Goods And Services Tax (GST): Rates, Registration, Eligibility, Benefits And Returns
India implemented GST (Goods and Services Tax) on July 1, 2017. This indirect tax was introduced to replace many indirect taxes like service tax, Value Added Tax, excise duty, etc. GST is imposed on the supply of goods and services. GST is charged at each point of sale of goods and services.
Read on to understand what is GST, how it works, different types of GST, benefits, how to calculate GST, GST registration and more.
What is GST and How Does it Work?
All goods and services sold in India are subject to GST. Unlike previous indirect taxes, this indirect tax is collected at the point of use rather than the origin. To conclude, GST is a multi-stage, destination-based tax levied on all value additions.
GST works as follows:
- Manufacturer: The manufacturer must pay GST on the raw materials acquired.
- Service Provider: In this situation, the service provider must mandatorily pay GST on the price of the goods and the value-added. On the other hand, the manufacturer’s tax can be subtracted from the total GST that must be paid.
- Retailer: The retailer must pay GST on the items purchased from the distributor and the margin that was incorporated. On the other hand, the retailer’s tax can be subtracted from the total GST that must be paid.
- Consumer: The consumer must pay GST on the purchased product.
What are the Types of GST?
There are four types of GST:
- Central Goods and Services Tax (CGST) – charged on intra-state supplies of goods and services.
- State Goods and Services Tax (SGST) – Like CGST, SGST is levied on goods and services sold within a state.
- Integrated Goods and Services Tax (IGST) – IGST is charged on interstate sales of goods and services.
- Union Territory Products and Services Tax (UTGST): The UTGST is levied on goods and services in any of the country’s Union Territories, including the Daman and Diu, Andaman, and the Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, and Chandigarh. In addition to UTGST, CGST is charged.
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GST Eligibility
The following entities and individuals need to register for GST:
- Aggregators of e-commerce
- Individuals who sell via e-commerce aggregators
- Individuals who pay taxes by the reverse change mechanism
- Input service distributors and suppliers’ agents
- Individuals who do not reside in the United States but pay taxes
- Businesses with revenue that exceeds the threshold limit
- Individuals who registered before the implementation of the GST law.
Benefits of GST
Out of many, the following are the main advantages of GST:
1. Advantages for Retailers and Manufacturers:
- Compliance becomes simple.
- Ensures that tax rates and structures are consistent.
- Removal of the cascading or compounding effect caused by multiple taxations.
- Clears the way for creating a unified national market
2. Advantages for the Federal and State Governments:
- It is relatively simple to implement and manage.
- Increased compliance and revenue collection
- Increased revenue effectiveness
3. Consumer Advantages:
- Payment of a single, transparent tax
- Taxpayers’ burden is reduced.
GST Registration Process
Any company that qualifies for GST must register with the Government of India’s GST portal. The GSTIN, or unique registration number, will be assigned to each registered entity.
The following points cover the online process of GST registration:
- Visit the online GST registration portal.
- Fill in all the required fields and click on ‘Proceed.’
- Upon submission, you will receive an OTP on your registered mobile number or email ID. Enter the OTP to generate a Temporary Reference Number (TRN).
- After proceeding to the next step, enter the generated TRN into the desired field, along with the captcha.
- Now, you will have to enter your business information such as, name of the business, name of the owner, place of business commencement, etc. Click on ‘SAVE & CONTINUE’ to proceed further.
- Next, enter information about your business proprietorship.
- Insert your digital signature at the end and submit.
- In the next few windows, you will be required to enter information regarding your place of business, nature of goods and services, details of bank account, etc.
- After submitting the above-mentioned information, an Application Reference Number will be generated on your registered mobile number or email ID. The ARN can be used to check the status of your GST application.
Registration of GST is required for all service providers, buyers, and sellers. A business with a total income of Rs.20 lakhs or more in a fiscal year must register for GST. Processing time is 2-6 working days.
The GSTIN is a 15-digit unique code assigned to each taxpayer. The GSTIN will be issued based on your PAN and state of residence. The following are some of the most common GSTIN applications:
The number can be used to apply for loans.
- With the GSTIN, refunds can be claimed.
- With the GSTIN, the verification process is simple.
- Corrections are possible.
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GST Certificate
A GST Certificate is an official document issued by the relevant authorities to a business registered for the GST system. Any business with an annual turnover of Rs.20 lakh or more and certain special businesses must register under this system. Form GST REG-06 is used to issue the GST registration certificate. You can obtain your GST Certificate from the GST Portal if you are a registered taxpayer under this system. The certificate is not physically issued. It is only available in digital form.
