Goods and Service Tax (GST) Explained
Know in detail about Goods and Services Tax (GST) in India. Stay updated and stay compliant.
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What is GST in India?
The Goods and Services Tax (GST) in India was introduced through the 101 Amendment Act. GST is a unified, destination-based tax replacing multiple indirect taxes. It aims to eliminate tax cascading, create a national market, simplify taxation, enhance compliance, and streamline goods movement across states. Implemented on 1 July 2017, GST categorises goods and services under multiple tax slabs, with exclusions like petroleum and alcohol. It uses HSN codes for classification and mandates e-invoicing for accuracy and compliance. GST also facilitates input tax credit, audits, and compliance via various returns and a governing GST Council. Gain clarity on goods excluded from GST, HSN codes, GST invoices, audits, reverse charge mechanism, input tax credit, output tax, GSTIN registration, benefits of GST, its components, the GST Council, registration process, and return filing compliance
The Goods and Services Tax (GST) is a comprehensive indirect tax on the manufacture, sale, and consumption of goods and services across India. It has replaced many indirect taxes that were previously levied by the central and state governments. The GST aims to streamline the tax structure and create a single, unified market in India.
GST ACT
An Act to make a provision for levy and collection of tax on intra-state supply of goods or services or both by the Central Government and for matters connected therewith or incidental to it.
Definition and Meaning of GST
The Goods and Services Tax (GST) is defined as a value-added tax levied on most goods and services sold for domestic consumption. It is paid by consumers but remitted to the government by businesses selling the goods and services.
Essentially, GST is a tax on value addition at each stage of the supply chain, from production to consumption, ensuring that the end consumer bears the tax burden.
History of GST
The idea of a Goods & Services Tax (GST) for India was first mooted sixteen years ago, during the Prime Ministership of Shri Atal Bihari Vajpayee. On 28 February 2006, the then Union Finance Minister proposed in the Budget for 2006-07 that GST would be introduced from 1 April 2010. The Empowered Committee of State Finance Ministers (EC), which had formulated the design of State VAT, was requested to come up with a roadmap and structure for GST. Joint Working Groups of officials, including representatives of both the States and the Centre, were set up to examine various aspects of GST and draw up reports on exemptions and thresholds, taxation of services, and taxation of inter-state supplies.Based on discussions within and between the EC and the Central Government, the EC released its First Discussion Paper (FDP) on GST in November 2009. The FDP spelled out the features of the proposed GST and formed the basis for the present GST laws and rules.In March 2011, the Constitution (115th Amendment) Bill, 2011 was introduced in the Lok Sabha to enable the levy of GST. However, due to a lack of political consensus, the Bill lapsed after the dissolution of the 15th Lok Sabha in August 2013.
On 19 December 2014, the Constitution (122nd Amendment) Bill 2014 was introduced in the Lok Sabha and was passed by Lok Sabha in May 2015. The Bill was taken up in the Rajya Sabha and was referred to the Joint Committee of the Rajya Sabha and the Lok Sabha on 14 May 2015. The Select Committee submitted its report on 22 July 2015. Thereafter, the Constitutional Amendment Bill was moved on 1 August 2016 based on political consensus. The Bill was passed by the Rajya Sabha on 3 August 2016 and by the Lok Sabha on 8 August 2016. After ratification by the required number of State legislatures and the President's assent, the Constitution amendment bill was notified as the Constitution (101st Amendment) Act 2016 on 8 September 2016. This amendment paved the way for the introduction of Goods and Services Tax in India.
After the GST Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), and the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill), these Bills were passed by the Lok Sabha on 29 March 2017. The Rajya Sabha passed these Bills on 6 April 2017, and they were enacted as Acts on 12 April 2017.
Thereafter, State Legislatures of different States passed their respective State Goods and Services Tax Bills. After the enactment of various GST laws, GST was launched with effect from 1 July 2017 by Shri Narendra Modi, Hon'ble Prime Minister of India, in the presence of Shri Pranab Mukherjee, the then President of India, in a midnight function at the Central Hall of the Parliament of India.
Father of GST & Implementation Date
In India, the title of 'Father of GST' is also attributed to the former Prime Minister, Atal Bihari Vajpayee. His government laid the foundation for GST by constituting a task force under Dr. Vijay Kelkar in 2000 to develop a sophisticated and efficient goods and services tax system. During his tenure, significant steps toward implementing GST were taken, ultimately shaping its future course.
