What is GST

The implementation of the Goods and Services Tax (GST) is an extremely significant step in India's indirect tax reform. By combining a large number of central and state taxes into a single levy, GST would greatly reduce the negative effects of cascading or double taxation and pave the way for a larger domestic market. With effect from 1 July 2017, the Government intends to adopt GST. From the consumers’ point of view, the main benefit will be the elimination of the total tax burden on goods, currently estimated at 25%-30%. This would also mean that the real burden on the user of indirect taxes on goods and services would be much more clear. Last but not least, this tax will be easier to enforce because of its straightforward and auto-policing character.

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What is GST?

GST is a goods and services tax that is levied by the government to replace many indirect taxes. Any business offering sale of goods with an annual turnover of 40 lacs or service with an annual turnover of 20 lacs would require to do GST registration and should have a valid GST Number. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. This Act came into implementation on 1st July 2017. “GST is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.”

The GST is paid by shoppers, customers, or consumers, it is transmitted to the government by the organizations selling the products and ventures. As a result, GST gives revenue to the government. The GST is included in the final price of all the goods or services before its purchase. This tax removes all the indirect taxes that are imposed by the central government and the state government previously in India. To be applicable for this, the businesses need to have done GST registration.

Why GST is implemented in India?

Goods and Services Tax (GST) was implemented in India to improve the way of collecting the tax. The main reason for introducing the GST in India is to reduce the tax burden that comes with both consumers and companies. With the previous tax system, there were various taxes included at each phase of the production network, without clearing the fact that tax has been paid at previous stages. Therefore, the end cost of the item doesn't clearly show the genuine price of the item and how much tax was applied. This cascading structure is excessively mind-boggling and inefficient. It sometimes garnered a lot of confusion and often led to double taxation.

It was a very wise and successful step of the government to integrate whole India at one nodal point through the mechanism of the uniform taxation system in the form of GST. In regards to the Indian economy, it shoots up significantly by removing the lengthy list of taxes that were levied by the state and central government previously. GST was implemented in the Rajya Sabha after the four bills were passed. These bills were: Central Goods and Services Tax GST Bill, Integrated GST Bill, Compensation GST Bill, and Union Territory Bill.

When did GST get implemented?

A3 Goods and Services Tax GST was publicized as the 'One nation, one tax' by the government. This Tax was passed in the parliament on 29th March 2017. This Act came into implementation on 1st July 2017. "The Indian GST Law is an all-encompassing, multi-stage, destination-focused tax charged on every value addition."

To implement the GST, the GST council committee had to approve the other bills and they were: Central Goods and Services Tax GST Bill (CGST), Integrated GST Bill (IGST), Compensation GST Bill, and Union Territory GST Bill (UTGST). These bills were passed by the Lok Sabha on 29 March 2017. The Rajya Sabha passed these Bills on 6 April 2017 and were then instituted as Acts on 12 April 2017. From there on, State Legislatures of various States have passed separate State Goods and Services Tax GST Bills. After the sanctioning of different GST laws, Goods and Services Tax GST was propelled all over India with an impact from 1 July 2017. The Jammu and Kashmir state legislature also passed its GST follow up on 7 July 2017, accordingly guaranteeing that the whole country is brought under a bound together under a uniform taxation system.

what are the GST registration guidelines as per the government of India?

A4 The guidelines of GST registration suggested that who should register under the GST and hence the government has provided the list of all the potential sellers or consumers:

1. People who enrolled under the pre-existing taxation laws i.e. Excise, VAT, service tax, etc.

2. Businesses with turnover over the edge furthest reaches of Rs. 40 Lakhs* (Rs. 10 Lakhs for states including North-Eastern States, J&K, Himachal Pradesh, and Uttarakhand)

3. Operators of a supplier and Input service wholesaler

4. A person who occasionally supplies taxable goods or services in a taxable territory is called a casual taxable person. There is no fixed place of business, that is it moves from one place to another.

5. Individuals that are under the consideration of the reverse charge mechanism: Reverse Charge, the receiver becomes liable to pay the tax, i.e., the charge of tax gets reversed

6. Every e-commerce person

7. A person who supplies via e-commerce aggregator

8. Individuals providing on the web data and database access or recovery administrations from a place outside India to an individual in India, other than an enlisted taxable person are all eligible for GST registration.

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Document required for GST registration

Based on the category of the individual or their business ownership, different sets of documents are required during GST registration.

For a sole proprietorship, the following details of the owner are required.

  • PAN Card
  • Aadhar Card
  • Passport Size Photograph
  • Address Proof
  • Bank Account Details
  • For a Public or Private Limited Company, the following documents are required:

  • Company’s PAN Card
  • The certificate of Incorporation which is issued by the Ministry of Corporate Affairs
  • Authorised signatory’s PAN and Aadhar details. (He/She must be a citizen of India)
  • Passport sized photo of the authorized signatory
  • MOA and Article of Association
  • Pan card of all Directors of the company
  • Address Proof of all Directors
  • Passport sized photo of all the directors
  • Address proof of the business place
  • Bank Account details
  • For a Partnership Firm, the following are required:

  • Details of all partners and the authorised signatory (PAN, Address Proof, Passport sized photograph)
  • Copy of the partnership deed
  • Registration Certificate/ Board resolution in case of LLP firms
  • Business Address Proof
  • Bank Account Details
  • For a HUF, the requirements are as follows:

  • PAN Card of HUF
  • Photograph of the owner
  • PAN and Aadhar of Karta
  • Address proof for the place of business
  • What are the types of GST?

    According to the government of India GST are of four types. The GST types are namely Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST). They have different taxation rates (GST rates) under them.

    Difference between GST types:

    1. CGST: CGST (Central GST) is implemented on the supply of goods and services. This tax is levied on the interstate supplies and is governed by the central government. The central government will hold on to revenue collected under CGST.

    2. SGST: SGST is a tax applied on Intra State supplies of both the goods and services by the State Government and will be administered by the SGST Act. The revenue is collected by the state government. However, the mainstream work of the state government is governed by the central government only.

