What is GST?
GST is a one of the latest indirect tax reform that abolishes various central/ state taxes and levies such as value added tax, service tax, excise duty, countervailing duty, octroi, entry tax and luxury tax. GST brings in taxation based on the value addition or net value at each stage instead of the gross value of the goods or services billed at each stage. This ensures that tax is eventually borne at the consumption stage as against multiple points starting from production to distribution.
GST remains the single tax starting form the manufacturer or service provider till consumer in India, thus effectively giving advantages of tax netting off while goods changes hand at each stage of value addition. This ensures that the Goods and Services Tax (GST) charged by the last mile dealer to consumers (seller or service provider) remains the final tax borne by the consumer setting off of all taxes paid at various stages of supply chain.
Who is Required to get registered for GST
GST was launched on July 1, 2017 by the Government of India and it applies to all Indian service providers including freelancers, traders as well as manufacturers. The GST is actually a single tax which has amalgamated various taxes like service tax, CST, excise duty and the state taxes such as the entertainment tax, luxury tax, octroi and VAT.
In India, all businesses having sale of goods with an annual turnover of Rs 40 lakhs, or service with an annual turnover of Rs 20 lakhs have to mandatorily be registered for GST and have a valid GST number. (as per CBIC notification of the increase in threshold turnover from Rs 20 lakhs to Rs 40 lakhs, effective 1st April 2019.)
Each and every product goes through multiple stages all along the supply chain, be it purchasing raw materials, manufacturing, sale to the wholesaler, selling to the retailer and then finally the sale to the consumer. GST is levied on all the stages. So, if a product is produced in Assam, but is consumed in Rajasthan, the entire revenue will be received by Rajasthan. Additionally, consumers/taxpayers with an annual turnover of less than Rs. 1.5 crore can choose a composition scheme and start paying GST at a fixed rate of turnover, doing away with all the hassles of GST.
In certain cases, GST registration is mandatory irrespective of their turnover:
- Casual taxable person / Input Service Distributor (ISD)
- Non-resident taxable person
- Inter-state supplier of goods and services
- Supplier of goods through an e-commerce portal
- Any service provider
- Liable to pay tax under the reverse charge mechanism
- TDS/TCS deductor
- Online data access or retrieval service provider
Components of GST
GST has 3 components:
- Central Component – Central Goods and Services Tax (CGST)
- State Component – State Goods and Services Tax (SGTC), where centre and state levy GST on all entities if the transaction occurs in the state.
- Inter State Component – Integrated Goods and Services Tax (IGST), charged by the centre when a transaction happens between two states.
Types of GST in India
In India, the Dual GST Model was implemented where simultaneous taxes is levied by both Central government and State government on the supplies that are taxable and occurs within a State or Union Territory. For inter-state supply of goods or services, GST gets levied by the Central Government however even in such intra-state transactions the tax gets distributed equally between state and central government.
These three types of GST are levied based on the aspect of inter-state and intra-state transactions. While CGST and SGST are levied on Intra-state transactions, IGST is levied on Inter-state transactions.
|IGST (Integrated Goods and Service Tax)||CGST (Central Goods and Service Tax)||SGST/UTGST (State/Union Territory Goods and Service Tax)|
|Tax Levied By||Central Government, on Inter-State supplies of Goods and/or services||Central Government, on Intra-State supplies of Goods and/or services||State/Union Territory Government, on Intra-State supplies of Goods and/or services|
|Taxes amalganated||Central sales tax (CST)||Service tax, excise duty, countervailing duty (CVD), special additional duty (SAD), Additional duties of excise(ADE), and any other indirect central levy||VAT, sales tax, luxury tax, entry tax ,entertainment tax, purchase tax, Octroi, taxes on lottery|
|Applicable to||Interstate supplies and import||Supplies within a state||Supplies within a state|
|Input Tax Credit||Against CGST, SGST and IGST||Against CGST and IGST||Against SGST/UTGST and IGST|
|Sharing of Taxes||Shared between state and central governments||Central government||State/ union territory government|
|Free Supplies||IGST is applicable on free supplies||CGST is applicable on free supplies||SGST and UTGST is applicable on free supplies|
How to file GST returns Online
Each dealer, manufacturer or supplier or goods or services, who is registered under GST is required to file GST returns on or before due date. As per new tax system, return filing is more or less automated.
One can file the GST returns online using Mobile app or available software of Goods and Service Tax Network.
How to file GST return online:
GST Tax Slabs
In India, there are 4 types of GST slabs. Essential household items and life saving drugs are taxed at 5%. Products such as processed food or computers are charged as 12%. Products like hair oil, soaps, sanitary napkins, industrial intermediaries and services are taxed at 18%. Luxury goods are taxed at 28%. Basic necessity goods come under the exempt list, which means they are not taxed.
GST Slab of 5%
This GST slab normally cover the basic amenities or very small industries. The items covered under this slab includes sugar, oil, spices, tea, coffee, coal, fertilizers, ayurvedic medicines, agarbatti, cashew nuts, sliced dry mango, sweets, unbranded namkeen, handmade carpets, life-saving drugs, fish fillet, lifeboats.
