GST is the abbreviated form of ‘Goods and Service Tax’. It is the only indirect tax which has been launched with an aim to make India a unified market.
GST is applicable to all the goods and services that are supplied within the boundaries of India. There are many different indirect taxes such as Central Excise Duty, Central Sales Tax, Entry Tax, Purchase Tax, State VAT, Additional Duties of Excise, Luxury Tax, Taxes on advertisements, Entertainment Tax, Special Additional Duty of Customs and many others, being levied on the suppliers as well as consumers at both central and state level, that have been incorporated into one indirect tax.
The act of Goods & Service Tax was passed by the parliament on 29th March 2017 and came into effect on 1st July 2017. It replaced many of the indirect taxes being levied in India on the supply of goods and services.
Under GST, the tax is being levied whenever there will be any sale of the goods and services. This will also help in the elimination of spurting any taxes. In addition to, it will establish goods and services of the Indian market to be competitive in both the local as well as global markets.
Benefits of GST
The main reason for implementing the Goods & Service Tax is to reduce the tax charged on the final price of goods and services. There are different benefits of the GST that are below mentioned –
- To regularize the businesses in the unorganized sector
- To lower the burden of doing compliances
- To digitalized the whole process from registration to applying for refunds
- To do e-commerce in a defined and proper way
- To improve the efficiency of logistics
- For the small businesses in a composition scheme
History of GST
There are a lot of facts attached to GST History. There are different countries around the world that have introduced GST such as Canada, Australia, Singapore and many others. The 10th Prime Minister of India, Atal Bihari Vajpayee has given the idea of implementing GST in the year 2000.
A committee was formed with Asim Dasgupta, Finance Minister of West Bengal being its head till the year 2011. The aim of this committee was to formulate the basic structure of GST. Different representatives from Central and State Government were involved in the committee to examine the reports from all the aspects.
Vijay Kelkar, who was the Advisory to the Finance Ministry in the year 2002 to 2004 had given a report in the year 2004 with the highlight of issues in the structure of tax system and how these issues could be resolved by adopting GST.
P. Chidambaram, Prime Minister in the year 2005 also talked about GST in the budget with the main objective to bring-in the uniformity in taxation all over India covering every sector through single Indirect Tax. Due to this, it was one of the points in the Budget Session of the Financial Year 2005-06. The date 1st April 2010 was decided to implement GST all over India.
Parthasarathy Shome, an advisor to the Chairman told that it will take time to get GST implemented. However, Mr P. Chidambaram mentioned that there has been significant progress in the preparation for implementing GST by all the States and in the Union Budget 2007- 08 as well as Union Budget 2008- 09, the date of its implementation was kept intact.
Pranab Mukherjee, Finance Minister of India in the year 2009 had announced about the basic framework related to GST with no change in the date of implementation. Asim Dasgupta gave its FDP (First Discussion Paper) with all the details of the proposed reform in GST. Under Mission-Mode Project of the government, the foundation of GST has been laid.
For this project, the budget sanctioned was of around Rs 1133 crore. Also, the computerization of the commercial taxes needs to be implemented at different states. Due to this GST has to be delayed for a year.
The congress was in power when the 115th Amendment was to be made in the constitution, regarding the implementation of the bill, GST. From the opposition party, there was a protest and the bill was sent to the scrutiny in a detailed manner by a standing committee. On June 2012, a bill was discussed and opposition raised the concerns on the clause 279 B for providing extra power in the hands of the Center. So the Finance Minister of India along with the Finance Minister of different states held the meeting and decided to resolve the issue by 31st December 2012.
In the 2013-14 Budget Session, there was an announcement made by then Finance Minister of India stating that for the states that they will be given compensation from the government and they should cooperate with the government for implementation of the GST. Then a Standing Committee was created which examined the bill and submitted its report to the parliament. With a few amendments, the bill was passed by the panel.
In the year 2015 Finance Minister of India, Arun Jaitley had told in his speech that GST would get implemented by 1st April 2016. But the disagreements arose among parties and states regarding the legal issues. Due to which the implementation got delayed further for a year to 1st July 2017.
Finally, 4 GST related bills became acts such as Central GST, State GST, Integrated GST and Union Territory GST. The council of GST in the meanwhile had finalized the rules as well as rates of GST and it was announced that GST will get implemented from 1st July 2017.