    3. IGST: IGST is charged on the supplies of goods and services from one state to another. Therefore, it is stated as the interstate tax. This tax is also applicable to the supplies of goods and services in both the case of import into India and export from India. The revenue is collected by the government of India.

    4. UTGST: Delhi (India’s Capital Territory), Chandigarh, Dadra & Nagar Haveli, Andaman & Nicobar Islands, Daman & Diu, Lakshadweep, and Puducherry are the prominent union territories in India. UTGST applies to all these union territories. The revenue is collected by the union territory government. UTGST is levied with the CGST only.

    These taxes are implied on the businesses only after their GST registration.

    On what basis are they differentiated?

    According to the government of India GST are of four types. The GST types are namely Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST). As mentioned earlier, their taxation rates (GST rates) are different from one another.

    The above taxes are differentiated based on:

  • The authority that is benefitted by the GST i.e Central, State, or Union territory government.
  • The priority of tax credit use.
  • Tax is collected by which authority i.e Central, state or union territory government.
  • Applicable transactions (Goods and services) i.e intrastate, interstate, union territory, etc.
  • Why are they segregated into 3 types of GST?

    India is a federal country and both state and central governments have the rights to levy and collect taxes. Both governments have different constitutional duties to perform hence they need to raise the resources. A double GST where the Center and State government at the same time demand GST will, in this manner, not exclusively be with regards to the Constitutional prerequisite of monetary federalism yet additionally be beneficial to all stakeholders.

    GST is a consumption-based tax i.e this tax is implemented on that state where those products or services are used not by that state where goods are manufactured. IGST will deal with the in[ut tax credit and interstate movement of goods. In this way, only one state has to deal with the central government to settle the tax amount, not with the other states. This process makes the process easier and hassle-free.

    Which of these have proved to be the most beneficial?

    GST is a tax levied on sales, i.e. the tax should be charged by the state in which the products or services are sold and not by the state in which those goods are produced. IGST must ensure that the input tax credit flows smoothly with the movement of goods between the States. Whereas, SGST is applicable when goods and services are supplied within the state. Along with SGST, CGST (Central GST) is also applied to it and hence transferred to the central government.

    For example;

    In Uttar Pradesh, a dealer sold products worth Rs. 10,000 to the customer in Uttar Pradesh. The GST rate is 12%, consisting of a 6 % CGST rate and a 6 % SGST rate, in which case the dealer collects Rs. 1200 and Rs. 600 will go to the central government and Rs. 600 will go to the government of Uttar Pradesh.

    So the Madhya Pradesh dealer had sold goods worth Rs. 1,00,000 to a dealer in West Bengal. The GST rate is 12%, with a CGST rate of 6% and an SGST rate of 6%. The dealer will in such a case bill Rs. 12,000 as IGST. That IGST is going to go to the Centre.

    Therefore, in total IGST will be more beneficial because it is the collective tax of both SGST and CGST (Central GST).

    What is the structure of GST?

    GST was made by keeping the situation of layman and inflation rates in mind. To make it easier and simpler GST was structured following the four tiers. These four zones are zero GST rates, lower GST rates, standard GST rates, higher GST rates.

    1. Zero rates: Zero rate tax is the nil tax that is applied to the goods and services. This tax is equivalent to the tax exemptions and it does not affect the actual price of the product. The zero rates of the GST structure will keep the costs of essential things under check, whether or not the government chooses to raise the tax rates later on.

    2. Lower rate: Lower tax rate is the 5% tax rate which is applied to the consumer price index (CPI) basket and mass consumption. This also helps to prevent the inflation of the item rate and keep in mind to check the price of goods.

    3. Standard rate: This includes 12% and 18% of the tax rates. Here, the council has finalized two standard rates to keep the check on inflation.

    4. Higher rates: Higher rates tax includes 28% of the tax rate. This includes goods like washing machines, air conditioners, soft drinks, etc. Previously due to the cascading effect, this tax of 27% increased up to 30-31 %. But due to this higher rate tax, it becomes fixed to 28%.

    What are the 5 slabs of GST?

    The 5 slabs of GST are 0%, 5%, 12%, 18%, and 28% this is broadly divided under the four tiers. They are namely, Zero rate, lower rate, standard rate, and higher rate.

    1. Zero rates: Zero rate includes the 0% tax rate which is equivalent to tax exemption. The government has exempted almost 50% of the items from the consumer price index (CPI) basket. This slab includes all the common commodities required by every common person like cereals, food grains, dairy items, and general train tickets, etc.

    2. Lower rate: Lower rate includes the 5% slab of GST. It includes the rest of the commodities of the CPI basket. It includes the sugar, kerosene, LPG, air conditioner railway tickets, etc. GST has put the transport services under this slab.

    3. Standard rate: This tier includes the two slabs that are 12% and 18%. Previously the goods which were placed under the slab of 9% to 15% are now considered under the 12% slab which limits the inflation. Processed food comes under 12 % slab. The rest of the goods like toiletries, toothpaste come under the slab of 18%.

    4. Higher rate: This tier includes the highest slab i.e 28%. This tax is levied on white goods like electrical appliances such as washing machines, air conditioners, etc.

    These are the 5 slabs under which the GST was structured.

    What are the products and services that come under GST?

    Products that come under the GST are divided into 4 slabs that are 5%, 12%, 18%, and 28%. 0% slab is the tax exemption slab and it does not come under the GST tax rate list.

    Products and goods that come under these slabs are as follows:

    Under 5% slab: Consumables like Sugar, coal, coffee beans, tea, packed paneer, raisin, edible oil, PDS Kerosene, domestic LPG, skimmed milk powder, cashew nuts, footwear (< Rs.500), milk food for babies, apparels (

    Under 12% slab: Butter, computers, ghee, processed or packaged food, almonds, mobiles, fruit juice, preparations of vegetables, fruits, nuts or other parts of plants including pickle murabba, chutney, jam, jelly, packed coconut water, and umbrella.

    Under 18% slab: Hair Oil, Capital goods, Toothpaste, Industrial Intermediaries, Soap, Ice-cream, Pasta, Toiletries, Corn Flakes, Computers, Soups, and Printers.