One Hundred and First Amendment of the Constitution of India
The One Hundred and First Amendments of the Constitution of India was a landmark reform that introduced the Goods and Services Tax (GST) , a destination-based tax in the country. This amendment, notified on 8 September 2016, provided the necessary constitutional framework for the implementation of GST, unifying various indirect taxes levied by the central and state governments into a single tax regime. This amendment aimed to create a seamless national market, improve tax compliance, and remove the cascading effect of multiple taxes.
Objectives of GST
The primary objectives of GST are:
- Simplification of Tax Structure: To replace multiple indirect tax laws with a single comprehensive tax, simplifying the tax structure and making it easier to understand and comply with.
- Reduction of Tax Evasion: To enhance the tax compliance framework and reduce tax evasion through a robust IT infrastructure and streamlined processes.
- Economic Growth: To boost economic growth by reducing the overall tax burden on goods and services, thus lowering production costs and increasing competitiveness.
- Uniform Taxation: To ensure uniformity in taxation across the country by harmonizing the tax rates and laws, thereby eliminating economic barriers between states.
- Increase in Government Revenue: To increase the tax base by bringing more businesses into the formal economy, thereby increasing government revenue.
Impact of GST
The implementation of GST has had a significant impact on various aspects of the Indian economy:
- Ease of Doing Business: Simplified tax compliance and a unified tax system have made it easier for businesses to operate across different states, promoting ease of doing business in India.
- Reduction in Cascading Effect: By subsuming various indirect taxes into a single tax, GST has eliminated the cascading effect of taxes, reducing the overall tax burden on goods and services.
- Increased Tax Revenue: The GST regime has widened the tax base and improved tax compliance, leading to increased tax revenue for both central and state governments.
- Economic Integration: GST has facilitated the creation of a common national market by removing inter-state trade transaction barriers, thereby promoting economic integration and growth.
- Consumer Benefits: The reduction in the overall tax burden has led to lower prices for many goods and services, benefiting consumers through increased purchasing power.
GST Rates Slabs 2024
GST Rate Structure in India
The GST rate structure in India is categorised into multiple slabs to accommodate different types of goods and services. As of 2024, the main .GST rate slabs are:
0% GST
Items of essential consumption such as unbranded food grains, fresh vegetables, and milk.
5% GST
Items of mass consumption and essential goods, including edible oil, sugar, spices, tea, and coffee.
12% GST
Processed food, computers, and products such as frozen vegetables, fruit juices, and medicines.
18% GST
Standard goods and services including capital goods, industrial intermediaries, and daily-use items such as toothpaste, soap, and hair oil.
28% GST
Luxury goods, demerit goods, and items such as automobiles, cement, and air conditioners.
These slabs ensure a balance between revenue generation and the affordability of essential goods and services for consumers.
Goods Excluded from the GST
Certain goods are excluded from the GST framework and are either taxed separately under different schemes or are entirely exempt. Some of the key goods excluded from GST include:
Petroleum Products
petroleum crude diesel, natural gas, and aviation turbine fuel (ATF) are currently not under GST and are taxed separately by the central and state governments.
Alcohol for Human Consumption
Alcoholic beverages remain outside the purview of GST and are taxed by the state government.
Electricity
The supply of electricity is also exempt from GST
Real Estate
The sale of land and buildings is not covered under GST, except for the construction of complex, building, and civil structures, which is subject to GST.
These exclusions help in maintaining the existing revenue streams for state governments and address specific economic considerations.
HSN Code (Harmonized System of Nomenclature) in GST
The Harmonized System of Nomenclature (HSN) is an internationally standardized system of names and numbers to classify traded products. In the context of GST, the HSN code is used to classify goods systematically and ensure a uniform classification system.
The key features of HSN in GST are:
Structure
HSN codes consist of 6 digits and are used globally for the classification of goods. In India, businesses with an aggregate turnover exceeding ₹5 crores must use 6-digit HSN codes, while businesses with a turnover below ₹5 crores are required to use 4-digit HSN codes.
Purpose
HSN codes help in systematic and standardized classification, which facilitates international trade and reduces the chances of misclassification.
Compliance: Using HSN codes in GST bills and returns is mandatory for businesses, ensuring consistency and transparency in tax administration.
SAC Code (Services Accounting Code)
The Services Accounting Code (SAC) is a system of classification used for services under GST. Similar to HSN codes for goods, SAC codes are used to identify and classify services. Key aspects of SAC codes include:
Structure
SAC codes are 6-digit codes that categorize services for the purpose of GST.
