What is GST?

Introduction

Goods and Services Tax commonly referred as GST is a type of Indirect Tax enforced in India in year 2017 via GST Act to subsume previously existing indirect tax laws like VAT, Excise duty, Service Tax etc and overcome its complexities and shortcomings. GST is a comprehensive and destination-based tax regime applicable on supply of goods or services. The introduction of a single indirect tax regime in the entire country replacing major other indirect tax laws has proved to be the biggest revolution in the Indian economy. GST is one of the simplest tax systems, wherein single tax rate is levied on supply of goods or services.

GST is a multi-stage tax levied on every value addition, which means GST would be levied on every point of supply of goods or services. Let us understand, a product goes through multiple stages along the supply chain before its actual reach to the end customer, which may initiate from raw material purchase to manufacturing to wholesale to retail and lastly to the customer. GST functions in a way, where tax would be levied on every stage of supply and value addition but it does not mean payment of tax at every stage. Here comes in the concept of Input Tax Credit (ITC) which lowers the tax burden by setting off the tax already paid by you for inputs while in the supply chain. Input Tax Credit means claiming the credit of the GST already paid on purchase of Goods and Services which are used for the furtherance of business.

Why GST?

There are multiple reasons for the introduction of GST in India. GST was introduced & implemented as ‘One Nation One Tax’ by the government in the country with effect from 1st July 2017. The main purpose for enforcing GST is to remove the cascading effect of taxes existing in the Pre-GST regime embedded in the cost of production & services. GST would bring in uniform taxation methodology on goods and services throughout the country doing away with complying with separate State & Central tax laws for businesses alongside allowing seamless flow of credit. Also the GSTN concept with entirely online processes & minimal human intervention would lead to reduced corruption. Below is the list of Central & State taxes subsumed under GST.

GST Applicability

Every person or supplier who makes a taxable supply of goods and/or services leviable to tax under GST law is liable to get registration under GST subject to the aggregate turnover limit in a financial year. GST council has been formed under the GST law as the governing body to revise, enact or make any changes in existing rules of GST. GST council has recently increased the threshold limits of aggregate turnover for mandatory GST registration.Previously every person dealing in goods having aggregate turnover more than Rs. 10 Lakhs in Special Category States and Rs. 20 Lakhs in Rest of the States were liable for mandatory GST registration. Currently, every person dealing in goods having aggregate turnover more than Rs. 20 Lakhs in Special Category States and Rs. 40 Lakhs in Rest of the States are liable for mandatory GST registration. The aggregate turnover limit for people dealing in services has not changed i.e. if persons providing services have aggregate turnover more than Rs. 10 Lakhs in Special Category States and Rs. 20 Lakhs for Rest of the States have to go for mandatory GST Registration.

The below list category persons/businesses have to opt for mandatory GST registration regardless of the aggregate turnover threshold limit:

Interstate suppliers
Casual Taxable persons
Persons taxable under the reverse charge basis
Non-resident taxable persons
Persons required to deduct TDS under GST
Persons required to deduct TCS under GST
Input Service Distributors
Persons making a sale on behalf of someone else whether as an Agent or Principal.
Every E-commerce Operator who provides a platform to suppliers to make supply through it.
Suppliers who supply goods through E-commerce operators who are liable to collect tax at source.
Online Service Providers providing service from outside India to a non-registered person in India.

Top 10 Advantages of GST

Every coin has two sides, similarly every reform too is bound to have pros & cons. GST was introduced mainly to remove the drawbacks to the old indirect tax regime including the cascading effect or tax on tax effect causing price rise of a particular product upon the end customer. GST has not only accrued benefit for the businesses but also has proved beneficial for customers and government. Below is the list of Top 10 advantages of GST:

Elimination of Cascading effect of tax.
Option available to small businesses to avail Composition Scheme.
Seamless Flow of Credit (ITC).
Uniformity of Tax rates & structure across the country.
Easy & simple compliance requirements.
Improved efficiency of logistics.
Technologically driven simple & easy procedures.
Reduction in Transaction Costs.
Higher revenue efficiency.
Better Control over loopholes & unorganized sector.

What is GSTIN?

Before the GST enforcement, all the traders or businesses registered under State VAT law or Central Service tax law were assigned a unique TIN number & service tax registration number respectively. Under the GST regime, all the registered businesses under a single roof are assigned a unique Goods and Services Tax Identification Number (GSTIN) by the GST authority. GSTIN is a 15-digit unique identification number assigned on PAN basis of respective businesses based on the state of their registration.

How has GST affected the Indian Economy?

The implementation of GST has proved to be a revolutionary step forward for the country as well as the Government. It has not only transformed the economy into digital and standardized one but has also led an exponential growth into Government’s revenue collection. The implementation of GST has been a step ahead towards the Digital India dream. GST has also facilitated execution of anti-tax evasion measures by strict upfront rules like E-way bill, reverse charge mechanism to name a few. It has also led to easier return filings for businesses and has created ease of doing business with improved control over small unorganized sectors.

Considering the fact of still existing gaps in the system, GST journey has marked to be the most proactive system engaged in improvising the rules & resolving the issues and loopholes since effectual. The overall impact of GST has been positive over the macro level and hopes to be yet better in coming future.

Frequently Asked Questions (FAQs)

GST in simple words?

GST is comprehensive, consumption based indirect tax levied on every value addition applicable on supply of goods or services. Referring to ‘One Nation One Tax’, it is a single indirect tax regime applicable throughout India.

Who introduced GST?

Honorable Atal Bihari Vajpayee visioned the idea of GST structure, but it was Mr. Arun Jaitley, the Finance Minister of the BJP Government, launched GST on 1st July, 2017.

What are types of GST?

There are 4 different types of GST namely: The Central Goods and Services Tax (CGST), The State Goods and Services Tax (SGST), The Union Territory Goods and Services Tax (UTGST), The Integrated Goods and Services Tax (IGST)

What are the GST rates in India?

The GST rates in India for various goods & services are divided into 0%, 0.25%, 3%, 5%, 12%, 18%, 28% GST.

Is GST applicable on all goods & services?

GST is not applicable under exempt list goods & services (Exempted goods & services) and upon NIL rate (0%) goods & services (Zero rated goods & services). Also, Petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel are not attracted to GST.

What is the difference between GSTIN & GSTN?

GSTIN is a unique Goods and Services Tax Identification number assigned to every taxpayer registration while GSTN is the Goods and Services Tax Network, which is an organization designated to manage the entire IT system of the GST portal.

What is HSN Code in GST?

“Harmonized System of Nomenclature” is the full form of HSN Code which is developed by Worlds Customs Organization (WCO). These codes are used to classify goods and are accepted worldwide which brings in uniform classification of goods and aids globalization.

What are the fees for GST registration?

GST registration can be done by any person or business or taxpayer free of charge (without any fees) on https://reg.gst.gov.in/registration/

Author

CS Zeel Kansara

Zeel Kansara is a Dynamic Company Secretary, a Law Graduate, passionate Blogger and an enthusiast Educator. She is proactive and inclined towards creative and technical content writing alongside her longing interest for hard-core Marketing.