    Under 28% slab: Small cars (+1% or 3% cess), High-end motorcycles (+15% cess), Consumer durables such as AC and fridge, Luxury & sin items like BMWs, and aerated drinks (+15% cess), cigarettes.

    Which are the products and services exempted by GST?

    Goods and services that are exempted from GST are:

    Exempted goods:

    Food: Cereals, edible fruits and vegetables, edible roots and tubers, fish and meat, tender coconut, jaggery, tea leaves (not processed), coffee beans (not roasted), seeds, ginger, turmeric, betel leaves, papad, flour, curd, lassi, buttermilk, milk, and aquatic feeds, and supplements.

    Raw Material: Raw silk, silk waste, wool (not processed), khadi fabric, the cotton used for khadi yarn, raw jute fibre, firewood, charcoal, and handloom fabrics.

    Tools: Hearing aids, hand tools (such as spades and shovels), tools used for agricultural purposes, handmade musical instruments.

    Exempted Services:

    Agriculture services: Agricultural services including harvesting, fumigation, cultivation, packaging, renting, purchasing or leasing machinery for agricultural purposes, activities involving the warehouses, the supply of farm labour are all included under the exempted services.

    Transportation Service: Transportation of merchandise by inland waterways, Transportation of travellers via air (in the conditions of Manipur, Meghalaya, Assam, Arunachal Pradesh, Nagaland, Sikkim, Tripura, and Bagdogra), Transportation by non-AC, transportation of rural produce, milk, salt, papers, or woodgrains, Transportation of merchandise where the gross sum charged is not as much as Rs. 1500.

    Educational service: Services include student and faculty transportation, mid-day meal catering services, security, housekeeping and services during admission, examination etc.

    Medical services: Services provided by a veterinary clinic; health-care services provided by clinics or paramedics, services provided by ambulances, charities, and organizations facilitating religious pilgrimage.

    How does the central govt and state govt revenue share the GST?

    India is a federal nation where the powers to levy and collect taxes were delegated to both the centre and the states. Both governments have different obligations, as provided for in the Constitution, for which they need to collect tax revenue.

    The Centre and States levy GST at the same time.

    Let assume that manufacturer A sells products worth Rs. 10,000 from Uttar Pradesh to Dealer B in Uttar Pradesh.

    Dealer B retails them for Rs. 17,500 to Trader C in Madhya Pradesh.

    Trader C finally sells for Rs. 30,000 to end-user D in Madhya Pradesh.

    Suppose the relevant tax GST rates for the products sold are CGST= 9 %, SGST=9 %, and IGST=9 + 9=18 % Because A sells this to B in Uttar Pradesh itself, it is an intra-state sale and will, therefore, apply CGST@9 % and SGST@9 %.

    Dealer B (Uttar Pradesh) sells C (Madhya Pradesh) to Traders. This is also an interstate deal, with IGST@18%.

    Trader C (Madhya Pradesh) also sells at Madhya Pradesh to end-user D is in the same state-level hence also, CGST and SGST are considered and it will be 9 % each i.e. divided equally.

    GST calculation:

    GST being a consumer-based tax would receive GST from the state level where the products were sold (Madhya Pradesh). Uttar Pradesh (where goods were sold) would get no taxes by that argument. The state-level will have Madhya Pradesh and the central government (30,000 * 9 percent) = 2,700 each.GST being a consumer-based tax would receive GST from the state level where the products were sold (Madhya Pradesh). Uttar Pradesh (where goods were sold) would get no taxes by that argument. The state-level will have Madhya Pradesh and the central government (30,000 * 9 percent) = 2,700 each.

    Uttar Pradesh (exporting state) would then have to move the Rs. 900 SGST credit (used in IGST payment) to the Centre.

    In turn, the Central Government will transfer to the state Madhya Pradesh (importing state) Rs. 450 IGST.

    How the GST collection is mandated among the corporate's, SME's and MSME's of India

    GST is intended to bring any form of indirect tax under one umbrella. For small and medium-sized businesses, owners or producers have to pay specific taxes and have to go to various departments to complete all tax documents. Previously, the overall tax imposed by the central and state-level governments was up to 32 %, but the business owners have to pay a much lower tax of about 18- % with the introduction of the GST and GST return process. Also, they are not expected to pay different taxes to various agencies. To any company owner, it makes the job much easier.

    The direct impact of GST on small and medium enterprises

    1) GST will support and promote the company startup process in India. Earlier, every business in India had to obtain VAT registration, which varies from one state to another, and the rules and regulations differ. And it was a rather perplexing operation. Nevertheless, according to GST, the businesses must register with GST that has a centralized procedure, which is very similar to service tax.

    2) Previously, VAT payment is compulsory for any company if the annual turnover in a few states is more than 5 lakhs and in a few other states is 10 lakhs. The disparity causes ambiguity in different states. Under GST a company is not expected to file for GST return or receive GST if the annual turnover is 10 lakh. It refers to any single state level. This will allow several small businesses with turnover ranging from 5 lakh to 10 lakh to avoid applying for GST return.

    GST return is a document that contains details on all the number of sales, tax collected on sales (output tax), number of purchases and tax paid on purchases (input tax). Once filing the GST return, one needs to pay the resulting tax liability to the government. GST return is expected to be filed by those businesses whose turnover is over Rs.20 lakhs or incase of Union Territory, Rs.10 lakhs.

    Process Involved in filing GST return

    Before filing for GST return, it is necessary to be registered under GST and have the 15-digit identification number. The identification number will be provided by the government based on the state code and PAN details.

    With Vakilsearch, you can file your GST return in 3 simple steps -

  • Collect your information in a seamless manner.
  • Return will be prepared based on the requirement
  • Return will be filed in no time.
  • It is highly recommended to use professional help. You can also directly go the government GST portal.