Usage
These codes are used by businesses to identify services in invoices, GST returns, and other compliance documents.
Examples: SAC codes cover a wide range of services, such as legal services (SAC 99821), accounting services (SAC 99822), and IT services (SAC 99831).
GST Invoice
A GST invoice is a vital document that a registered supplier issues to the buyer, detailing the supply of goods or services and the associated GST. The essential components of a GST bill include:
Description of Goods/Services
Detailed description, HSN/SAC codes, quantity, and unit price
Invoice Number
A unique serial number for identification
Date
The date of issue of the invoice
Recipient Details
Name, address, and GSTIN of the recipient, if registered
Description of Goods/Services
Detailed description, HSN/SAC codes, quantity, and unit price
Taxable Value
The value of goods or services, excluding GST
GST Rates and Amounts
Applicable CGST, SGST/UTGST, and IGST rates and amounts
Total Amount
The total value, including GST
Signature
Authorised signature of the supplier.
A GST invoice serves as a crucial record for both the supplier and recipient, facilitating input tax credit claims and ensuring compliance with GST regulations.
E-Invoicing in GST
E-invoicing, or electronic invoicing, in GST, is a system where B2B invoices are electronically authenticated by the Goods and Services Tax Network (GSTN) for use on the common GST portal. This system aims to standardise the invoicing process, reduce errors, and streamline the flow of input tax credits. The key features of E-Invoicing include:
Standardization: A uniform invoice format across businesses.
Automation: Real-time reporting and reduced manual intervention.
Compliance: Ensures compliance with GST regulations and reduces the risk of tax evasion.
E-Invoicing Applicability & Turnover Limit
E-invoicing is applicable to businesses based on their annual turnover. The applicability and turnover limits are as follows:
Turnover Limit: Initially, e-invoicing was mandated for businesses with a turnover exceeding ₹500 crores. Over time, this limit was reduced to ₹50 crores. As of 2024, businesses with an annual turnover of ₹5 crores and above are required to generate e-invoices.
Exemptions: Certain entities such as SEZ units, insurers, banks, financial institutions, and NBFCs are exempt from e-invoicing requirements.
E-Way Bill
The E-Way Bill is an electronic document required for the movement of goods valued above ₹50,000. It is generated on the GST portal and contains details of the goods, their consignor, consignee, and the transporter. Key points about this Bill system include:
- Purpose: To track the movement of goods and ensure compliance with GST laws.
- Components: Details of the supplier, recipient, goods, and transporter.
- Validity: The validity of the E-Way Bill depends on the distance the goods need to be transported. For instance, it is valid for one day for a distance of up to 100 km.
GST Audit
A GST audit is an examination of records, returns, and other documents maintained by a taxpayer to verify the correctness of turnover declared, taxes paid, refund claimed, and input tax credit availed. The key aspects of a GST audit include:
Applicability: Applicable to businesses with an annual turnover exceeding ₹2 crores.
Types of Audits:
Turnover-Based Audit
Conducted by a Chartered Accountant or a Cost Accountant.
Special Audit
Directed by the GST authorities based on discrepancies.
Departmental Audit
Conducted by the tax authorities.
Reverse Charge Mechanism in GST
The Reverse Charge Mechanism (RCM) in GST is a system where the recipient of goods or services is liable to pay the GST instead of the supplier. This mechanism is applicable in specific cases as notified by the government. Key points about RCM include:
Applicability
- Specified Goods and Services: Certain goods and services are notified under RCM.
- Unregistered Supplier: When a registered dealer procures goods or services from an unregistered supplier.
- Compliance: The recipient must issue a payment voucher and a tax invoice for the goods or services received under RCM.
- Input Tax Credit: The recipient can claim input tax credit on the GST paid under RCM, subject to normal input tax credit rules.
These elements of the GST system ensure a streamlined, transparent, and efficient tax compliance process for businesses in India.
Input Tax Credit (ITC)
Input Tax Credit (ITC) is a fundamental feature of the Goods and Services Tax (GST) system, allowing businesses to reduce their tax liability by claiming credit for the GST paid on purchases. This mechanism prevents the cascading effect of taxes and ensures that tax is paid only on the value addition at each stage of the supply chain.
Eligibility: Registered businesses can claim ITC for GST paid on goods and services used for business purposes
Conditions:
The recipient must possess a valid tax invoice
Goods or services must be received
Tax must have actually been paid to the government
Returns must be filed correctly and timely
Exclusions: ITC cannot be claimed for personal use, exempt supplies, or goods/services specified in the blocked credit list.
