Understand Basics of Goods and Service Tax (GST) in India

Quick guide on GST to get a good view on the GST framework.

GST is a form of indirect tax for the whole nation which will make India into one unified market by implementing a uniform rate of tax across the country.

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

What are the benefits of GST?

Benefits of GST Implementation can be availed by both, businesses and Government. Ultimately consumer will also be benefitted. Following are some benefits:

  1. Benefits to Business:
    • Easy Compliance: All the tax payer needs can be needs such as registrations, filing of returns, can be done using one single web portal.
    • Uniformity of Tax rates: GST has a uniform rate of tax across the country thereby it increases the ease maintaining accounts and doing business. Simply Stating it would make the country tax neutral irrespective of place of business.
    • Removal of Cascading effect of tax:Input tax credit can be claimed on GST paid across the states in India.
    • Gain to Exporters: As tax paid on purchases can be claimed across the states it reduces the cost of goods and it will help Indian exporters to compete internationally.

  2. Benefits to Government:
    • Easy to Administer: Previously there were many state and central taxes but now all the taxes have been subsumed into GST which makes the government work easy.
    • Decrease in Cost: GST is expected to decrease the cost of collection of taxes.

  3. Benefits to Consumers:
    • Transparency: Under GST there would be levy of single Tax from manufacturer to consumer leading transparency of taxes paid to the consumer.
    • Reduced cost of Goods: As, now Input tax credit can be claimed across all the states the cost of goods will be reduced as tax paid to other states now will not be added to cost of goods and services.

  4. Other general benefits:
    • Increase of investment in capital goods as now input tax credit is available under GST may leads to 12-14% (expected) decrease in cost of Capital goods.
    • GST may lead to increase in GDP of the Country.

List of taxes which are subsumed into GST

At Central Level
  1. Central Excise duty.
  2. Duties of Excise (Medicinal and Toilet Preparations).
  3. Additional Duties of Excise (Goods of Special Importance).
  4. Additional Duties of Excise (Textiles and Textile Products).
  5. Additional Duties of Customs (commonly known as CVD).
  6. Entry Tax (All forms).
  7. Special Additional Duty of Customs (SAD).
  8. Service Tax.
  9. Central Surcharges and Cesses so far as they relate to supply of goods and services.

At State Level
  1. State VAT.
  2. Luxury Tax.
  3. Entry Tax (all forms).
  4. Entertainment and Amusement Tax (except when levied by the local bodies).
  5. Taxes on advertisements.
  6. Purchase Tax.
  7. Taxes on lotteries, betting and gambling.
  8. State Surcharges and Cesses so far as they relate to supply of goods and services.

This can be explained with example below:

Position Under Existing Tax LawsPosition under GST
Food Value1000Food Value1000
Service Charge100Service Charge100
Vat @ 14% on value of Good140GST @ 18% on total value of supply i.e.1100198
Service tax @ 6% on value of food60The entire supply would be treated as a single composite supply under GST.
Service tax @ 15% on Service Charge14The same would be taxable as per supply of service @ 18% on the entire value of supply.
Total Taxes Paid 215Other taxes need not levied as levied earlier

Commodities proposed to be kept outside purview of GST:

  1. Supply of Alcoholic liquor for human consumption.
  2. Electricity is also out of purview of GST.
  3. Five Petroleum products as mentioned below:
    • Petroleum Crude
    • Motor spirit (petrol)
    • High speed diesel
    • Natural gas
    • Aviation turbine fuel
  4. Transaction of securities is not liable to GST as securities have been specifically excluded from the definition of goods and services.

Registration requirement under GST

Section 22 of the CGST/ SGST Act 2017, every supplier (including his agent) who makes a taxable supply i.e. supply of goods and/or services which are liable to tax under GST, and his aggregate turnover* in a financial year exceeds the threshold limit of twenty lakh rupees, shall be liable to register himself within 30 days in the State or the Union territory from where he makes the taxable supply.

In case of eleven special category states {as mentioned in Art. 279A (4) (g) of the Constitution of India}, this threshold limit for registration liability is ten lakh rupees.

Besides, Section 24 of the Act mentions certain categories of suppliers, who shall be liable to take registration even if their aggregate turnover is below the said threshold limit of 20 lakh rupees.On the other hand, as per Section 23 of the Act, an agriculturist in respect of supply of his agricultural produce; as also any person exclusively making supply of non-taxable or wholly exempted goods and/or services under GST law will not be liable for registration.

* Aggregate Turnover:

Aggregate turnover shall include the aggregate value of all taxable supplies, exempt supplies and exports of goods and/or services and exclude taxes viz. GST.] Aggregate turnover shall be computed on all India basis. For NE States and special category states, {Arunachal Pradesh, Assam, Jammu & Kashmir, Meghalaya, Manipur, Uttarakhand, Himachal Pradesh, Sikkim, Tripura, Mizoram, and Nagaland} the exemption threshold shall be [Rs. 10 lakhs]. All taxpayers eligible for threshold exemption will have the option of paying tax with input tax credit (ITC) benefits. Tax payers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption.