  • Select “Service” button
  • Select on “Returns dashboard”
  • From the drop-down menu, the financial year and return file period must be filled.
  • Choose the return one wants to file and select “Prepare online”
  • Provide all the information like amount and also a late fee if required.
  • Select “Save” to save all the details
  • Finally, click on “Submit” to file the return.
  • Once the return status is submitted, one must click on “Payment of tax”. Choose “Check balance” to see both the cash and credit balance. One must choose the amount of credit required from that of what’s available to clear their liabilities. Now, select on the option “Offset Liability” to make the payment. Once the confirmation appears, choose “OK”

    Before leaving the page, one must check the box next to the declaration and must select the authorised signatory’s name from the drop-down list. Then choose either “File form with DSC” or “ File form with EVC” and then proceed with the GST payment.

    What is CGST?

    CGST is a Central goods and services tax, one of the categories that fall under the Goods and services tax GST. CGST falls under the GST act 2016 under the concept of "One nation, one tax". The revenue collected under the head of CGST is handed over to the central government. The CGST is charged to repay the centre for the prior taxes in the form of Central Excise Duty, Service Tax, Duties of Custom, extra charges, cesses, and so forth. The CGST is implemented with the SGST or UTGST, according to the Dual GST system. The GST rate that is applicable for goods or services is then divided equally into CGST and SGST/UTGST.

    This infers both the Central and the State governments will agree on consolidating their levies with a suitable extent for taxes sharing between them. Furthermore, it is obviously referenced in Section 8 of the GST Act that the taxes be collected on all Intra-State supplies of goods or services benefits yet the rate of taxes will not be surpassing 14%, each.

    Explain CGST with a brief example

    CGST is a central goods and services tax act under GST. CGST is implemented on the supply of goods and services. This tax is levied on the interstate supplies and is governed by the central government. Central Governments will obtain the revenue collected from CGST. SGST is also a component that levies on the intrastate goods and services and revenue is collected by the state-level government. So in total, both the central and state government agree to combine their levies and share the revenue collected by the consumers in equal proportion.

    This can be understood by an example.

    Raman is a merchant from Bhopal, Madhya Pradesh that sells items worth Rs. 10000 to Varun in Gwalior, Madhya Pradesh. The GST rate that applies to these items is 5% and will contain a CGST rate of 2.5% and an SGST rate of 2.5%. So Raman should collect from Varun a grand aggregate of Rs. 10,500, out of which Rs. 250 goes as a to the central government and Rs. 250 goes to the state government.

    Salient features of CGST

    The salient features of CGST 2017 are:

  • Tax is implemented on all intrastate supplies of both the goods and service
  • Tax levies on the goods and services are equally shared by the central and state government.
  • In regard to taxes paid on any stockpile of products or services or both utilized or expected to be utilized in the course business.
  • The registered person will be allowed himself to assess the taxes payable under the GST Laws and furnish a tax returns for each Tax Period.
  • to provide for powers of inspection, search, seizure and arrest to the officers;
  • to provide for the conduct of an audit of registered persons in order to verify compliance with the provisions of the Act;
  • to accommodate an anti-profiteering condition to guarantee that business passes on the advantage of reducing the tax rate on goods or services or both to the shoppers;
  • It provides the provision to give penalties to surpass the proposed legislation by the government.
  • Taxonomy of CGST law?

    The Central goods and services tax (CGST) Act, 2017 includes 174 Sections in 21 Chapters and three Schedules. The three schedules are on supplies without any consideration, Goods and services related treatment of activities and activities that are neither goods or services. These Schedules are as under:

  • Under Schedule I -Those activities to be treated as supply even when made without consideration are included.
  • Under Schedule II-Those activities to be treated as either a supply of goods or supply of services are included.
  • Under Schedule III-Those activities or transactions which are or shall neither be treated as a supply of goods nor a supply of services are included.
  • What is SGST?

    A1 SGST is a State goods and services tax, one of the categories that fall under the Goods and services tax GST. SGST falls under the GST act 2016 under the concept of "One nation, one tax". The revenue is collected by the state-level government. It occurs when the supply of goods or services happens within the state. For example, if some product is manufactured in Uttar Pradesh and sold in Uttar Pradesh only it falls under the category of SGST.

    For a transaction completed under the state government, levies the tax and it is equally divided by both the central and state governments i.e it includes both SGST and CGST. Therefore, during the intrastate transactions of goods SGST and CGST both collect the revenue but are governed by the central government only.

    Explain SGST with a brief example

    SGST is a State goods and services tax, one of the categories that fall under the Goods and services tax GST. This emerges when the location of supply (purchaser) is the same as just as the area of the provider (dealer), happens to be in a similar state. Right now, the dealer should gather both SGST and CGST from the purchaser — here, the SGST gets deposited with the state-level government, and CGST gets kept with the central government.

    For example:

    If Person A buys 1 tonne of coal from Jharkhand worth rupees 5000. According to the slabs of GST, coal falls under the slab of 5% taxation. Therefore, a 5% tax includes the final price of coal which becomes 5250 rupees. So, 2.5% tax will be collected by the state government which is 125 rupees and 2.5% will be collected by the central government i.e 125 rupees. Hence, both governments share an equal proportion of tax credit.

    Salient features of SGST

    As once stated by Dr Sanjiv Agarwal In-State GST, the States can impose GST by itself and the Centre retreats itself from the field of GST or VAT completely. Considering the different resources and responsibilities of the States, this can be a very desirable option. Here, the State GST will be adapting the redistributing mechanism. The Centre Government retreating from this will result in a reduction in fiscal transfers to every individual state Government. The States’ dependency on the Center will reduce and also their revenue capacity will be improved. One of the most well-known examples of such arrangements is the USA, where the States are relegated with the general sales taxes. However, some notable hurdles are expected in India by adopting this option, and it may not be considered suitable here.

    State GST will be paid to the States, as the taxes are imposed by them on related transactions of goods and service.

    Exceptions are on goods and services that are exempted from GST and having transactions below the guided limit.

    Some of the basic features of law will remain uniform across States of law as far as they are practicable. The basic features such as a chargeable, taxable event, measure, valuation, the classification are taken into consideration here.

    Taxonomy of SGST law?

