This year central government has passed four sets of GST in Budget session. The parliament approved the acts after introducing them as a portion of the Money Bill. In this article, we will go through every detail about GST and will understand why it is making taxes and business easier and simple.
GST four ACT are as following:-
- Central GST Act, 2017
- Integrated GST Act, 2017
- Union Territory GST Act, 2017
- GST (Compensation to States) Act, 2017
What is GST with an example
Most people are unaware of the GST full form which in actual stands for Goods and Service Tax. In India, GST is one of the biggest indirect tax reform. On 29th of March 2017, this act was passed in the parliament. GST Act came into effect on the 1st of July 2017. The act is multi-stage, comprehensive and also a destination-based tax that is levied on every value addition.
This act deals with an indirect tax levy on sales, consumption, and manufacture of goods as well as services in India. All the business are required to extract a GST identification number in every state they are registered.
Destination based taxed is called GST . GST is collected by the State where goods are consumed. The Tax has adopted the Dual GST model in which both Central and States levies tax on Goods or Services or both.
Example to explain GST
Let’s assume, a manufacturer of skirt buys raw materials like cloth (cotton, silk, etc), buttons, zips, thread, and other essential equipment that is required to stitch the skirt and make it beautiful. This raw material costs the manufacturer Rs 500. This Rs 500 includes a 10% tax of Rs50. Once the skirt is made, the manufacturer has added his own value to the material. As a part of this example, if one were to assume that the value added is Rs 100, then the total cost of the skirt is now Rs 600 (Rs 500 + Rs 100). With a 10% tax rate, the tax on this trouser would be Rs 60. However, since the manufacturer has already paid Rs 50 as tax while purchasing raw material, under GST, the tax incidence will now be only Rs 10 (Rs 60 – Rs 50).
The matter of importance is the working of GST for the wholesaler in the second stage. Now, the wholesaler would buy the shirts at Rs 600 and would keep a margin on it to make a profit. Assuming that the margin is kept at Rs 60, the cost of the clothing item now becomes Rs 660. Applying the same 10% principle, the tax would amount to Rs 66. But, out of this Rs 66, Rs 60 are already accounted for from stage one. So the effective tax incidence for the wholesaler would be Rs 6 (Rs66 – Rs 60).
The final stage is that of the retailer. Now that the retailer has bought the shirts at Rs 660, he would also keep a profit margin. Say the margin that the retailer decides on is Rs 40. The total cost now becomes Rs700. Using the 10% rule, the tax would be Rs 70. However, with Rs 66 already accounted for in the earlier two stages, the tax incidence would be Rs 4 (Rs 70 – Rs 66). To sum up, the total GST for the entire chain, from manufacturer to retailer is Rs (50 + 10 + 6 + 4 = 70). The input suppliers will fail to claim for the tax credit if they haven’t purchased any item.
Types of GST
|Sr No.||Types of GST||Tax collection by||Known as |
|1.||SGST||collected by the State Govt||State GST |
|2.||CGST||collected by the Central Govt||Central GST |
|3.||IGST||collected by the Central Govt||Integrated GST |
|4.||UTGST||collected by union territory government||Union territory GST|
GST registration is important for any element that takes part in the services within India and supply of goods. The bill for the usage of GST was affirmed by the Prime Minister of India, Narendra Modi, the main goal behind this was that all indirect tax focused by the state and central government could be subsumed under one single tax. Following is basic information to finish GST registration from your home:
- Log on to GST portal GST official website; www.gst.gov.in.
- The menu at the top of the page, u will see a tab called ‘Services’, click on it and you will get three options – ‘Payments’, ‘User Services’ and ‘Registration’.
- Click on ‘Registration’ and choose ‘New Registration’ to begin with Part A of the registration process.
- A new page will open and here you are required to select your status as a GST practitioner or a taxpayer.
- A few details, then you have to invade in the form, such as the district and state in which the business is located, legal name of the business, Permanent Account Number, email address, mobile number, etc.
- The portal will then verify your details and you will receive a One Time Password (OTP) for confirmation.
- Click on ‘Proceed’ after entering the OTP in the OTP Verification window.