Output Tax under GST
Output Tax under GST refers to the tax that a registered business is required to collect from customers on the supply of goods or services. It is calculated based on the applicable GST rates on the value of the goods or services supplied.
Calculation
Output tax under GST is calculated by applying the GST rate to the transaction value of the supply.
Payment
Output tax collected must be paid to the government by filing monthly or quarterly GST returns.
Adjustment
Businesses can adjust their output tax liability by claiming ITC for the GST paid on their purchases.
GSTIN
The Goods and Services Tax Identification Number (GSTIN) is a unique 15-digit identification number assigned to every registered taxpayer under the GST regime. It is used for all GST-related activities, including filing returns, claiming ITC, and paying taxes.
Structure:
- The first two digits represent the state code.
- The next ten digits are the PAN of the taxpayer.
- The 13th digit is based on the number of registrations within a state.
- The 14th digit is Z by default.
- The 15th digit is a check code.
Importance:
- GSTIN is mandatory for businesses with an annual turnover exceeding ₹40 lakhs (₹20 lakhs for special category states).
- It is required for issuing tax invoices, filing GST returns, and availing ITC.
- It ensures compliance with GST laws and facilitates the seamless movement of goods across states.
These components—Input Tax Credit (ITC), Output Tax, and GSTIN—are crucial for businesses to understand and manage their GST obligations effectively.
Advantages of GST
The Goods and Services Tax (GST) implementation in India has brought several advantages to the economy and taxpayers:
- Simplification of Tax Structure: GST replaced multiple indirect taxes with a single tax, reducing complexity and compliance costs for businesses.
- Uniformity: It created a uniform tax regime across the country, promoting ease of doing business and reducing interstate tax barriers.
- Reduction in Tax Cascading: By allowing Input Tax Credit (ITC), GST eliminated the cascading effect of taxes, leading to lower prices for consumers and increased competitiveness for businesses.
- Boost to GDP Growth: GST has contributed to economic growth by enhancing tax compliance, expanding the tax base, and improving overall tax revenue.
- Transparent Tax System: It has improved transparency in tax administration through digitalization and real-time reporting.
- Benefit to Consumers: Consumers benefit from reduced prices of goods and services due to the elimination of multiple taxes.
Components of GST
The components of Goods and Services Tax (GST) in India include:
CGST (Central Goods and Services Tax)
It is a central tax collected by the central government on intra-state supplies of goods and services
SGST (State Goods and Services Tax)
Collected by the state governments on intra-state supplies of goods and services
IGST (Integrated Goods and Services Tax)
Collected by the central government on inter-state supplies of goods and services, and imports
UTGST (Union Territory Goods and Services Tax)
Collected by the union territories on intra-union territory supplies of goods and services
Compensation Cess
Levied on specific goods and services to compensate states for any revenue loss post-GST implementation.
GST Council
The GST Council is a constitutional body responsible for making recommendations on issues related to GST, including rates, exemptions, and administrative policies. Key features of the GST Council include:
Composition
Chaired by the Union Finance Minister and includes the Finance Ministers of all states and union territories.
Functions
Determines GST rates for goods and services, drafts rules and regulations, and resolves issues related to GST implementation.
Decision-Making
Operates on the principle of consensus, with each member having one vote irrespective of the size of their state's economy.
Meetings
Meets regularly to discuss and decide on GST-related matters, ensuring cooperative federalism and uniformity in tax policies across states.
GST Registration and Process
GST registration is mandatory for businesses engaged in the supply of goods or services with an annual turnover exceeding ₹40 lakhs (₹20 lakhs for special category states). The registration process includes:
Application: Businesses apply for GST registration online through the GST portal by submitting required documents such as PAN, Aadhaar, business address proof, and bank account details.
Verification: The application is verified by the GST authorities, and a GSTIN (Goods and Services Tax Identification Number) is issued upon approval.
Filing Returns: Registered businesses must file monthly or quarterly GST returns depending on their turnover, detailing their sales, purchases, and tax liability.
Compliance: GST registrants must comply with GST rules and regulations, issue tax invoices, collect GST from customers, and maintain proper records of transactions.
GST Return Filing
GST return filing is a critical aspect of compliance under India's Goods and Services Tax (GST) regime. It involves reporting details of sales, purchases, and taxes paid to the tax authorities. Understanding the process and due dates is essential for businesses to avoid penalties and maintain compliance.