    When levying tax on various goods or services supplies, it becomes important to determine if supplies are to be regarded as intra-State supplies or inter-State supplies. It must also be calculated, as it will be a deciding factor in paying the required taxes, i.e. CGST, SGST / UTGST, and IGST.

    Sections 7 and section 8 of the IGST Act regulate the relevant provisions for the determination of inter-State and intra-State supplies. IGST Act section 8 applies to intra-State supplies. Sub-section (1) of section 8 of the IGST Act deals with the procurement of goods within the State.

    The section provides the "under the provisions of section 10, the supply of goods where the supplier's location and the place of supply of goods are in the same state or territory of the Union shall be treated as intra-State supply" excludes three suppliers from being treated as intra-State supply, even if the supplier's location and the place of supply are in the same state or Union territory these are:

  • supplies to or by a developer or unit of the SEZ;
  • goods imported into India and
  • tourist supplies as referred to in Section 15
  • What is IGST?

    IGST is an Integrated goods and services tax, one of the categories that fall under the Goods and services tax GST. CGST falls under the GST act 2016 under the concept of "One nation, one tax". IGST is implemented on the services or goods that are supplied interstate i.e from one state to another. IGST is also applicable to the goods which are exported from India and to import to India.

    Under IGST two things should be kept in mind:

    Exports would be zero-rated.

    IGST keeps up the honesty of the Integrity of the Tax Credit chains in between State supplies. The IGST rate would comprehensively be equivalent to the CGST rate in addition to the SGST rate. The Central Government demands IGST on all between State exchanges of taxable goods and services.

    Explain IGST with a brief example

    IGST is an Integrated goods and services tax, one of the categories that fall under the Goods and services tax GST. It charged on the goods and services which are transported from one state to another state. The revenue generated by IGST is shared by the central and state government as per the rules of the authority.

    This can be understood by a simple example such as:

    If a person A from Maharashtra had sold goods to Person B from Karnataka worth Rs. 1,00,000. The GST rate is 18% comprising 18% IGST because it is the interstate sale.In this case, Rs. 18,000 as IGST is charged by the dealer. The Center will obtain the IGST.

    Salient features of IGST?

    IGST is an Integrated goods and services tax, one of the categories that fall under the Goods and services tax GST. This act is applied to the whole of India including the state likes Jammu and Kashmir also as per the government rules.

  • It helps to maintain the continuous chain of the tax credit on inter-state transactions.
  • No necessity to pay tax forthright or considerable blockage of funds for the inter-state merchant or purchaser.
  • No one can claim for the refund of tax in the exporting state as the input tax credit is already used up while paying the tax in that state.
  • Self-checking model.
  • The action of streamlining is restricted between State sellers and Central and State Governments.
  • It should have the option to streamline their procedures speedily.
  • As Dealers making between state supplies will be enrolled and correspondence with them will be by email, the consistency level will improve significantly.
  • The IGST Model can take 'Business to Business' just as 'Business to Consumer' exchanges into account.
  • Taxonomy of IGST law?

    The IGST Act comprises of the following

    11 Chapters

    33 Sections

    8 Definitions

    Short till, extent and commencement (Section 1)

    This Act will be levied on the entire of India, i.e., including the State of Jammu and Kashmir. Previously, Service Tax wasn't implemented in the State of Jammu and Kashmir yet Central Excise Act, 1944 applied to that state. What is implied by 'India' is characterized in area 2(35) of the Goods and Services Tax Act, 2016?

    Definitions (Section 2)

    There are seven definitions in section 2, viz,

  • Appropriate State
  • Government
  • Integrated Goods and Services Tax (IGST)
  • Input Tax
  • Input Tax Credit
  • Supply
  • Output tax
  • It is made specific that the words or expressions that are not defined in the Act shall remain with their same meaning as assigned in the Central GST Act,2016.

    Section 27 of the IGST Act provides that certain provisions of the Central GST Act shall apply to IGST.

    What is UTGST?

    UTGST is a Union territory goods and services tax, one of the categories that fall under the Goods and service tax (GST). CGST (Central GST) falls under the GST act 2016 under the concept of "One nation, one tax". It occurs when the supply of goods or services happens within the same union territory and revenue collected goes under the administration of union territory only. There are a total of 7 Union Territory In India

  • National Capital Territory of Delhi – Delhi.
  • Chandigarh – Chandigarh.
  • Daman and Diu – Daman.
  • Dadra and Nagar Haveli – Silvassa.
  • Pondicherry – Puducherry.
  • Andaman and Nicobar Islands – Port Blair.
  • Lakshadweep – Kavaratti
  • In GST, since Delhi and Pondicherry have their own legislation, they are not considered as Union Territories. This is the separate act of GST which covers the supplies of goods and services of all the union territories. UGST is priced at the same levels as CGST (Central GST), too. But in each case, only one shall be imposed between UTGST or SGST at a time along with CGST (Central GST).

    Explain UTGST with a brief example

    UTGST is a Union territory goods and services tax, one of the categories that fall under the Goods and services tax GST. A union territory is directly under Central Government administration. This separates them from other states that have their own elected governments. The tax levies on the supply of goods and services within the same union territory. UTGST applies to the five Union Territories that are without their own legislatures. They include Andaman and Nicobar Islands, Dadra and Nagar Haveli, Chandigarh, Lakshadweep, and Daman and Diu. UTGST is the same as SGST but it applies to union territories along with the equal proportion tax for CGST (Central GST).

    This can be explained with certain examples:

    If good or service supplies in same union territory -

    If a person A of Chandigarh sells 50 tables worth rupees 1,00,000 to person B from Chandigarh only. The tax on tables will be 12% for supposing then total tax evaluated on the final price would be 12,000. So it will be equally divided between CGST and UGST which is 6% each. Hence, 6000 rupees will be collected by the central government and 6000 will be collected by union territory authorities.

    If good or service supplies in another union territory-

    If tables were sent from Daman and Diu to Dadra and Nagar Haveli then this 12,000 rupees tax will go under the IGST tax and collected by the central government only. Here UTGST will not be implemented as it occurs inter-state and it is handled by IGST.

