Goods And Services Tax

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.

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.

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.

Additional Info: Also check Property Tax

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

Additional Info: Also check NPS Tax Benefits

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.

Additional Info: Also check Pradhan Mantri Awas Yojana

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)

Additional Info: Also check UAN Member Portal

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.

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.

The following are the different types of GST Returns:

GSTR-2 and GSTR-3 are suspended

• 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.

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.

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.