GST

Introduction

Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services in India. It is a comprehensive multi-stage, destination-based tax: comprehensive since it has incorporated nearly all indirect taxation, with the exception of a few state taxes; multi-stage as the GST is levied at various levels of the manufacturing process, but is supposed to be refunded to all parties during various points of production, other than the final customer, because as a destination-based levy, it is collected from the point of consumption and not from the point of origin, as in the case of previous taxes.

The tax came into effect from 1 July 2017 through the implementation of the 101st Amendment of the Constitution of India by the Indian government. The GST replaced existing multiple taxes levied by the central and state governments.

Tax rates, laws and regulations shall be regulated by the GST Council, which shall be consisting of the Finance Ministers of the Central Government and all States. The GST is intended to replace several of the indirect taxes with a centralised tax and is thus supposed to reshape the country's $2.4 trillion economy, but its introduction has attracted criticism. Biggest advantages of the GST include national transit time, which declined by 20% due to the dissolution of interstate checkpoints.

Goods and services are split into five separate tax collection slabs – 0 %, 5 %, 12 %, 18 % and 28 %. However, petroleum goods, alcoholic beverages and electricity are not paid on the basis of GST and are now taxed individually by individual state governments, as per the previous tax regime. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition, a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.

India has implemented a dual GST model, which ensures that taxation is controlled by both the Union and State governments. Transactions made in a single state shall be levied with CGST from the central government and the SGST by the state government. Integrated GST (IGST) is imposed by the central government for inter-state purchases and manufactured goods or services. GST is a consumption-based tax or destination-based tax, thus, taxes are charged to the State in which the goods or services are purchased and not to the State in which they are made.

GST Council

The Goods & Services Tax Council is a constitutional body setup to govern the various aspects of GST. As per Article 279A of the amended Constitution, The GST Council, which will be a Collective Platform of the Center and the States, shall be comprised of the following members:

• The Union Finance Minister - Chairperson
• The Union Minister of State in charge of Revenue or Finance - Member
• The Minister in charge of Finance or Taxation or any other Minister nominated by each State Government – Members

The primary objective of the Goods and Services Tax Council is to make recommendations to the Union and the States on the following matter:

• Taxes, cesses and surcharges imposed by the Union, the States and municipal authorities that could be taxed under GST
• Goods and services that may be subject to, or excluded from GST 
• Model Goods and Services Tax Rules, principles of levy, allocation of goods and services Tax imposed on supplies in the process of inter-state trade and commerce according to Article 269A and principles regulating the place of supply
• The threshold of turnover at which products and services can be excluded from GST
• Rates including floor rates for products bands under the GST
• Any special fee or rate for a defined time to collect extra capital during any natural disaster or disaster
• Specific laws affecting the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand
• Any other issue relating to taxation on goods and services, as may be determined by the Council
• The Goods and Services Tax Council shall also recommend the date on which the goods and services tax is imposed on crude oil, high-speed diesel, motor spirit (commonly referred to as petrol), natural gas and aircraft turbine fuel
• The Goods and Services Tax Council shall create a process to resolve any dispute—
• between the Government of India and one or more States
• Between the Government of India and any State or States on one side and one or more other States on the other
• About two or more Nations, based on, or adopted by, the Council's recommendations

Various Taxes subsumed under the GST

The primary objective of GST was to subsume various existing taxes across centre and state and implement a single taxation system in the Good & Services market.

The GST subsumed a number of taxes that were levied across the state. They are: 

• Central Excise Duty
• Services Tax
• Additional Customs Duty
• Surcharges
• State-Level Value Added Tax 
• Octroi

Multi-stage GST

GST is levied at multiple stages of GST starting from production to supply. 

• Purchase of raw materials
• Production or manufacture
• Warehousing of finished goods
• Selling to wholesalers
• Sale of the product to retailers
• Selling to the end consumers

Value Addition – GST

GST is levied on the value addition given to a raw material to make it into a complete product ready to be sold. For example, if we take cotton, it is cleaned and sent to mills, it is woven into yarn, which is woven into fabric, which then becomes a shirt, given an attractive brand name and packaging, sold to wholesalers, who sell it to retailers, who finally sell it to the final consumer. A simple cotton becomes a shirt through various value additions. GST is levied on these value additions.