    Salient features of UTGST

    UTGST is the same as that of SGST but the only difference is that it applies to union territories that have their own legislation. Based on it, the salient features of UTGST are as follows:

    1) The Bill provides for the levy of the Union Territory Goods and Services Tax(UGST).

    2) The tax implemented by the central government will be confined to the boundaries of union territory only.

    3) As per the GST rules, the taxation of UTGST will not be exceeded by 20%

    4) Through notification based on recommendations from the GST Council, the centre can exempt certain goods and services from the purview of UGST

    5) All police, rail, customs, and those officers engaged in collecting land revenue, including village officers, and Central Tax officers, must assist tax officers in enforcing this Act.

    6) Several provisions of the Central Goods and Services Tax Act, 2017 apply to this Act. Such provisions include

  • time and value of supply
  • composition levy
  • registration
  • tax returns
  • payment of tax
  • assessment
  • refunds
  • inspection
  • Search and seizure
  • advancing ruling
  • appeals and offences
  • 7) Taxpayers with unused input credit obtained under current legislation can use it under GST.

    Taxonomy of UTGST

    In the case of organized use of UTGST's Input Tax Credit, the procedure to be followed is the same as SGST. To sum up, the SGST or UTGST input tax credit will initially set- SGST or UTGST, respectively. Input Tax liabilities can be set- available IGST credits and balance, if any. Before setting it off with CGST or SGST, the IGST credit must be fully used with the new law. The IGST ITC setting order can be rendered in any proportion and in any order to set the CGST (Central GST) or SGST output after using the same for IGST output. In the case of organized use of UTGST's Input Tax Credit, the procedure to be followed is the same as SGST. To sum up, the SGST or UTGST input tax credit will initially set- SGST or UTGST, respectively. Input Tax liabilities can be set- available IGST credits and balance, if any. Before setting it off with CGST or SGST, the IGST credit must be fully used with the new law. The IGST ITC setting order can be rendered in any proportion and in any order to set the CGST (Central GST) or SGST output after using the same for IGST output.

    The Union Territory GST has the same tax GST rates of 0%, 5%, 12%, 18%, and 28%. Tax exemption requirements would be the same for UTGST for products and services determined by the Government for SGST.

    Is India the only country with GST?

    Goods and Services Tax (GST) is not only available in India. Indeed the launch of GST was pretty late in India. France was the first country to introduce GST aimed at reducing tax avoidance in 1954. Since then, GST has been adopted by more than 140 countries with some countries having dual-GST models (e.g. Brazil, Canada, etc.). India has chosen the dual-GST Canadian model.

    GST is applicable in a number of developed and developing countries. Yes, the EU's Free Trade Agreements and Economic Ties are more close to GST, which has no entry taxes as India has entry taxes for various states. GST registration is levied to reduce all the indirect taxes from the system.

    The Indian GST case is designed for efficient tax collection, elimination of corruption, easy movement of goods between states, etc. GST unites the markets of a nation and leads to improved tax enforcement, thereby contributing to economic growth and development.

    The impact GST has created on the Indian Economy

    The Goods and Services Tax (GST) is an initiative expected to bestow the much-needed boost for India’s economic growth by altering the existing indirect tax base into a free flow of multiple goods and services.

    GST has created a great impact on the Indian economy in various ways:

    1) Reduces tax pressures on manufacturers and helps promote productivity by generating more. Pumped with numerous tax clauses, the current tax structure prevents manufacturers from producing to their optimum potential and retards production. GST will deal with this issue by offering a manufacturer's tax credit.

    2) Numerous tax barriers, such as check posts and toll plazas, result in the wastage of unpreserved items being transported. This penalty turns into large costs due to higher buffer stock and warehousing expenses. The roadblock would be removed by a single tax structure.

    3) The system will be more straightforward because the consumers will know exactly how much taxes they are paying and on what basis.

    4) By expanding the tax base GST would contribute to government revenues.

    5) GST would give credit to manufacturers for the taxes paid in the products or services chain. It is supposed to enable producers to buy raw material from different licensed dealers and is hoped to bring in more vendors and suppliers under the taxation purview.

    6) GST will abolish customs duties that relate to exports. The competitiveness of the nation in international markets would improve due to the lower transaction costs.

    7) Filing for GST return has enabled more honest transactions between businesses and the government.

    Pros of GST implementation

    The goods and services tax (GST) is collected on most goods and services that are being sold for domestic consumption. It is considered as a value-added tax. It is applied in 2017. The GST is paid by the consumer and revenue is collected by the government.

    There are several pros of GST and their areas:

    1) It removes all the indirect taxes which in turn reduces the unwanted tax burden such as VAT, CST, Service tax, CAD, SAD, and Excise.

    2) Less tax enforcement relative to the new tax system, and a streamlined tax strategy.

    3) Removal of the cascading impact of taxation i.e. abolishes numerous taxes.

    4) Reduction of production costs due to a lower tax burden for the manufacturing sector. Therefore prices of consumer products are likely to decline.

    5) Lower the pressure on the common citizen i.e. the public would have to spend less money to purchase the same earlier costly goods or services.

    6) Increased demand for and products used.

    7) Increased competition would raise supply. That will eventually contribute to a rise in the manufacture of goods.

    8) Regulation of movement of black money as the method usually practised by traders and shopkeepers would be subjected to a compulsory test.

    9 ) Long-term boost to the Indian economy.

    10) Under GST, however, the restrictions on inter-state movement of goods have been lessened.

    11) GST allows for electronic compliances and payments, and only when the manufacturer has approved the balance is eligible for input credit. That has given those industries transparency and regulation.

    12) Enabled more sincere transactions between businesses and the government with the rules imparted via GST return.

    Cons of GST implementation

    The goods and services tax (GST) is a value-added tax imposed on multiple goods and services that are sold for domestic consumption. It is applied in 2017. The GST is paid by the consumer and revenue is collected by the government.