As told by Arun Jaitley, Finance Minister of India - GST will keep a check on Inflation. The tax will be levied on it on the basis of the goods and services category and GST Rates will be the same in all the parts of India. After GST, those who are burdened with the maximum tax will be relieved. It will keep on a check on the theft of taxes. The tax will be calculated as per the layers of taxes and not just like that.
There will be four tax slabs in the GST namely 5%, 12%, 18% and 28 %. This slab has been made for different categories of goods and services depending on the item that whether it’s of daily necessity or luxury.
So the GST History is long enough but the result is fruitful to wait for.
Varieties of GST
Its full form is Central Goods and Service Tax. This tax is collected by the Central Government of India. It is applied to the sales that are carried interstates such as within the territory of Gujarat and Maharashtra and so on.
Its full form is State Goods and Service Tax. This tax is being collected by the State Governments respectively. It is applied to the sales that are being carried intrastates such as within the territory of Gujarat.
Its full form is Integrated Goods and Service Tax. This tax is being collected by the Central Government of India. It is applied to the sales that are being carried outside the geographical boundaries of state and between different states; for example within Gujarat and Maharashtra.
UGST or UTGST
Its full form is Union Territory Goods and Service Tax. This tax is collected by the Union Territory Governments. It is applied to the sales that are carried in Union Territories, for instance within the territory of Chandigarh.
Calculator of GST
The GST Calculator is a tool which effectively calculates the cost of both goods and services. There is a formula which is being derived by the government for adding GST, which is –
- GST Amount = (Original Price x GST Rate) divided by 100 or
- Net Price = Original Price + GST Amount
For removing the GST calculation is being done in the following ways –
- GST Amount = Original Price – (Original Price x (100 / (100 + GST Rate)))
- Net Price = Original Price – GST Amount
How the tax will be calculated?
There is always a long process in manufacturing good and various things or materials are required. For example, to make a readymade shirt the manufacturer needs to purchase the thread. Then, the thread is converted into a cloth will add-up to the cost
Again, when the manufacturer will dye the cloth and give the final touch, the cost will further increase. GST will be applied as the addition of monetary value during each stage for getting the final stage product. If the GST Calculator is being applied to it, the value of GST and actual price could be obtained of a product.
The GST rates are decided according to the use of commodities. If the commodity is of daily usage, the GST applied on it will be lower. But if it is a luxury item, the GST will be applied on the higher side. Some of the GST Rates are shared below to give you a better idea of item pricing:
Commodities with 5% GST:
- Apparels up to Rs.1,000
- Braille paper
- Braille typewriters
- Stamp-post marks
- Braille watches
- Cashew nuts
- Skimmed milk
- Revenue stamps
- Pizza bread
- Packaged food items
- Frozen vegetables
- Floor covering
- First-day covers
- Edible Oils
- Coir mats
- Domestic LPG
- Fish fillet
- Footwear up to Rs.500
- Hearing aids
- Milk food for babies
- Postage stamps
- Roasted coffee beans
Services with 5% GST:
- The restaurants that are small and have a turnover till the limit of Rs 50 lakhs
- Supply of tour operators’ services
- Air travel in economy class
- Transport services such as airways and railways
- Sale of advertisement space for print media
- Transportation on roads through cabs or radio taxis.
Commodities with 12% GST:
- Work contracts
- Tooth powder
- State-run lotteries
- Preparations of vegetables
- Packaged dry fruits
- Fruit juice
- Exercise books
- Carom board
- Ayurvedic medicines
- Animal fat sausage
- Apparel above Rs.1000
- Cake servers
- Diagnostic kits and reagents
- Fish knives
- Frozen meat products
- Glasses for corrective spectacles and flint buttons
- Non-AC restaurants
- Packed coconut water
- Playing cards
- Sewing machine
Services with 12% GST:
- Guesthouses, inns, and hotels with the tariff of room per night ranging from Rs.1000 and Rs.2500
- Air tickets by business class
Commodities with 18% GST:
- Weighing machinery
- Preserved vegetables
- Padding pools
- Mixed condiments
- Instant food mixes
- Footwear priced above Rs.500
- Curry paste
- Aluminium foil Furniture
- Bidi Patta
- Branded garments
- Corn flakes
- Electrical transformer
- Flavoured refined sugar
- Hair oil
- Ice cream
- Kajal pencil sticks
- Mineral water
- Mixed seasonings
- Optical Fiber
- Swimming pools
- Salad dressings
- Steel products
Services with 18% GST:
- Telecom services
- Guesthouses, inns, and hotels with the tariff of room per night ranging from Rs.2500 t0 Rs. 5000
- AC hotels serving alcohol to customers
- IT services
Commodities with 28% GST:
- Weighing machine ATM
- Washing machine
- Waffles and wafers coated with chocolate
- Vacuum cleaner
- Hair clippers
- Chocolates devoid of cocoa
- Ceramic Tiles
- Automobiles Motorcycles
- Aerated water
- Aircraft for personal use
- Chewing gum Molasses
- Hair shampoo Sunscreen
- Pan masala
- Shaving creams
- Vending machines
- Water heater
Services with 28% GST:
- Guesthouses, inns, and hotels with the tariff of room per night ranging above Rs. 5000
- Cinema and entertainment
- Gambling and race club betting
- 5-star hotels
The GST Rates has changed several times as the goods and services categories are changing from one to another, depending on their usage.
