Goods and Services Tax in India (GST)
GST was an idea conceived in 2000 to unite the Indian nation under One Nation, One Tax. Since then, 17 years have passed to make this law a reality. In 2017, GST was finally passed in Lok Sabha and Rajya Sabha.
Why is GST important?
It is important because it managed to bring India under one tax umbrella, which led to international confidence in Indian goods and services. It also made business incredibly easy to do within the country, as enterprises now had one common taxation scheme under which they could operate.
In this guide, we will discuss all the aspects of GST, including how you can register for it and how to calculate it. Let’s get started!
What is GST in India?
GST stands for Goods and Services Tax which came into effect on 1st July 2017. This is indirect taxation, which an end consumer usually pays.
GST replaced many other indirect taxes such as excise duty, VAT, service tax, entry tax and luxury tax.
In brief, this tax is levied on the supply of goods and services. It is calculated on the value added to any goods. Goods and Services Tax in India is a comprehensive, destination-based and multi-stage tax added on every value addition.
Let's take a complete look into what these various terms mean, thereby understanding what GST is all about.
- Comprehensive - GST covers every aspect of sale and purchase. It replaced various other taxes. It is called comprehensive because it encompasses every aspect of commercial life.
- Destination-based - GST is levied in a state where the product is sold rather than the state where it was manufactured. For example, if these goods were produced in West Bengal and sold in Andhra Pradesh, the GST will be levied and collected in Andhra Pradesh.
- Multi-stage - In the production of any goods or services, there are usually plenty of stages. These stages include the procurement of raw materials, production or manufacture, warehousing, selling to wholesalers, retailers and finally, the end consumers. At every stage, GST is levied. This makes it a multi-valued tax.
- Value addition - Let's take an example of textile production. First, raw materials such as cotton or silk are taken and made into cloth. This increases the value of the raw materials. Then the fabric is designed into clothes which further enhances their value. After the dresses are made, they are branded and sold to retailers who advertise and market them, thereby increasing their value. GST is levied on each of these stages where value is added to the product.
With this understanding of what is GST tax, you can go on to understand different types of GST.
What are the types of GST in India?
There is a four-fold break-up of goods and services tax in India. It oversees the levy of tax for central government GST, GST for states, union territories, and the integrated goods and services tax. You can check out the details of these below.
- Central Goods and Services Tax - The central government levies a CGST on goods and services transactions. It is levied along with the State Goods and Services Tax and the Union Territory Goods and Services Tax. These are shared between the state and centre. For example, if you are a Mumbai-based trader selling to another Mumbai-based trader for an amount of Rs.50,000 with a GST calculated at 18%, then 9% will go to the state's coffers, and the other 9% will go to the central government's coffers.
- State Goods and Services Tax - SGST or State Goods and Services Tax is calculated for intrastate goods and services transactions. The State Government keeps all of this tax that is levied. This tax replaces the other previous taxes such as VAT, octroi, luxury, entertainment and purchase tax.
- Integrated Goods and Services Tax - Integrated Goods and Services Tax is the tax that is levied on service transactions and inter-state goods. It applies to exports and imports too. Both the state and the center take their respective shares of the tax. SGST part of the tax goes to that state where the goods or services are consumed.
- Union Territory Goods and Services Tax - Union Territory Goods and Services Tax is the same as State Goods and Services Tax except that it is levied in the Union Territories of the country rather than the states. So expect to pay this tax in Pondicherry, Daman and Diu, etc.
What are the different GST rates on goods and services?
There are four types of GST slab rates. These are 5%, 12%, 18% and 28%. The GST council revises these rates to ensure efficient pricing of these products.
Here are the different slabs of GST and the various goods and services that fall under these categories.
The goods and services available at 5% GST
- Edible oil, spices, tea, coffee, and sugar
- Matting, coir mats, and floor covering
- Wind-based Atta Chakki or Pawan Chakki
- Natural cork
- Appliances for differently-abled individuals, such as Braille paper, Braille watches, hearing aids, etc.
- Marble rubble
- Indian sweets or Mithai
- Different accessories or carriage parts for differently-abled individuals
- Fly-ash blocks
- Incense sticks and kites
- Life-saving drugs and medicines, like insulin
- Numismatic coins
- Ice and snow
- Walking sticks
- Cashew nuts
- First-day covers revenue stamps
- Stamp postmarks
- Renting a motor car without paying for fuel
Goods and services available at 12% GST
- Frozen meat
- Fruit juices
- Diagnostic kits and reagents
- Sewing machines
- Handmade matches
- Dairy products
- Notebooks and exercise books
- Jewellery box
- Plastic beads
- Two-way radios
- Fixed Speed Diesel Engines
- Sauces, bottles of ketchup, condiments
- Real estate construction
- Hotel accommodation within Rs. 1001 and Rs. 7500 per day
Goods and services available at 18% GST
- Food or drinks at those places with AC and liquor license
- Party arrangement with shamianas and food supplies
- Movie tickets prices above Rs. 100
- Household products
- Non-leather school bags and satchels
- Shopping bags and handbags made of cotton, jute, artificial plastic, and other materials but excluding basket work or wickerwork
- Precast concrete pipes
- Outdoor catering
- Works contract supply
- Dental wax
- Electrical transformer
- Headgear and its parts
- All devices for length measuring by hand, like measuring tapes, callipers, etc.
- Staplers, pencil-sharpening devices
- Rear tractor wheel rims, tractor housing transmissions, tractor center housing, tractor support front axle
- Transformers and industrial electronics
- Plastic tarpaulin
- Pencil sticks for Kajal
- Aluminium foil
Goods and services available at 28% GST
- Caffeinated beverages
- Food or drinks at 5-star hotels
- State-owned and state-authorised lotteries
- Cars and two-wheelers
- Dishwashing machines
- Aerated beverages
- Tobacco products, such as cigarettes
- Racing club services
- Washing machines
- Air conditioners
These are some of the goods and services that you can get at these particular tax brackets.