Main Return Form (GST RET-1): The primary return form consolidates details of all supplies made, input tax credit availed, tax payments, and any interest due. Taxpayers, except small ones, file this return monthly.
New GST Returns System
The introduction of the new GST returns system aims to simplify the filing process and enhance compliance. Here are key aspects of the new system:
Annexures (GST ANX-1 and GST ANX-2)
- GST ANX-1 (Annexure of Outward Supplies): Reports details of outward supplies, inward supplies liable to reverse charge, and imports. It's reported invoice-wise (except for B2C supplies) on a real-time basis.
- GST ANX-2 (Annexure of Inward Supplies): Contains details of all inward supplies, mostly auto-drafted from suppliers' GST ANX-1.
Differences from the Old System
- Turnover Threshold: Small taxpayers (up to Rs 5 crore turnover) file quarterly returns; others file monthly.
- Continuous Invoice Upload: Enables real-time upload of revenue invoices by taxpayers.
- Input Tax Credit (ITC) Claiming: Based on invoices uploaded by suppliers in GST ANX-1.
When to File GST?
The filing due dates for GST returns vary based on the type of taxpayer and the type of return:
- Monthly Filing: Generally, GSTR-1 (by the 11th of the succeeding month), Form GSTR-3B (by the 20th of the succeeding month), and GSTR-7 (by the 10th of the succeeding month).
- Quarterly Filing: GSTR-4 for composition dealers, QRMP scheme dealers (by the 18th of the succeeding quarter).
- Annual Filing: GSTR-9 (annual return by 31st December of the subsequent financial year).
Adhering to these filing deadlines is crucial to avoid penalties and maintain compliance with GST regulations. Understanding the new GST returns system and its filing timelines helps businesses manage their tax obligations efficiently.
Compliances Under GST
Under the Goods and Services Tax (GST) regime in India, businesses are required to adhere to various compliance requirements to ensure proper implementation of tax laws and regulations. Key compliances include:
GST Registration
Mandatory for businesses with annual turnover exceeding specified thresholds.
Filing of GST Returns
Regular filing of GSTR-1 (outward supplies), GSTR-3B (summary return), and GSTR-9 (annual return) based on turnover.
Payment of Tax
Timely payment of GST liabilities accrued from sales and services.
Maintaining Records
Proper documentation of invoices, bills of supply, and other GST-related documents.
GST Audit
For taxpayers with turnover above the prescribed limit, an annual audit of accounts by a chartered accountant or cost accountant.
Compliance with E-Invoicing
Applicable to businesses with turnover above specified thresholds for electronic issuance of invoices.
Classes of officers under the State Goods and Services Tax Act
Under the State Goods and Services Tax (SGST) Act in India, the classes of officers typically include:
Commissioner of SGST:
The highest-ranking officer is responsible for the administration of SGST within the state.
Additional Commissioner of SGST:
Assists the Commissioner and may oversee specific functions or divisions.
Joint Commissioner of SGST:
Assists in the administration and enforcement of SGST, often having jurisdiction over specific regions or areas.
Deputy Commissioner of SGST:
Responsible for the supervision and management of tax administration at the district or divisional level.
Assistant Commissioner of SGST:
Assists the Deputy Commissioner and handles operational aspects of tax assessment, collection, and compliance.
Superintendent of SGST:
Manages specific sections or units within the SGST department, overseeing day-to-day operations.
State Tax Officers/Inspectors:
Conduct field inspections, and audits, and assist in enforcing SGST compliance at the state level.
Other Class of Officers:
Includes various support staff, clerical positions, and other officers appointed as per the requirements of the SGST Act.
GST Composition Scheme
The GST Composition Scheme is an optional scheme available to small taxpayers to simplify compliance and reduce tax dues. Key features include:
Eligibility
Businesses with turnover up to Rs 1.5 crore (Rs 75 lakh for special category states) can opt for the scheme.
Fixed Tax Rate
Pay GST at a prescribed fixed rate on turnover without the benefit of input tax credit (ITC).
Quarterly Returns
File GSTR-4 quarterly, summarizing sales and payment of tax.
Restrictions
Not eligible for inter-state sales, ineligible goods/services, or e-commerce operations.
Types of Supply Under GST
Under the Goods and Services Tax (GST) regime in India, supplies are categorized into different types based on various parameters such as tax applicability, nature of goods or services, and other factors. Understanding these categories helps businesses comply with GST regulations effectively.
