshold limits for Service Providers have not been changed. Therefore, the previous limits will continue to apply for Service Providers

The other key points to be remembered under GST registration are,

  • Individuals registered under the Pre-GST law (i.e., Excise, VAT, Service Tax, etc.) have to be registered under GST
  • Casual taxable person / Non-Resident taxable person, as well as an agent of a supplier & Input service distributor, have to be registered under GST
  • Another important category of persons that have been included under the purview of GST are those paying tax under the reverse charge mechanism
  • GST registration is also required for persons who supply via e-commerce aggregator as well as Every e-commerce aggregator
  • Persons supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person are also included in the ambit of GST and hence have to be registered under the same.

GST Returns

The businesses that have been registered under GST are required to file returns on a monthly, quarterly or yearly basis. Also, the nature or type of return to be filed depends on the type of business and its classification.

The qualification for GST returns is to have GST compliant invoices for the sales and purchases of any business. There are many ERP options available in the market that assists in generation of GST compliant invoices. Businesses can choose from among many such options based on their budget and other factors like ease of understanding and operation, employee background handling such invoice generation, etc. The types of GST returns that are available to the businesses are mentioned below.

  • GSTR-1- Details of outward supplies of taxable goods and/or services affected
  • GSTR-2, GSTR-3 (Currently suspended)
  • GSTR-3B - Simple return in which summary of outward supplies along with input tax credit is declared and payment of tax is affected by the taxpayer
  • CMP-08 - Statement-cum-challan to make a tax payment by a taxpayer registered under the composition scheme under section 10 of the CGST Act (supplier of goods) and CGST (Rate) notification no. 02/2019 dated 7th March 2020 (Supplier of services)
  • GSTR-4 - Return for a taxpayer registered under the composition scheme under section 10 of the CGST Act (supplier of goods) and CGST (Rate) notification no. 02/2019 dated 7th March 2020 (Supplier of services)
  • GSTR-5 - Return for a non-resident foreign taxable person
  • GSTR-6 - Return for an input service distributor to distribute the eligible input tax credit to its branches
  • GSTR-7 - Return for government authorities deducting tax at source (TDS)
  • GSTR-8 - Details of supplies effected through e-commerce operators and the amount of tax collected at source by them
  • GSTR-9 - Annual return for a normal taxpayer
  • GSTR-9A - Annual return to be filed by a taxpayer registered under the composition levy anytime during the year
  • GSTR-9C - Certified reconciliation statement
  • GSTR-10 - Final return to be filed by a taxpayer whose GST registration is cancelled
  • GSTR-11 - Details of inward supplies to be furnished by a person having UIN and claiming a refund

FAQs on GST in India

1. What are the types of GST in India?

The types of GST in India are Central Goods and Service Tax (CGST), State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST) and Integrated Goods and Services Tax (IGST).

2. What is the GST Model adopted b y India?

The GST model adopted by India is known as Dual GST Model where the Central Government and the State Government levy tax simultaneously on taxable goods and services.

3. What are GST HSN and SAC Codes?

HSN is the abbreviation for Harmonized System of Nomenclature. This is a system where 6 digit uniform codes are used to classify the goods in systematic manner to determine the rate at which they should be taxed under GST. HSN is now used under a three tiered system under GST.

4. What is the reverse charge mechanism under GST?

The reverse charge mechanism under GST is where the receiver of the goods or services is liable to pay tax instead of the supplier of the goods and services. This mechanism was introduced in GST with a view to ease the taxability and the compliance procedure in the hands of the supplier and the receiver.

5. What is the GST composite scheme?

GST Composite Scheme was introduced for the benefit of small businesses that have turnover less than Rs. 1,50,00,000 (Rs. 75,00,000 in case of North eastern States and Himachal Pradesh). It was initiated with a view to ease the compliances and reduce the paperwork as well as provide them a chance for lower taxability. Under the Composite scheme, the small businesses have to pay tax at a fixed rate ranging from 1% to 6% of the turnover.

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