Registration of GST
It is mandatory for the businesses having a turnover of more than Rs 20 lakhs (Rs 10 lakhs especially in the case of North East and hill states) to undergo GST Registration. For some of the organizations, it is necessary to have GST Registration; or else they will be penalized for this as it will be taken as an offence. It generally takes around 2 to 6 working days to get the registration of GST.
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Who all should get registered for GST?
- The casual taxable or non- resident individual.
- Businesses with the turnover of around Rs 20 lakhs and in areas such as Jammu and Kashmir, Uttrakhand, North East States and Himachal Pradesh with the turnover limit of around Rs 10 lakh.
- An individual who gives supplies through the aggregator of E-commerce.
- Each aggregator of E-commerce.
- An individual who is registered under the Service tax, Excise Tax, VAT and other indirect taxes before GST.
- All those paying taxes under the mechanism of reverse charge and many others.
Documents required for registering the GST
- PAN (Permanent Account Number)
- Aadhaar Card
- Proof of address where the business is established.
- Signature in digital form
- Statement of bank account
- Cheque cancelled
- Address and Identity proof of the Directors or Promoters along with their photographs
- Registration of Business proof or Certificate of Incorporation.
- Letter from Authorised or resolution of the board for the authorized signatory
How to register for the GST?
In order to do the GST Registration, the taxpayer needs to follow these steps –
- Login through the website www dot gst dot gov dot in
- There will be a menu bar on the top of the page. A tab with Services to be found over there, and then tap on it.
- There will be three options in it – Registration, then Payments and lastly User services.
- Tap on Registration and then tap on New Registration for filling Part A of the registration process.
- A new window will appear and here the taxpayer needs to select their status as on a GST practitioner.
- Some of the details are required into it which needs to be filled up like PAN (Permanent Account Number), email Id, the number of mobiles, business legal name, place where the business is located and many others.
- The details will be verified by the portal and will generate a One Time Password for the confirmation.
- Put the OTP for completing the verification process and then tap on Proceed.
- A temporary reference number will be generated and with this number, a user needs to fill the registration form Part B.
- In a new page, the taxpayer will find “My saved application”. There will be an icon of Edit under the option of Action. Click on it.
- This will redirect to a page with different tabs like Verification, Goods and Services, Additional Places of Business, Authorized Representative, Authorized Signatory, State Specific Information, Bank Accounts, Principal Place of Business, Promoter/Partners, and Business Details. In each of the tab, information is needed to be filled.
- After filling all the information, click on the button Save and continue.
- After this information is required to be filled related to bank account along with updating all the documents.
- Then this will redirect to the verification tab, displaying all the information provided at an earlier The Taxpayer need to put the digital signature on the filled application form. The digital signature can be put through the Digital Signature Certificate, EVC or through E-Signature.
- Tap on the submit button. All the details, as well as document, will get saved.
- Click on ‘Proceed’. A new window will open, click here on the Sign.
- Once the form is signed, submit it and an Application Reference number acknowledgement will be sent to the registered email id and mobile number.
- The GST application will be verified by the GST officer. In case the application is rejected, this may be due to some other documents or information that is required. So, the taxpayer needs to submit these documents and information for processing their GST Registration.
Frequently Asked Questions (FAQs) on GST
Question 1: What do you understand by Goods and Services Tax (GST)?
GST is an Indirect Tax which came into effect on 1st July 2017. It is a comprehensive, destination-based and multi-stage tax.
GST is levied on every value addition stage right from the manufacturing level to the consumption level (final).