Time, Place, and Value of Supply Under GST
- Time of Supply: Determines when GST liability arises on goods or services. It is based on the earliest invoice date, payment date, or completion of the supply date.
- Place of Supply: Determines whether a supply is intra-state or inter-state for tax purposes, impacting the applicability of CGST and SGST/UTGST or IGST.
- Value of Supply: The transaction value is considered for GST purposes, excluding GST, discounts, subsidies, and other taxes.
Exempt Supply
- Definition: Refers to goods or services that are completely exempt from GST. These supplies do not attract any tax liability under GST.
- Examples: Education services provided by an educational institution, healthcare services provided by a clinical establishment, etc.
Zero-Rated Supply
- Definition: Refers to supplies of goods or services that are taxable but at a zero rate of GST. The input tax credit can be claimed on inputs/input services used for making zero-rated supplies.
- Examples: Exports of goods or services, supplies to SEZ units or developers.
Taxable Supply
- Definition: Refers to supplies of goods or services that attract GST at the applicable rates. The input tax credit can be claimed on inputs/input services used for making taxable supplies.
- Examples: Sale of goods, provision of services within India.
Mixed Supply
- Definition: Refers to a supply consisting of two or more individual supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in conjunction with each other.
- Tax Treatment: The GST rate applicable to the principal supply determines the tax rate for the entire mixed supply.
- Examples: Supply of a package consisting of goods and services where the value of goods is significantly higher than the value of services.
Understanding these classifications helps businesses determine the correct GST treatment for their supplies and ensures compliance with GST regulations in India.
GST Payment & Refunds
GST Payment
The GST you pay is essentially the difference between the total price (including GST) you collect from your customer and the price you pay for the good or service (excluding GST). You then remit this difference to the government.
GST Refunds
Registered businesses can claim an input tax credit (ITC) on the GST paid on purchases. This ITC can be used to offset the GST liability on your sales. If the ITC is greater than your GST liability, you can claim a refund from the government.
GST Calculation & It’s Formula
There are two main scenarios for calculating GST:
Finding the GST amount when the price includes GST (inclusive price)
Formula:
GST amount
(Total Price * GST Rate) / (100 + GST Rate)
Finding the net price (price excluding GST) when the price includes GST:
Formula:
Net Price
Total Price / (1 + GST Rate/100)
How to calculate GST?
Here's an example:
Let's say the total price of a good (including GST) is Rs. 1,180 and the GST rate is 18%.
Finding GST amount
GST amount = (1180 * 18) / (100 + 18) = Rs. 180
Finding net price
Net Price = 1180 / (1 + 18/100) = Rs. 1000
GST Cancellation and Revocation
GST cancellation and revocation procedures are crucial under the Goods and Services Tax (GST) regime in India. Here are the key aspects to understand:
Cancellation
GST registration can be canceled voluntarily by the taxpayer or by tax authorities due to non-compliance or other reasons.
Revocation
If GST registration is canceled by authorities, taxpayers can apply for revocation within a specified period.
Challenges in GST Implementation in India
Introduction of GST in India has posed several challenges, impacting businesses and the economy. Some key challenges include:
Complexity
GST involves multiple tax rates, compliance requirements, and technological integration, which can be complex for businesses to navigate.
Transition Issues
The shift from previous tax regimes to GST has caused transition challenges, including understanding new rules and procedures.
Compliance Burden
Compliance with GST filing requirements, input tax credit rules, and e-invoicing mandates has been a burden for many businesses.
IT Infrastructure
The GSTN portal's performance, availability, and user interface have faced criticism for reliability and efficiency issues.
Inspection, Search, Seizure, and Arrest under GST
Power of Inspection (Section 60):
Purpose:
Authorized officers, typically not below the rank of Joint Commissioner, can inspect places of business if they have reason to believe tax evasion or non-compliance has occurred.
Authorization:
Officers can authorize others to inspect premises where goods or services are transacted, or where records are kept.
Search and Seizure:
If officers have reason to believe goods liable for confiscation or documents useful for proceedings are hidden, they can conduct searches and seize such items.
Access and Breaking Seals:
Officers can seal premises or break open locked places to access relevant goods or documents suspected of tax evasion.
Document Seizure:
Persons from whom documents are seized have the right to make copies or extracts in the presence of an authorized officer.