- Temporary Reference Number which will be generated in the system which will be displayed on the screen.
- The Temporary Reference Number will help you to use to login to Part B of the registration process.
- In Part B you need to enter Temporary Reference Number along with the Captcha Code to start the registration process.
- ‘My Saved Application’ will appear on a new page, and then you have to click on the ‘Edit’ icon which is under the ‘Action’ option.
- You will be again directed to the registration application form with different tabs, such as Authorised Signatory, Business Details, Authorised Representative, Promoter/Partners, Goods and Services, Additional Places of Business, Principal Place of Business, State Specific Information, Bank Accounts, and Verification.
- For entering the required information you will have to choose the tabs which are mentioned above.
- After that, enter the information related to the commodity before you select ‘Save & Continue’.
- You will then have to fill in information related to your bank account and then upload the relevant documents.
- You will then be again directed to the verification tab where the details you have sent for verification are displayed. You are now required to put your digital signature on the application after you have filled it up. Digital signatures can be put using E-Signature, EVC, or Digital Signature Certificate. LLPs and Companies can use only Digital Signature Certificates.
- Click on the ‘Submit’ option and the updated details and documents will be saved.
- Click on ‘Proceed’ and you will be again directed to a pop-up window where you will click on ‘Sign’.
- Once you have completed with signing the form, you can submit it so that an appreciation can be sent to your registered mobile number and email in the form of the Application Reference Number.
- A GST officer will then verify your application number to determine whether it can be rejected or approved. With the rejection of your application, you will have to give some other information or documents till the authorities approve your application.
GST returns should be filed/applied by all persons who have registered themselves under GST. According to the CGST Act 2017, GST return should be filed every month. Who all are registered under GST an annual return has to be filed. Some have to file their returns on a quarterly basis and also annually, who area entities registered under the GST Composition scheme. GSTR 1, GSTR 2, and GSTR 3 are the most common returns that must be filed.
As per the CGST law, normal taxpayers will have to submit these three returns on a monthly basis along with one annual return. Taxpayers who are registered as Input Service Distributors are liable to deduct (TDS) and collect (TCS) or the tax. A registered taxable individual is requested to submit the tax or they have to supply information in Form GSTR1 by the 10th day of the following month.
Kind of return applied in GST
|Return applied under GST||information|
|1.||GSTR 1||Information regarding outward supplies of commodities or services by registered taxable suppliers. The due date for return will be on the following month’s 10th day.|
|2.||GSTR 1A||Information relating to auto-drafted supplies of commodities or services. The due date for return will be on the following month’s 15th day|
|3.||GSTR 2||Information relating to inward supplies of products and services by registered taxable recipients. The due date for return will be on the following month’s 15th day.|
|4.||GSTR 2A||Information relating to auto-drafted supplies from GSTR 1 or GSTR 5 to the recipient.|
|5.||GSTR 3||This is a monthly return based on the finalization of information relating to outward supplies as well as inward supplies in addition to the payment of tax amount by registered taxable persons. The due date for return will be on the following month’s 20th day.|
|6.||GSTR 3A||Notice to return defaulter under Section 46 of the Central GST Act, 2017.|
|7.||GSTR 4||Quarterly return for registered individuals who have selected the composition levy by composition suppliers. The due date for return will be on the following month’s 18th day|
|8.||GSTR 4A||Auto-drafted information for registered individuals who have chosen the composition levy|
|9.||GSTR 5||Return for NRI taxable individuals by NRI taxable individuals. The due date for return will be on the following month’s 20th day|
|10.||GSTR 5A||Information relating to the supply of database access, online information, or retrieval service by an individual located outside the country made to non-taxable individuals in India|
|11.||GSTR 6||Return for Input Service Distributor by Input Service Distributor. The due date for return will be on the following month’s 13th day.|
|12.||GSTR 6A||Information relating to auto-drafted supplies from GSTR 1 or GSTR 5 to Input Service Distributors.|
|13.||GSTR 7||Return for Tax Deducted at Source by the tax deductor. The due date for return will be on the following month’s 10th day.|
|14.||GSTR 7A||Tax Deducted at Source Certificate.|
|15.||GSTR 8||Statement for Tax Collected at Source by the tax collector or e-commerce operator. The due date for return will be on the following month’s 10th day.|
|16.||GSTR 9||GST Annual return by registered taxable persons. 31st December of the financial year will be the due date for returning.|
|17.||GSTR 10||GST final return by a taxable individual whose registration is either canceled or surrendered. The returning date will be three months after the date on which the cancellation took place or the date of issuing the cancellation order whichever comes later|
|18.||GSTR 11||GST inward supplies statement for (Universal Identification Number) UIN by individuals having UIN and claiming a refund. 28th day of the month is the return date for which the filing of the statement took place.|
|19.||ITC-1A||GST ITC mismatch report.|
21 July 2018 GST rate revised at 28th GST Council meeting
The 28th meeting of GST council meeting was healed on 21st July 2018. Below are the rates of 45 goods and 2 services were again revised.
