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.
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:
There are four types of GST:
The following entities and individuals need to register for GST:
Out of many, the following are the main advantages of GST:
1. Advantages for Retailers and Manufacturers:
2. Advantages for the Federal and State Governments:
3. Consumer Advantages:
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:
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.
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.
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.
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:
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)]
Apart from online GST return filing, the GST regime has brought several new systems.
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.
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:
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.
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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