What is GST registration?
Every business with a turnover that exceeds Rs.40 lakhs or Rs.10 lakhs for the North East and hill states must register as a normal taxable person. This process is called GST registration. GST registration usually takes between 3-6 days and can be quite a tedious process.
How to register for GST?
Every individual or business has to register for GST. You will have to apply with the Goods and Services Network (GSTN). Once you have registered, you will receive a Goods and Services Tax Identification Number. This is a 15 digit number that is issued state-wise once you have completed the registration.
Documents for GST registration process online
Some of the documents that you will require while registering for GST are:
- An applicant’s PAN card
- Pan, Voter, or Adhaar card of the promoters and partners
- A business address proof in the form of a lease agreement, rent, or other utility bills
- Account statement of the firm, or individual or company
- Partnership deed or incorporation certificate
How to apply for GST registration online?
PART A of registration:
Follow these steps to apply for GST registration online.
- Go to the GST portal https://www.gst.gov.in/ .
- Select the "Services" tab.
- Choose "Registration" and then select "New Registration."
- Under the drop-down menu for "I am a," select "Taxpayer."
- Fill the form GST REG-01 for the new registration, and enter the details of your business, state, email address, mobile number and PAN card.
- A one-time password will be sent to your mobile. Enter that password and select "Proceed."
- When you complete this level, you will have to go to another process called part B.
- You will receive a Temporary Reference Number (TRN) after verification.
This is how you complete the application for the GST number.
PART B of the registration:
- To start the registration under PART B, you need to login with the TRN.
- Enter the Captcha code.
- Complete the OTP verification with the OTPs sent to the email id and the registered mobile number.
- Then you will be redirected to the GST registration page.
- Next, the details of your business need to be given, such as the name of your Business or Company.
- Add other information such as PAN number and the state where your business is to be set up.
- If you have any existing registrations, mention them and the date when the business will commence.
- In the next step, the names and details of up to ten business partners or promoters need to be mentioned.
- In case of a sole proprietorship, the PAN, Aadhar, DIN (Director Identification Number) and personal details have to be provided.
- In case someone else is filing your GST returns, their details have to be furnished.
- The address of the premises, official contact information and nature of the property need to be filled in.
- The company's bank account details, details of the services and details of any other places of the same business have to be filled in.
- The "type of business" needs to be specified. All these details are to be entered under the correct heading.
- Click on the "Save and continue" button. After it is submitted, you will need to provide your digital signature.
- Click on "Submit."
- You will now receive your ARN (Application Reference Number ) by email or SMS to confirm the registration of your application.
How to calculate the GST amount?
The following formulae is needed for calculating the GST before the application of GST and after the removal of GST. Here's how GST is calculated.
Formulae for adding GST
GST Amount = (Original Cost x GST%)/100
Net Price = Original Cost + GST Amount
Formulae for removing GST
Net Price = Original Cost – GST Amount
You can also find several GST tax calculators online.
What are the benefits of GST?
There are manifold benefits of GST registration. These are a few of them.
- The benefit of GST to the government
One of the chief benefits of the GST to the government is bringing all the nation's markets under one tax system. This creates confidence in the international market for Indian products and increases foreign investment. This boost to foreign investment will help Indian products reach a global venue and increase the export and import market.
- The benefit of GST to the common man
The benefits of GST to the consumer are manifold. Consumers will have to pay much less than before when they had to pay VAT. GST is a one-time tax, so it is charged at just one stage. For example, food items have become cheaper and packaged goods such as shampoos, toothpaste and soaps have become more affordable.
- With GST, the cascading effect to tax has been eliminated, which is the "tax on tax" system.
- There is now a higher threshold for a business person to register under GST (The business has to have a turnover of Rs. 40 lakh or more. It sets smaller companies free from having to pay GST.
- GST has come up with a "composition scheme" that is responsible for helping small businesses pay lesser tax and also reduces compliance.
- There is one simple and easy procedure to pay the GST tax. You can do it online by getting your registration number.
- The number of compliances is fewer. There is just one return to be filed. The GSTR-1 will be manually populated, and the other forms are auto-populated.
- There is a clear-cut definition for the e-commerce sector where companies like Amazon and Flipkart are treated the same in all the states, and there is no notable difference in identifying them.
- The unorganised sector has been largely regulated with the arrival of GST. The new regulations have benefited the construction and textile industry.
What is GST return?
All businesses have to file monthly, quarterly, or annual GST returns. You can file the GST returns online. A GST return is a document that contains the sales, purchase, expense, or income of every business or person with a GSTIN. This document is used by tax authorities to calculate the net tax liability. There are different GST return charges.
You can do the GST return filing online.
GST helpline number and official details
1) You can call the GST Helpline Numbers, which are given below and contact the government authorities to help with GST filing.
GST Help Desk
ICEGATE Help Desk
2) Here are some of the key email contacts that you can contact for the filing of your GST.
GST Help Desk
ICEGATE Help Desk
3) GST Self Service Portal
Under the Services→User Services section of the official GST portal https://www.gst.gov.in/, You can fill out the grievances in the form along with your details and complaint, which will then be addressed.
In conclusion, GST is the tax change that has united the country under One Nation, One Tax. It has made the taxation system much simpler and has joined the country irrespective of the state into one tax regime that makes business easier and more manageable for day-to-day transactions.
Hence get acquainted with the details of GST and make sure your business is compliant with all its mandates!