GST rate reflection on goods
|Item||New rate||Old rate|
|Raw material for brooms||Nil||12%|
|Stone, wood deities, marble||Nil||5%|
|Sal leaves and products of the same||Nil||18%|
|Coir pith compost||Nil||5%|
|Phosphoric acid of fertilizer grade||5%||12%|
|The retails sales value of knitted caps is more than Rs 1000||5%||12%|
|Textile floor, handmade carpets||5%||12%|
|For fuel mixing, ethanol which is sold to the companies of oil marketing||5%||18%|
|Solid bio-fuel pellets||5%||18%|
|Unpolished Kota stones and similar items||5%||18%|
|Rubber roller that is hand-operated||12%||18%|
|Jewelry boxes and handbags||12%||18%|
|Zip and slide fastener||12%||18%|
|Fuel cell vehicle||12%||28%|
|Brass kerosene pressure stove||12%||18%|
|Handicrafts that are not handmade||12%||18%|
|Grafting putty, glaziers’ putty, resin cements||18%||28%|
|Televisions up to 68cm||18%||28%|
|Food mixers and grinders||18%||28%|
|refrigerators, Freezers, water coolers, ice cream freezer, milk coolers||18%||28%|
|Hair clippers and shavers||18%||28%|
|Storage water heaters||18%||28%|
|Varnishes and paints, including lacquers and enamels||18%||28%|
|Hand dryers and hair dryers||18%||28%|
|Electric smoothing irons||18%||28%|
|Pads for applying cosmetics||18%||28%|
|Trailers and semi-trailers||18%||28%|
|Working trucks which are not having lifting equipment or handling equipment||18%||28%|
|Motor vehicles used for special purposes||18%||28%|
GST rate reflection on services
|Service||New rate||Old rate|
|Multimodal transportation supply||12%||Nil|
What are the benefits of GST in India?
Below categories will show you the GST benefits
| For business and industry |
|1.||Uniformity of tax rates and structures||GST will ensure that indirect tax rates and structures are same across the whole country, the increasing certainty and keep the ease of doing business.|
|2.||Easy compliance||All taxpayer services such as payments, returns, registrations, etc. will be available to the taxpayers online, which would make compliance transparent and easy.|
|3.||Increase competitiveness||Reduce in transaction costs of doing business would eventually lead to an increasing competitiveness for the industry and trade.|
|4.||Removal of cascading||Throughout the value chain, and across boundaries of States the seamless tax-credits, would ensure that there is minimal cascading of taxes.|
|5.||Gain to manufacturers and exporter||It will help in reducing the cost of local manufactured goods and services.|
| For Central and State Governments |
|1.||Better controls on leakage||Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an inbuilt mechanism in GST’s design which will be incentivizing the compliance of tax by traders|
|2.||Simple and easy to administer||So many indirect taxes at the state and central level are replaced by GST. It is going to be easier and simple for administrators to handle.|
|3.||Higher revenue efficiency||GST will help in decrease the cost of collection of tax revenue of the government which will help in leading to higher revenue efficiency.|
| For the consumer |
|1.||Relief in the overall tax burden||Because of prevention and efficiency gains of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.|
|2.||Single and transparent tax proportionate to the value of goods and services||Under GST there would be only one tax for leading to the transparency of taxes paid to the final consumer and manufacturer to the consumer|