Cases where Registration is mandatory

  • Every person who is registered under any of the laws that are subsumed into GST, on the day immediately preceding the appointed day - Shall be liable to register w.e.f the appointed day.
  • Persons making any inter-State taxable supply.
  • Casual taxable persons * making taxable supplies; They should register themselves at least 5 days prior to commencement of business.
  • Persons who are required to pay tax under reverse charge.
  • Non-resident taxable persons** making taxable supply; They should register themselves at least 5 days prior to commencement of business.
  • An electronic commerce operator for whom the provision of section 9(5) of GST Act apply.
  • Persons who are required to deduct tax under section 51.
  • Every electronic commerce operator.
  • Persons who supply goods or services or both on behalf of other taxable persons whether as an agent or otherwise.
  • Input service distributor.
  • Persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52.
  • Every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person.
  • Such other person or class of persons as may be notified by the Government on the recommendations of the Council.

* Casual Taxable Person: Casual Taxable Person has been defined in Section 2 (20) of GST Law. It means a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business.

** Non-resident Taxable Person :means any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India in terms of Section 2 (77).


GST Composition Scheme

  • Small tax payers with an aggregate turnover in a financial year up to Rs. 50 lakhs shall be eligible for composition scheme.
  • The Composition scheme is optional but if opted will be applicable for all business verticals.
  • The taxpayer shall pay tax as a percentage of his turnover during the year without availing the benefit of input tax credit & he cannot pass the benefit of Input tax credit to the buyer while making sale.
  • Any person opting for composition levy shall not issue any tax invoices and shall not collect any tax from his customers.
  • Tax payers making interstate supplies for paying tax on reverse charge basis shall not be eligible for composition scheme.

Registration

Registration should be done for new users & migration should be done for existing users.

  • Registration for new users is not yet opened at the GST Portal it will be started from 1st July 2017
  • Migration for existing tax payers can be done at GST portal at https://www.gst.gov.in/, Migration for the users will be reopened from 1st June 2017.

Exemption from registration

  • Person engaged in business of supply of non-taxable supplies or fully exempt supplies.
  • Person engaged in agricultural activities and agricultural supplies.

Pre-requisites of migration/registration into GST

  1. Obtain the unique provisional Id and Password.
  2. Note:It can be obtained from your respective Vat, service tax, sites login. For every assesse there is a unique Id and password given.

  3. Digital Signature. (E-signature with Aadhar linking).
  4. Valid Email address and Mobile Number.
  5. Registration Certificate obtained under earlier Tax laws.
  6. Bank Account details & IFSC Code.
  7. Proof of Constitution of business.
    • For Partnership: Partnership deed of the firm.
    • In any other case: Registration certificate of business Entity.
  8. Details of Promoters, Partners, such as their pan number, aadhar card, photograph.
  9. Proof of appointment of authorized signatories and their personal details.
  10. Proof of principal place of business.
  11. Proof of additional place of business if any.

Registration procedure of GST:

  1. GST REG-01 (Part A): Applicant requires to submit his PAN number, Mobile number, Email Id for verification at GST portal. Pan will be verified in GST portal, mobile and email id will be verified by OTP. After successful validation application reference number (ARN) number will be generated.
  2. GST REG-01 (Part B): Applicant needs to fill the form B & mention the ARN number generated earlier here and attach the relevant documents and can submit it.
  3. GST REG-02: Will be issued as acknowledgement after successful submission of part B form GST REG-01.
  4. GST REG-03: With in the 3 days of submission of form REG-01 Part B if the details are found incomplete or if any additional information is required by the officer then a Notice seeking the information will be issued in form GST REG-03.
  5. GST REG-04: Within 7 days of receipt of notice in form GST REG-03 the person needs to reply stating all the details asked in form GST REG-04.
  6. GST REG-05: If the additional details mentioned in form GST REG-04 are not found satisfactory then rejection of registration application will be issued in form GST REG-05.
  7. GST REG-06: If all the details provided via forms GST REG-01 Part B & form GST REG-04 are found satisfactory then certificate of Registration will be issued in form GST REG-06.
  8. GST REG-09: For registration of non-resident taxable person. (Registration will be valid for a maximum period of 90 days).

Accounts and Records Maintenance

Ledgers to be maintained – State Specific

  1. CGST, SGST and IGST – Input.
  2. CGST, SGST and IGST – Credits to be distributed in ISD.
  3. CGST, SGST and IGST – Output.
  4. CGST, SGST and IGST – Accrued but not due (CG).
  5. Electronic Cash Register.
  6. Electronic Credit Register.
  7. Electronic Liability Register.

Cash Ledger – State Specific

Cash Ledger linked to the registration

  • Balance in the cash ledger can be utilized against the respective State tax liability.
  • Excess balance in one State and tax payable in another State.
  • Examine the cost of maintaining balances in various States v Excess Input tax in States and tax payable in one State.
  • Stock Transfers.
  • Timely billing of intra company transactions.

Dashboards released by GSTN Portal.

CGST, SGST and IGST to be disclosed separately.


Record Maintenance.

Documents to be maintained [Electronic documents (IT Act, 2000)]
  1. Production or Manufacture of Goods.
  2. Inward Supplies.
  3. Outward Supplies.
  4. Stock of Goods.
  5. Input tax credit.
  6. Output tax payable and paid.

GST Portal

  1. Electronic Cash Register.
  2. Electronic Credit Register.
  3. Electronic Liability Register.
  4. More than one place of business.

Audit of Records and Reconciliation.

Warehouse Owner / Operator

Maintain details of consignor and consignee

Period of Retention of Documents

  1. 60 months from date of filing of annual return.
  2. 5 years and 9 months from end of the year.



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