GSTIN, Legal Name, Trade Name, Business Constitution, Address, Registration Types, Date of Liability, Period of Validity, Details of the Approving GST Officer, Signature, Particulars of Approving Authority, and Date of Issue are the contents of the GST Certificate.
GST Returns
A GST return is typically a document that includes a registered business’s purchases, sales, tax paid, and input tax credit (ITC). The return must be filed with the tax authorities, who use the same information to calculate a business’s tax liability.
What matters here is that to file GST returns, a business must have GST-compliant invoices for their sales and purchases.
Different returns must be filed monthly or quarterly, depending on the type of registration the business has. A regular taxpayer, for example, must file GSTR-1 every month with details of outward supplies of goods or services.
GSTR-4, on the other hand, is a quarterly return that must be filed by a business registered under the GST regime.
GST Rates
The GST tax slabs are as – 0%, 5%, 12%, 18%, and 28%.
Certain petroleum products, motor spirit, high-speed diesel, aviation turbine fuel, natural gas, and alcoholic liquor for human consumption are exempt from GST rates. Individual state governments tax these goods and services by their tax policies.
Here are the exchange rates for a few commodities:
- 12 per cent for books
- 28 per cent for cement
- 18 per cent for mobile phones.
- 18 per cent for steel
- 5 per cent for hotel food
How to Calculate GST
With the help of the following formula, any business, manufacturer, wholesaler, or retailer can easily calculate GST: Where GST is not applicable:
GST Amount = (Supply Value x GST per cent)/100
Price to be charged = Supply Value + GST Amount
Where GST is included in the supply price:
GST Amount = Supply Value – [Supply Value x 100/(100+GST per cent)]
What are the New Compliances under GST?
Apart from online GST return filing, the GST regime has brought several new systems.
e-Way Billing
By introducing “E-way bills,” GST established a centralised waybills system. This system was deployed in stages on April 1, 2018, for inter-state goods movement, and on April 15, 2018, for intra-state goods mobility in a staggered manner.
Manufacturers, traders, and transporters can easily generate e-way bills for goods transported from origin to destination using the e-way bill system. Tax authorities also gain because this technique minimises spending at checkpoints and helps reduce tax evasion.
e-Invoicing
The e-invoicing system went into effect on October 1, 2020, for businesses with an annual aggregate turnover of more than Rs.500 crore in any previous fiscal year (from 2017-18). This system was also extended to those with an annual aggregate turnover of more than Rs.100 crore on January 1, 2021.
Each business-to-business invoice must be granted a unique invoice reference number by uploading the invoice to the GSTN’s invoice registration system. The site validates the accuracy and legitimacy of the invoice. The digital signature and a QR code are then used to authorise the transaction.
E-invoicing allows for invoice interoperability while also reducing data entry errors. Its purpose is to transfer invoice data directly from the IRP to the GST and e-way bill gateways. Therefore, it reduces the need for manual data entry when filing GSTR-1 and assists in generating e-way bills.
The introduction of the Goods and Services Tax (GST) in India signified a substantial shift in the country’s taxation environment. Previously, separate taxes were paid to the state and the centre. However, GSTIN merged all taxes into one, and ‘One Nation, One Tax’ is now a practical reality. The following are some of the changes brought about by GST:
- There are no additional taxes to pay.
- Replacement of indirect taxes such as excise duty and sales tax with a single tax
- Taxes on luxuries and necessities are clearly separated.
- Introduction of simplified methods for filling out Income Tax Returns and taxes, such as through the official GST online portal.
- Real estate and the MSME sector benefit
- Because there are no separate taxes, goods transportation is simplified.
- Both the state and federal governments handle tax administration.
- Transparency in the fiscal process.
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Final Word
The cascading effect of GST on the sale of goods and services has largely been eliminated. The removal of the cascading effect has affected the cost of goods because the GST regime finished the tax on tax, and the price of goods fell. Moreover, GST is primarily driven by technology. All activities such as registration, refund application, return filing, and response to notice must be finished online on the GST portal, speeding up the process.
FAQs on GST
Ans: Yes, you can register for GST online for free.
Ans: To obtain a GST number, one must first apply for GST registration through the GST portal at www.gst.gov.in. To begin, one must have a valid email address, mobile phone number, and a PAN for the business.
Ans: Yes, one can give up their GST number. However, one can only do so one year after their registration date.
Ans: No, a bank account is not required at the time of GST registration.
Ans: When it comes to GST registration, the government does not charge any fees. However, because the registration process is time-consuming, you may be charged a professional fee if you approach a chartered accountant or consultant.
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