Inspection of Goods in Movement (Section 61)
- Requires conveyance operators carrying goods over a certain value to carry prescribed documents. Officers have the authority to intercept and verify these documents.
Power to Arrest (Section 62):
- Authorization: Commissioners can authorize officers to arrest persons suspected of offenses under the GST Act.
- Procedure: Arrested persons must be informed of reasons and produced before a magistrate within 24 hours for cognizable offenses.
Power to Summon (Section 63):
- Summoning: Officers authorized by competent authorities can summon persons to provide evidence or produce documents relevant to GST inquiries.
- Compulsory Attendance: Summoned individuals must attend and provide truthful information or produce required documents.
Access to Business Premises (Section 64):
- Authority: Authorized officers can access business premises to inspect records, including books of account, documents, and electronic records.
- Documentation Demand: Persons in charge of premises must provide requested records to the officer or an audit team within a specified time.
Assistance to GST Officers (Section 65):
- Mandate: Officers of Police, Customs, State/Central Government engaged in GST collection, land revenue collection, and village officers are mandated to assist GST officers.
- Expansion: Other classes of officers can be empowered through government notification to aid GST officers upon request.
These provisions empower GST authorities to enforce compliance, prevent tax evasion, and ensure the fair implementation of GST regulations through thorough inspection, effective search and seizure procedures, and legal actions like arrest when necessary.
Criticism of GST in India
Since its implementation, GST in India has faced criticism on various fronts:
Multiple Tax Slabs
Critics argue that multiple tax slabs complicate compliance and administration, advocating for fewer slabs to simplify the tax structure.
Compliance Complexity
Businesses struggle with filing multiple returns, understanding input tax credit rules, and complying with e-invoicing requirements.
Economic Impact
Some sectors have reported adverse effects on profitability due to GST, impacting small businesses and traders.
IT Challenges
Technical glitches and operational challenges on the GSTN portal have affected filing deadlines and compliance timelines.
Special provisions relating to casual taxable persons and non-resident
The special provisions for casual taxable persons and non-resident taxable persons under the GST Act are designed to facilitate compliance for individuals or entities operating temporarily or from outside India.
Validity of Registration
The certificate of registration issued to a casual taxable person or a non-resident taxable person is valid for a period of ninety days from the effective date of registration.
Extension of Registration
The proper officer may, upon request, extend the initial ninety-day period by an additional period not exceeding ninety days.
Advance Deposit of Tax
At the time of applying for registration under section 19(1) of the GST Act, a casual taxable person or non-resident taxable person must make an advance deposit of tax. This deposit amount is equivalent to the estimated tax liability for the period of registration sought
Additional Deposit on Extension
If an extension of the registration period is requested under subsection (1), the taxable person must deposit an additional amount of tax equivalent to the estimated tax liability for the extended period.
Utilization of Deposited Amount
The amount deposited under subsection (2) is credited to the electronic cash ledger of the person. This amount can be utilized for making GST payments, such as tax liability on supplies, or for other purposes as provided under section 35 of the GST Act.
These provisions ensure that casual taxable persons and non-resident taxable persons contribute their estimated tax liability upfront, thereby facilitating smoother compliance with GST regulations during their temporary operations or presence in India.
GST Law
GST law in India comprises a comprehensive framework aimed at simplifying indirect taxation system across the country. Here are the key components of GST law:
Central Goods and Services Tax Act (CGST), 2017:
Governs the levy and collection of taxes on intra-state supplies of goods and services by the central government.
State Goods and Services Tax Acts (SGST), 2017:
Enacted by individual states and Union Territories to levy and collect taxes on intra-state supplies within their respective jurisdictions.
Union Territory Goods and Services Tax Act (UTGST), 2017:
Similar to SGST but applicable to Union Territories without legislatures.
Integrated Goods and Services Tax Act (IGST), 2017:
Deals with taxes on inter-state supplies of goods and services, and imports.
Ensures seamless taxation on transactions occurring across state boundaries.
Goods and Services Tax (Compensation to States) Act, 2017:
Provides compensation to states for any revenue loss arising due to the implementation of GST.
Rules, Notifications, Amendments, and Circulars:
Issued under the respective Acts by the central board and state governments to provide clarity on GST provisions, procedural aspects, rates, exemptions, and compliance requirements.