    There are several Cons of GST and they are as follows:

    Increased costs due to the purchasing of software:

    Companies must either upgrade their current accounting or ERP software to GST-compliant one or buy a GST software so that they can continue their business. But all the solutions lead to an increased cost of purchasing software and educating workers to use the new billing software effectively.

    Online tax structure:

    GST is a method of filing taxes online. Each part of this new tax regime is done online, from GST registration to the filing of GST return. Though companies are slowly transitioning to digital solutions, with these new technologies and solutions small businesses are still not very well versed.

    The Goods and Service Tax (GST) was brought into effect in the middle of the financial year:

    As GST was introduced on 1 July 2017, companies followed the old tax system for the first 3 months (April, May, and June), and GST for the remaining time of the financial year. Therefore, Businesses can find it difficult to adapt to the new tax regime which leads to problems of confusion and enforcement.

    The burden of tax on SME'S

    The tax liabilities for small and medium-sized enterprises (SMEs) increased. It is because the excise tax was only charged in the past by firms with annual revenue of Rs. 1.5 crores above. Under the new tax law, however, any company that has an annual turnover of Rs. 20 lakhs above is supposed to pay GST.

    Social impact GST has created

    The goods and services tax (GST) is a value-added tax levied on supplies of goods and services. It is applied in 2017. The GST is paid by the consumer and revenue is collected by the government.

    Tax levies on goods and services in the context of economic reform have an impact on society and are as follows:

    Simplification of fiscal structure:

    GST registration has streamlined the country's tax system. GST is a single tax, it has become easier to measure taxes at the various stages of the supply chain

    Export growth:

    GST has reduced the customs duties on goods exported. Output costs in the local markets have also fallen as a result of GST. Both of those factors have increased the country's export rate. When it comes to expanding their markets internationally, corporations have become more successful.

    Improved pan-India operations:

    Businesses can now escape roadblocks for taxes, such as toll plazas and check posts. This created problems earlier, including damage to unpreserved goods as they were being transported. Those issues were eliminated by a single taxation scheme. Now they can easily transport their products via India.This has contributed to improvement in their pan India operations.

    Production support:

    According to the Indian retail industry, the total tax portion is around 30 percent of the cost of the product. The taxes have gone down because of the effects of GST.Therefore, the end-user gets to pay fewer taxes.

    GST Exemption list of goods and services

    Goods and services that are exempted from GST are:

    Exempted goods:

    Food: Cereals, edible fruits and vegetables, edible roots and tubers, fish and meat, tender coconut, jaggery, tea leaves (not processed), coffee beans (not roasted), seeds, ginger, turmeric, betel leaves, papad, flour, curd, lassi, buttermilk, milk, and aquatic feeds, and supplements.

    Raw Material: Raw silk, silk waste, wool (not processed), khadi fabric, the cotton used for khadi yarn, raw jute fibre, firewood, charcoal, and handloom fabrics.

    Tools: Hearing aids, hand tools (such as spades and shovels), tools used for agricultural purposes, handmade musical instruments.

    Exempted Services:

    Agriculture services includes services like cultivation, fumigation, harvesting, packaging, the supply of farm labour, renting or leasing of machinery for agricultural purposes and warehouse dependent activities.

    Transportation Service:

    Transportation of merchandise by inland waterways, Transportation of travellers via air (in the conditions of Manipur, Meghalaya, Assam, Arunachal Pradesh, Nagaland, Sikkim, Tripura, and Bagdogra), Transportation by non-AC, transportation of rural produce, milk, salt, papers, or woodgrains, Transportation of merchandise where the gross sum charged is not as much as Rs. 1500.

    Educational service:

    Transportation of both students and faculties, catering services for the mid-day meal, admission, examination services, and security and housekeeping services.

    Medical services:

    Services provided by a veterinary clinic; health-care services provided by clinics or paramedics, services provided by ambulances, charities, and organisations facilitating religious pilgrimage.

    Indian GST Laws

    GST Law comprised of (i) Central Goods and Services Tax Act, 2017 including Central Goods and Services Tax Act (Extension to Jammu and Kashmir) Act, 2017, (ii) State Goods and Services Tax Act, 2017 as approved by the respective States, (iii) Union Territory Goods and Services Tax Act, 2017, (iv) Integrated Goods and Services Tax Act, 2017 including Unified Goods and Services Tax Act (Extension to Jammu and Services Tax Act), 2017), (v) Goods and Services Tax (Compensation to States) Act, 2017 (hereinafter referred as CGST, SGST, UTGST, IGST and CESS respectively all at the GST portal) and (vi) Amendments, Circulars, Notifications and Rules issued under the respective Acts.

    GST rules are as follows:

  • Issue a tax invoice for all taxable goods and services if you are registered under GST.
  • Issue a Supply Bill if you are registered under the Composition Scheme
  • Make sure you list all your sequential sequence invoices
  • Make sure that your GST invoices include your name, address, place of delivery, GSTIN. This is to be taken care during the GST registration as well.
  • Similar state sales tax: Equally paid is CGST and SGST. Example: if the actual GST rate is 12%, CGST is 6% and SGST is 6%
  • Interstate sales: for any sales tax outside the state of your company, IGST must be charged Example: if you provide 18% GST services from Tamil Nadu to Maharashtra or any other state, you must charge IGST 18%.
  • Filing for GST return to eliminate the tax liability of the business.
  • How to find HSN number or Service tariff code for GST

    HSN code means "Harmonized nomenclature system." This method was implemented all over the world for the systematic classification of products. HSN code is a standardized 6-digit code, which classifies 5000 + products and is recognized worldwide. The World Customs Organization (WCO) established it, and it came into practice in 1988.

    Services Accounting Code (SAC) in GST: Goods, services likely to one another are also classified for recognition, measurement and taxation in a uniform manner. The codes for these services are called Services Accounting Code or SAC.

    How does HSN code works? -

    The HSN structure will contain 21 sections, 99 Chapters under them, with about 1,244 headings, and 5,224 subheadings respectively.

    Each Section is divided into multiple Chapters. Each chapter is separated into Headings which is in turn divided into Sub Headings.

