What is GST?

A single indirect tax has replaced all other indirect taxes. This single indirect tax is the GST, i.e., the Goods and Services Tax.

Goods and Services Tax Act came into effect from 1st July 2017 subsequent to the Parliament passing the Act on 29th March 2017. This is a comprehensive tax collected at every value addition stage and is a destination-based tax.

In other words, GST is one single indirect tax that is collected when goods are supplied and services rendered. This single indirect tax is applicable to the entire country.

What are the Components of GST?

The two components of GST are CGST and SGST.

CGST, i.e., Central GST is the GST to be collected by the Central Government and SGST, i.e., the State GST is the GST to be collected by the State Government. The rates for CGST and SGST will be advised accordingly. Both CGST and SGST will be collected at the same price.

CGST and SGST will be collected simultaneously on all the transactions except for the categories of supplies and services, that are not within the purview of GST and for transactions which are within the benchmark limit fixed for applicability of GST. CGST will be collected irrespective of the location of the supplier and the beneficiary. SGST will be collected only when the transactions happen within the State. For example, when both the supplier and beneficiary are located in Karnataka, SGST is applicable.

For intra-state transactions, that is, from one State to another State, IGST will be collected. IGST is the Integrated Goods and Services Tax. IGST will be divided between the Centre and the State as stipulated by the parliament based on the recommendations of the GST Council.

The Pattern of Tax before the Introduction of GST

Buying material->VAT->Manufacture->VAT + Excise Duty->Wholesaler/Warehouse->VAT->Sale to Retailer->VAT->Sale to the consumer.

The Pattern of Tax after the Introduction of GST

In the case of GST, tax is collected at every stage whenever there is value addition. GST is multi-stage tax and destination-based.

Multi-stage is explained below:

Buying Raw Material->Manufacture->Sell to Warehouse/Wholesaler->Sale to Retailer->Sale to the consumer.

In the above-mentioned case, there is value addition at every stage. The manufacturer buys the raw material and converts it into a product. The product is sold to the wholesaler in bulk. The wholesaler packs the goods in large quantity and sells it to the retailer. The retailer, in turn, converts the packaged product into packets of small quantity and sells it to the consumer. At every stage, there is a value addition for the product which appreciates the value of the product. GST is levied for the monetary value added at every stage until it reaches the final consumer.

Destination-based explanation:

If the goods are manufactured in one State and sold in another State, the entire tax will go to the State which receives the goods since GST is collected at the consumption point.

Advantages of GST

The advantages of GST are numerable. The main advantage is it has eliminated the levy of tax on tax which has impacted the cost of commodities. All the activities related to GST like registration, filing of returns, claim for a refund and reply to notices which accelerates the process. In a nut-shell the advantages are as listed below:

  • The cascading effect has been removed
  • The threshold limit for registration has been enhanced
  • Composition scheme is introduced for small businesses
  • Activities relating to GST are technology driven
  • Compliances are lesser
  • E-commerce has a defined treatment
  • Efficiency in logistics has increased
  • The unorganised sectors are regulated

Taxes Paid before GST

The following Central and State Taxes were levied before GST:

Taxes collected at Centre

  • Additional Excise Duty
  • Central Excise Duty
  • Additional Customs Duty
  • Special Additional Customs Duty
  • Central Surcharge and Cess
  • Service Tax

Taxes collected at the State

  • Central Sales Tax
  • Luxury Tax
  • Entertainment Tax
  • State VAT
  • Advertisement Tax
  • Entry Tax
  • Tax on purchase
  • Tax on lottery tickets, betting, and gambling
  • State Surcharge and Cess.

What Has Changed after GST?

GST replaced the different indirect taxes that were being paid at Centre and State level.

Taxes paid after GST are:

  • SGST: State GST (for the inter-state transaction)
  • CGST: Central GST (irrespective of the location of supplier and receiver)
  • IGST: Integrated GST (for the intra-state transaction)

What is a GST Return?

A document wherein all the income details of a taxpayer that has to be filed with the tax administrative authorities is the GST Return. Based on this return tax liability will be calculated by the tax authorities.

A GST Return which includes the following has to be filed by a registered dealer:

  • Sales
  • Purchases
  • Input tax credit (GST paid on purchases)
  • Output GST (GST paid on sales)

GST compliant purchases and sales invoices are required to file GST Returns.

Who Should File a GST Return?

Any regular business in the GST Regime has to file 26 returns in a year. This includes two monthly returns and one annual return.

The data has to be manually updated in the GSTR-1 Return. The information updated by the supplier and the receiver in GSTR-1 will be automatically populated into the Return GSTR- 3B.

Composition dealers who are termed as a special case have to file a special return.

Types of GST Returns

The following are the different types of GST Returns:

Name of Returns form Details Periodicity To be filed on or before

GSTR-1

Particulars of outward supplies of services and goods that are taxable

To be filed monthly

On or before 11th of the succeeding month w.e.f. October 2018. Earlier, it was before 10th of the succeeding month

GSTR-3B

Consolidated details of outward supplies along with input tax credit is given with which the tax liability of the taxpayer will be calculated

To be filed monthly

20th of the succeeding month

GSTR-4

To be filed by dealers registered under composition

To be filed quarterly

18th of the month succeeding the quarter

GSTR-5

To be filed by non-resident foreign taxpayer

To be filed monthly

20th of the succeeding month

GSTR-6

To be filed by Distributor of Input Service

To be filed monthly

13th of the succeeding month

GSTR-7

Return meant for authorities deducting tax at source

To be filed monthly

10th of succeeding month

GSTR-8

Details of tax amount collected by supplies made through e-commerce operator

To be filed monthly

10th of succeeding month

GSTR-9

Returns for normal taxpayer

To be filed annually

On the 31st December of the succeeding financial year

GSTR-9A

Return for a taxpayer registered under composition category at any time of the year.

To be filed annually

On the 31st December of the succeeding financial year

GSTR-10

Final-Return

To be filed once when there is cancellation or surrendered of registration

Within 3 months of the cancellation order date or within 3 months of the date of cancellation whichever is later

GSTR-11

A person who is having UIN and claiming a refund should furnish details of inward supplies

To be filed monthly

On the 28th of the month succeeding the month of filing the statement

GSTR-2 and GSTR-3 are suspended

Who Should Register for GST?

  • If the turnover of the business exceeds 40 Lakhs and 10 Lakhs for businesses at Jammu & Kashmir, Himachal Pradesh, North-Eastern States.
  • Non-Resident Taxable Person/Casual taxable person
  • If the business is registered under the Pre-GST law (i.e., Service Tax, VAT, Excise, etc.) should register for GST.
  • A person who makes supplies through the e-commerce operator
  • When tax is paid under reverse charge mechanism
  • Input service distributor and agents of a supplier
  • A person giving database access and online information or retrieval services to a person abroad to a resident who is not a registered taxable person.

Documents Required for GST Registration

The following documents are required for GST Registration:

  • Incorporation certificate or proof of registration of business
  • Address proof and Photo ID proof of directors/promoters along with photographs
  • Aadhaar card
  • PAN card of the applicant
  • Proof of address of the business
  • A cancelled cheque/bank pass-sheet
  • Digital signature
  • Board resolution/authorisation letter for Authorised Signatory.

Penalty for Not Registering for GST

A person is termed as an offender for not paying tax or short payment of tax (in case of genuine errors) should pay a penalty of 10% of the tax amount due with a minimum of 10,000. For deliberately evading the tax a penalty of 100% of the tax amount has to be paid.

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