Question 2: Which of the current taxes are replaced by GST?
Here’s a look into the taxes subsumed under GST:
(a) Taxes collected & levied by the Central Government:
- Central Excise duty
- Additional excise duties (Textiles and Textile Products)
- Additional excise duties (Goods of Special Importance)
- Excise duties (Medicinal & Toilet Preparations)
- Special Additional Duty of Customs (SAD)
- Additional Customs Duties (commonly known as CVD)
- Service Tax
- Cesses and Central Surcharges (related to goods’ supply & services)
(b) Taxes of State that are included under the GST are:
- State VAT
- Luxury Tax
- Central Sales Tax
- Entry Tax (all forms)
- Taxes on advertisements
- Entertainment & Amusement Tax (except when local bodies levy it)
- Purchase Tax
- State Surcharges & Cesses (related to the supply of goods & services)
- Taxes on gambling, lotteries, and betting
Question 3: On what principles did the aforementioned taxes were included under GST?
Different Local, State & Central levies were observed to confirm if they can be subsumed under GST or not. Following principles were kept in mind while identifying:
(i) The particular tax should be primarily indirect in nature.
(ii) This tax must be a part of the chain of transaction that starts with import/production/ manufacturing or provisioning of the goods and ends when the goods or services are consumed.
(iii) The inclusion of these taxes must offer the free flow of credited tax in inter and intra-State levels. The levies, fees, and taxes that are not directly related to goods & services supply must not be included under GST.
(v) The fairness of revenue for both the States and the Union individually must be attempted.
Question 4: List the commodities that are kept outside the horizon of GST?
The commodities that are kept out of the purview of GST are:
- Five petroleum products included in this list are – motor spirit (petrol), petroleum crude, high-speed diesel, turbine fuel used in aviation, and natural gas.
- Alcoholic liquor for human consumption.
- Electricity is also kept outside the GST.
Question 5: After the introduction of GST, what will be the status of the above-mentioned commodities?
These commodities will be taxed as per the current taxation system (Central Excise and VAT) after the introduction of GST.
Question 6: What taxes will be imposed on Tobacco products and Tobacco introduction of GST?
All other commodities except those mentioned above will be subject to GST. However, the Centre is free to charge the Central Excise duty on such products.
Question 7: How many types of GST are proposed to be implemented in India?
There will be three different types of charges in GST:
- Central GST: The GST that is charged by the Centre for the intra-state supply of services or goods is known as Central GST or CGST.
- State/ Union GST: The GST that is charged by the Union Territory/ State for the supply of services or goods within a Union Territory/ State is known as UTGST or SGST.
- Integrated GST: The GST that is charged by the Centre on each inter-state supply of services and goods is known as Integrated GST or IGST.
Question 8: Name the authority that levies and administers the GST?
The Centre administers and levies the IGST and CGST, whereas respective Union Territories and States administer and levy the UTGST/ SGST.
Question 9: What is the requirement of Dual GST?
Being a federal country both States and Centre in India have the power to levy and collect the taxes as per the law. Both these Governmental levels have different responsibilities to perform and thus, there is a requirement of dual GST.
Question 10: Do registered dealers have to record Aadhaar/PAN while selling goods to unregistered dealers?
No, there is no requirement for taking PAN/ Aadhaar details of customers under GST.
Question 11: How does GST handles goods that are returned by the recipient?
Yes, GST has a solution for the same under Section 34. Here, if the goods supplied by a registered supplier are returned by the recipient, then the supplier can issue a credit note to the recipient that contains all the particulars of the returned goods. The supplier must provide the details of the credit note within a month in which the credit note was issued but it should not be later than September of the following year in which supply was made, whichever comes first.
Question 12: Are security transactions taxable in GST?
No, the security transactions are not taxable in GST. The reason for the same is these transactions are completely excluded from the services and goods’ definition.
Question 13: How do the disputes get resolved under the regime of GST?
As per the Constitution Act, 2016, the Tax Council of Goods and Services must specify a mechanism to resolve the disputes:
- Between the Indian Government and one or more States or
- Between the Indian Government and one or more than one States on one side or one State on the other side, or
- Between more than two or two States arising because of the recommendation or implementation of the Council.
Question 14: How does the GST deal with imported goods?
The import of services and goods is treated as inter-state supply and IGST is charged within the country. The tax in case of imported goods follows the principle of destination as well wherein the SGST is applied on the goods and services consumed in State.