    The titles of sections and chapters describe the varied categories of goods, whereas the headings and subheadings provide detailed descriptions of the products.

    HSN codes seek to make GST universal and embraced globally.

    HSN codes delete the need to upload a comprehensive product summary. Because GST tax filing returns are automated, this will save time and make filing easier. HSN code can be symbolized in 8 digits and each digit has some meaning:

    The first two digits indicate the Chapter under HSN codes.

    The next two digits indicate the headings under Chapters.

    Next 2 digits indicate the sub-headings, 6 digits HSN code is accepted worldwide.

    The next 2 digits sub-classify the product tariff heading during import and export of supply.

    Economy before vs after GST

    India's growth rate has remained very strong over the last two decades on average since 1990 it has been above 6.5 %. The income per capita has also risen from under US$ 200 in the 1980s to about US$ 2500 in 2020. Inflation was the main threat from 1980 to 2000 but has slowly become more stable because of the government's balanced approach to the budget and privatization and liberalization initiatives. The growth rate of the money supply has decreased significantly since 2011. Having a rapidly growing public sector is common for a developing economy such as India. Although collecting more taxes from a small and still underdeveloped tax base is difficult, demand for public funds from infrastructure, health and education, and other social services are high. Barriers to trade between provinces created by cascading too many taxes shall be eliminated after unified GST is enforced.

    As of 1 July 2017, GST was introduced in India. Because of the cascading of taxes, it has removed all systemic rigidities and unnecessary pressures on customers. The GST Council has set GST rates of 0 %, 5 %, 12 %, 18 % and 28 % for goods and services; there is a comprehensive timetable for goods and services-specific GST rates. For studying, We consider on average 12% GST for our counterfactual scenarios to be applicable to all goods and services along with 5% income tax across all households. In this way, as the current taxes are replaced they have very positive economic impacts.

    Effect of GST on foreign trade

    The implementation of Goods and Services Tax (GST) has had a significant effect on India's foreign trade as it has brought about changes in the system of taxation on imports and exports and abolished various indirect taxes and exemptions.

    For export services from India:

  • The rules for inter-state service provision are therefore relaxed. In the case of service exports, an exporter may take advantage of the input tax credit or claim reimbursement of production taxes paid only if they are licensed under the GST Act.
  • In addition, in compliance with the provisions of the Integrated Goods & Services Tax (IGST) law, the export of products and/or services is considered to be a zero-rated supply and in such a scenario an exporter is entitled to demand GST refund.
  • For Import services to India:

    Imports under GST are regarded as inter-state supplies and thus subject to taxation. Once goods are imported into India, along with customs duty, IGST is levied on the value of the goods. The Harmonized Nomenclature System (HSN) is used to classify goods and measure IGST and customs duty under the GST system.

    Imports are to be completely taxed in India under the proposed GST, irrespective of whether the imported goods and services are manufactured in India or not, thus giving domestic producers a level playing field, especially in the import-substitution industry. This will support the government's ' Make in India ' initiative.

    Future trends and predictions of GST

    The success of the GST and its realities were mixed. We've seen successful gains in both the short and medium-term. In June, the collection of GST revenue rose to Rs 95,610 crore. The compliance rate stood at 69.5 % and that is a reasonable number to reach during the first year of its introduction given the scale and the industry.

    In the short term-

    Despite the challenges, the short-term effect of GST has been positive though. It has resulted in the removal of numerous tax regimes and cascading tax impacts. Because of the lower tax burden, average costs have decreased with the subsequent production increase.

    In the long term -

    GST will be streamlined even further in the long run. Compared to India's five-rate system, countries that have benefited from GST implementation usually deploy two or three GST rates. When the cascading effect vanishes, inflation will decline, leading to a favourable outlook for the market. The fiscal deficit will be rising as tax revenue increases.

    Upcoming initiatives:

  • It is a good start to turn a pen-and-paper economy like India to a fully digital platform.
  • In retrospect, the GST was a step in the right direction. It will have a long-term effect on the growth of the country's GDP, ease of doing business, trade and industry development, and the initiative ' Make in India. '
  • Scope of economic growth with GST implementation

    Scope of economic growth with GST in India are:

  • This will result in less corruption and higher tax collections.
  • Single taxation leads to a fair and sustainable economy. The program would make detection of the tax defaulters easier.
  • Tax avoidance would be greatly reduced with lower tax GST rates contributing to higher investment in the manufacturing industry.
  • One tax rather than too many separate taxes would simplify tax collection and tax control.
  • Increased investment in production and reduced costs would result in increased export volumes.
  • Distribution of the tax burden among goods and service industries.
  • The cascading impact of taxes is supposed to be eliminated and help in the creation of a single national market.
  • The most noticeable concern is the exemptions from main industries such as power, gas, petrol, crude oil, and immovables. Such exemptions cannot be made as planned to will the cascading impact of indirect taxes.
  • Under the GST regime, the tax burden between manufacturing and services would be shared equally through lower tax levels resulting in an expanded tax base and reduced exemptions.
  • Reduced tax liability on businesses with the GST return filing rules and process.
  • Is GST a Success in India?

    GST implementation in India is certainly a historic act for Indian Economy's futuristic development. Our next-generation should take advantage of GST's true taste and benefits. Thus, in a broad sense, GST is a huge blessing for India which will very soon help our country get into the list of developed nations.

    GST is a huge success for India in many contexts such as:

  • Traders have had to comply with the rules and regulations of various tax departments and laws during the pre-GST era. Compliance with taxes became better for traders now.As the revenue base expanded exponentially, that augured well for the government.
  • The gross monthly revenue collection increased further to Rs 97,100 crore by around 10 per cent in 2018-19.
  • The amount of revenue from the government has also gone up. In the eight months of 2017-18, the total revenue collection per month was Rs 89,700 crore per month. This pushed about 12 percent of the annual revenue collection.
  • In the years 2017-19, the assessed base under GST has increased by about 85 per cent. The assessed number stood at about 65 lakh on the eve of the GST launch, which has now gone up to 1.20 crore.
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