Advantages of GST

GST attempts to subsume all the different kinds of taxes under a single umbrella. It is instrumental in ensuring uniform taxation across the country on all Goods & Services. Here are a few more advantages of GST:

• Reduction in Cascading of Taxes
• Overall Reduction in Prices
• Common National Market
• Benefits to Small Taxpayers
• Self-Regulating Tax System
• Non-Intrusive Electronic Tax System
• Simplified Tax Regime
• Reduction in Multiplicity of Taxes
• Consumption Based Tax
• Abolition of CST
• Exports to be Zero Rated
• Protection of Domestic Industries – IGST

These benefits of GST have resulted in the following economic effects in the Indian economy

• Decrease in Inflation
• Ease of Doing Business
• Decrease in “Black” Transactions
• More informed consumer
• Poorer States to Gain
• Make in India

Structure of GST

GST in India abolished various individual taxes and brought in a single taxation system

Before GST

After GST

Goods & Services still outside GST

• Alcohol for human consumption - Power to tax alcohol remains with the State
• Five petroleum products – crude oil, diesel, petrol, natural gas and ATF - GST Council to decide the date from which GST will be applicable
• Tobacco - Part of GST but power to levy additional excise duty with Central Government
• Entertainment tax levied by local bodies - Power to tax remains with local bodies

Tax Segregation between the Centre and State

There are 3 types of taxes under the GST; CGST, SGST and the IGST

CGST – Central GST is levied by the Central Government 

SGST – State GST is levied by the State Government

IGST – Integrated GST is levied for Inter-state supply of goods and services

How to register for GST?

One can register for GST under the following norms; 

• Normal Taxpayer
• Composition
• Casual Taxable Person 
• Input Service Distributor
• SEZ Developer
• SEZ Unit
• Tax Deducted at Source or Tax Collector at Source

Registering on the GST website consists of two parts:

• Submitting the Registration Application
• Aadhaar Authentication (E-KYC)

The steps to register yourself as a Normal Taxpayer/ Composition/ Casual Taxable Person/ Input Service Distributor (ISD)/ SEZ Developer/ SEZ Unit, is the same. Please follow the below steps:

• Logon to the GST website. The Home page will be displayed.
• Go to Services > Registration > New Registration option. Or, you can also click on the REGISTER NOW link.
• In the ‘New Registration’ page, select your registration type, select the State or Union Territory you belong to, the legal name of your business, PAN number and various other details as requested.
• Enter your current mobile number to receive the confirmation OTP
• Enter the Captcha Code and click ‘Proceed’
• It will now display all the GSTINs / Provisional ID’s / UINs / GSTP IDs mapped to the same PAN across India. Click on ‘Proceed’
• You will now be sent an OTP on your mobile phone and your email address, which you need to enter in the correct fields. Then click PROCEED.
• A Temporary Reference Number (TRN) is created under your name. The next step is filling up all other details pertaining to your business and the Aadhaar verification.
• Login to the GST Portal with your TRN. 
• Once you login, go to the MY SAVED APPLICATIONS tab. 
• Open the saved application form to fill in the following details: 
• Business Details
• Promoter/ Partners
• Authorized Signatory
• Authorized Representative
• Principal Place of Business 
• Additional Places of Business
• Goods and Services
• State Specific Information
• Aadhaar Authentication
• Verification

• Once you have submitted all the details, you will come to the Aadhaar verification tab. You can opt to do the Aadhaar verification of the Promoters/ Partners, Authorized Signatories.
• If you do not want to go for Aadhaar verification, you can opt for E-KYC by uploading all the relevant documents in PDF format
• If you have opted for Aadhaar verification, you will receive the authentication link on your registered mobile number or email. Aadhaar verification will be processed and approved within 3 working days without the need for site visit.
• In case of non-Aadhaar verification, the applications can take up to 21 business days for processing and approval. Site visit is also mandatory for non-Aadhaar verifications.
• The last tab, Verification tab is for authorized signatory on your GST application.
• You can choose one of the Promoters/ Partners, Authorized Signatories from the drop down box to be nominated as the Authorized Signatory.
• You then have to digitally sign the application using the DSC utility or the EVC or the E-Signature options.
• Once you have verified the application through any one of the above methods, you will receive a SUCCESS message.
• The application is then processed and your new GSTIN is allotted to you.

GSTIN - What is GSTIN?

GSTIN, short for Goods and Services Tax Identification Number is a unique 15-digit identification number assigned to each taxpayer, primarily dealers and suppliers or other business entities registered under the GST regime. Your GSTIN will be allotted to you upon successful registration on the GST website.