Also services like railways, airways, AC and Non-AC restaurants, takeaway food, hotel rooms with a tariff less than ₹ 7,500, and special flights for pilgrims are covered in this GST slab.
GST Slab of 12%
Various other items are included in this slab like mobile phones, umbrella, sewing machine, jewelry box, processed foods like frozen meat, fruit juices, butter, cheese, ghee, etc
Also services like business class flight tickets and movie tickets below ₹ 100 are covered under this slab.
GST Slab of 18%
This GST slab majorly covers the remaining items that are not covered under the above two slabs. The items in this slab includes pasta, pastries, ice-cream, hair oil, safety glass, mineral water, hair shampoo, oil powder, water heaters, detergent, washing machine, leather clothing, scent sprays, cookers, cutlery, binoculars, artificial flowers, after-shave lotions, shaving cream, wristwatches, suitcase, briefcase, furniture, stationery items, mattress monitors, television screen, lithium-ion batteries, video games are covered.
Majorly services like Banking stock broking and other financial services are included in this GST slab. Also service like restaurants within hotels with tariffs are above ₹ 7,500, actual hotel bill below ₹ 7,500, movie tickets above ₹ 100 are also covered in this gst slab.
GST Slab of 28%
This GST slab is generally covers luxury or not preferred goods with more than 200 items coverage like high-end motorcycles, cars, durable consumer products, cigarettes, pan masala, weighing machine, cement.
Also services included in this GST slabs are like racing, betting in casinos, the actual bill of hotel stay above ₹ 7,500.
Apart from above GST tax slabs, a special rate of 0.25% is levied on semi-polished and cut stones.
Website to check Product covered under GST slabs or GST rates for any products : https://cbes-gst.gov.in/gst-goods-services-rates.html
GST Return refers to the document which contains the details of income that is to be filed with the tax authorities, as per the law. Under the GST, a registered dealer is supposed to file GST returns containing purchase, sales, output, GST on sales and GST paid on purchases. Taxpayers have to file two returns every monthly and one return every year. There is no way for revision, and unreported invoices from the past can be included in the present month.
GSTIN is an unique identification number that is assigned to each and every GST taxpayer. GSTIN has to be verified by logging on to the GST portal.
GSTN stands for Goods and Service Tax Network and is a non profit, non government, private limited company which is a network that helps you in preparation, filing and getting returns of your indirect tax liabilities.
GST Returns and their Due Dates
|GST Returns||Due Date|
|GSTR – 1||11th of next month|
|GSTR – 2||15th of next month|
|GSTR – 3B||20th of next month|
|GSTR – 4||18th of the month succeeding the end of quarter|
|GSTR – 6||13th of next month|
|GSTR – 9||31st December succeeding the end of financial year|
|GSTR – 9C||31st December succeeding the end of financial year|
Documents Required for GST Registration – Online
The list of documents required varies depending on the type of business entity.
- Address proof of Proprietor
- PAN Card of Proprietor
- LLP Agreement
- Names and Address proof of all the partners
- PAN Card of LLP
Private Limited Company
- PAN Card of the company
- Certificate of incorporation
- Identity Proof of all the directors
- Address proof of all the directors
- Articles of Association (AOA)
- Memorandum of Association (MOA)
- Signed Resolution by board members
- Digital Signature Certificates
Procedure of GST Application
Fill out the form – The first step will involve our GST representative collecting all the necessary documents from you and file the GST application on the iCFO platform. The ARN number will be released right after that.
GST Registration Certificate – The GST Registration Certificate and GSTIN is issued once the GST application and documents have been verified by the GST officer. The certificate can be downloaded from the GST Portal.
Penalty in case of failure of GST registration – According to the Section 122 of the CGST act, there is a direct penalty for any taxable person who fails to register for the GST.
Voluntary GST Registration
This is only in case of companies with an annual turnover of less than Rs 20 lakhs as it is advantageous even if it is not mandatory.
- Taking Input Credit
- Doing inter state business without any restrictions
- Registering on e commerce websites to expand the business.
- Having a competitive edge over the competitors.
Filing GST Returns
GST Return is a document that contains the details of the income of the taxpayers and this document has to be filed with the GST authorities so that the tax liabilities of the taxpayer can be calculated properly. Here’s what a GST Return file should include:
- GST Output on sales
- GST paid on purchases
GST Penalties you should remember
For late filing – Penalties for late filing is Rs 100 for each day and Rs 200 for each CGST and SGST. The penalty can accumulate upto a maximum limit of Rs 5000 along with the payment of tax at 18% per annum.
For not filing – If you miss out on filing any one of the GST , then the subsequent forms can also not be submitted before filing the outstanding ones.
For the 21 Offences – If there’s no intention of tax fraud found, a penalty of 10% or a minimum of Rs 10,000, or a jail term can be an option, depending on the amount of the taxes.