Latest update - 22 June 2024
The Ministry of Finance appreciated the Goods and Services Tax (GST) for reducing the prices of household articles. The 53rd GST Council meeting took place in New Delhi on 22 June 2024 and was chaired by the Union FM Nirmala Sitharaman. Highlights from the 53rd GST Council Meeting are as follows:
- Introduction of GSTR-1A for amending particulars within the same tax period and reduction in the threshold for reporting B2C interstate supplies from ₹2.5 lakh to ₹1 lakh
- Extension of the due date for filing GSTR-4 to 30 June from FY 2024-25 onwards and reduction of the TCS rate for Electronic Commerce Operators to 0.5%
- Mandatory filing of GSTR-7, even for nil TDS deductions, and exemption from filing GSTR-9/9A for taxpayers with an annual turnover up to ₹2 crore for FY 2023-24
- Amendments in Sections 16(4), 73, 74, and 112 to provide more flexibility and clarity in compliance
- Introduction of Section 11A for regularising non-levy or short levy of GST and nationwide rollout of biometric-based Aadhaar authentication for GST registration.
GST Registration FAQs
What is the full form of GST?
GST stands for Goods and Services Tax.
What is cess in GST?
Penalties for not registering for GST on time include late fees and interest charges. It's crucial to adhere to registration deadlines to avoid financial implications and ensure compliance with tax regulations.
What is the difference between the effective date of GST registration and the date of GST registration?
The effective date of GST registration is when you become liable to pay GST, while the date of registration is when you are officially registered. Understanding this difference is important for determining when your GST obligations commence.
Is issuing a tax invoice and tax collection mandatory for voluntary GST registration?
Yes, issuing a tax invoice and tax collection is mandatory for voluntary GST registration. Even if your turnover is below the threshold, compliance with invoicing and collection requirements is necessary to meet legal obligations and maintain transparency in your transactions.
Can I avail input tax credit against a 5% GST liability for goods sold by my LLP?
No, input tax credit cannot be availed against a 5% GST liability for goods sold by your LLP. Input tax credit is typically applicable for higher tax rates, and the limited 5% tax rate may not provide eligibility for claiming input tax credit in this scenario.
What should a business do about GST when not registered and dealing with GST-charging entities?
If not registered for GST and dealing with GST-charging entities, consider registering to avail input tax credits. Without registration, businesses might bear the entire tax burden, impacting profitability.
How to resolve error code SB001 in GST export through ICEGATE?
Resolve GST export error code SB001 on ICEGATE by verifying data accuracy, ensuring proper document submission, and seeking assistance from ICEGATE or GST support for technical guidance.
How to deal with negative amount errors in GSTR3B due to credit notes?
To address negative amount errors in GSTR3B due to credit notes, rectify the values, report corrections in subsequent returns, and maintain accurate documentation to reconcile discrepancies
How to handle GST compliance if my GSTIN was cancelled and I didn’t file the final return?
If your GSTIN was cancelled without filing the final return, rectify by filing the pending return immediately. Failure to do so can lead to penalties and compliance issues.
What is the GST Annual Return?
The GST Annual Return is a summary of a taxpayer's financial activities for a fiscal year, including details of sales, purchases, and taxes paid. It provides a comprehensive overview of the taxpayer's GST transactions.
What is the HSN Code?
The HSN Code, or Harmonised System of Nomenclature, is a standardised coding system for classifying goods internationally. It simplifies the identification of products for tax and regulatory purposes, aiding in smooth trade.
What is the full form of SAC Code?
The full form of SAC Code is ‘Service Accounting Code.’ It is a system of classification for services under GST, helping in uniform taxation and simplifying compliance for service providers.
Can a salaried person apply for GST?
Yes, a salaried person can apply for GST registration if involved in business activities beyond their employment. Registering is mandatory if the aggregate turnover exceeds the prescribed threshold.
What is an E-way Bill?
An E-way Bill is a document required for the movement of goods worth over a specified value between different states. It ensures tax compliance and facilitates the smooth transportation of goods by providing details about the consignment.
Authors
Written by Akash, Reviewed by Deepa Balakrishnan. Last updated on Sep 11 2024, 4:58 PM
Deepa Balakrishnan,BBA.LLB. (Hons.), specializes in various legal disciplines including GST advice, tax-saving strategies, ITR filing, and LLP annual compliance. With her expertise, she provides valuable guidance to clients across diverse industries.
Akash G Varadaraj,a legal content writer at Vakilsearch, brings over 3 years of experience in the legal niche. His mission is to simplify complex legal matters into understandable terms even for a layman. Collaborating closely with senior lawyers and SMEs, he ensures the delivery of top-notch content.