Format of GSTIN

The GSTIN is based on the State and the PAN number of the applicant. It looks something like this:

Part 1: This number corresponds to the State that the entity is present in

Part 2: These numbers correspond to the PAN number of the applicant

Part 3: This is the number of registrations done by the applicant within the state

Part 4: This is a default digit and is always kept at Z

Part 5: This is the check code to detect errors. It could either be a number or an alphabet

What are the documents required to register for GST?

You generally require the following documents to register for GST: 

• Photographs of the proprietors and partners
• Constitution of taxpayer
• Proof(s) of the location of the business
• Bank account details
• Aadhaar Card details
• PAN Card details

How to file returns on GST?

GST comprises of two main function: 

• Outward Supplies (FORM GST ANX-1) 
• Input Tax Credit (FORM GST ANX-2)

• Invoices can be uploaded as and when received
• It can also be viewed by the recipient and accepted for input tax credit
• NIL return filers can file their return through a simple SMS process
• Small taxpayers with turnover up to Rs.5 crores shall file quarterly returns
• Quarterly return is basically for two kinds of taxpayers; B2C suppliers or B2B + B2C suppliers
• They can file their returns using the Sahaj and Sugam forms respectively
• Amendment returns are allowed to amend any particular invoice you have submitted

What are some of the new compliances under GST?

E-Way Bill System

GST E-way Bill is a provision that ensures seamless movement of goods between and within states. As per Article 68 of the Goods and Services Tax Act, read in compliance with Rule 138, E-way Bill is a mandatory document to be carried by the person transporting any shipment of goods that exceeds Rs. 50,000 in value. A GST E-way Bill is generated on the E-way Bill Portal by the person transporting the goods. A physical copy of the E-way bill should be carried with the transporter and produced when asked by the authorities.

The GST E-way bill was adopted in April 2018. It's now compulsory around the nation. Registered GST Taxpayers will register via GSTIN on the E-way bill portal. Unregistered persons/carriers can enrol in the Eway billing system by providing their PAN and Aadhaar.

The primary use of GST E-way Bill is in product supply. E-way Bill is mandatory for any inter-state transportation of goods with a distribution volume exceeding Rs. 50,000/-in motorised transport. And even if the transfer of commodities is triggered for factors other than supply, an E-way bill must be produced. Reasons other than supply include the transfer of commodities on the grounds of:

• Export/Import
• Job Work
• Semi Knocked Down (SKD)/Complete Knock Down (CKD)
• Recipient (Unknown)
• Line Sales
• Sales Returns
• Exhibition or Fairs

There are various ways for generating E-way Bill 

• Online on the Web  
• Android App - The IMEI of the phone and the registered mobile number has to be given
• SMS based generation through your registered Mobile Number
• Excel based upload is also available for bulk generation
• Using Site-to-Site integration
• Using GSP (Goods and Services Tax Suvidha Provider)

Electric Vehicles

GST on Electric Vehicles has been reduced from 12% to 5%

Charger or Charging stations for Electric Vehicles attract only a 5% GST

Hiring of Electric Buses by local authorities, with a carrying capacity of more than 12 passengers, has been totally exempted

ITC – Input Tax Credit

FORM GSTR-3B is used to avail Input Tax Credit for invoices issued by suppliers

FORM GST ITC-04 is used to avail Input Tax Credit for invoices relating to job work

TDS/TCS

FORM GSTR-7 is used to furnish returns 

Supply made by Government / PSU to another Government /PSU is exempted from TDS/TCS

Revenue Mobilization

A committee of ministers was set up to research the revenue trend, including an overview of the explanations for the systemic trends impacting the collection of revenue in certain States. The analysis will provide the fundamental factors for the divergence from the revenue collection goals vis-à-vis the initial expectations addressed during the design, implementation and related structural problems of the GST framework.

The Group of Ministers will be supported by the Committee of Experts from the Central Government, State Governments and the National Institute of Public Finance and Planning (NIPFP) to review and discuss the results with GoM. The GoM will, in exchange, send its decision to the GST Board.

Electronic Invoicing

The electronic invoicing method for B2B transactions has been implemented in a phase-wise manner. Phase 1 is proposed to be voluntary and has been carried out from January 2020.

GST on Real Estate

GST shall be levied at an effective rate of 5% on residential properties outside affordable segments and 1% on affordable housing properties.

Natural Calamity Cess

It has been agreed to levy a Cess on Intra-State Supply of Goods and Services within the State of Kerala at a rate not exceeding 1% for a period not exceeding 2 years.

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