What is GST – Goods and Services Tax Explained in Detail – Legal Sahayak

What is GST?

What is GST – Goods and Services Tax

The Goods and Service Tax Act, 2017 passed in the Parliament led to the imposition of Goods and Services Tax (GST) in India. It is an indirect tax or consumption – based tax levied on the supply of goods and services. It is levied at every step in the production process but is refunded to all parties in the chain of production. The final burden of tax lies on the final consumer. Multiple taxes that once existed and were levied by Central and State government, including; central excise duty, service tax, additional customs duty, surcharges, state-level value-added tax, and octroi, are replaced by GST.

GST law in India is comprehensive, multi-stage, destination-based tax that is levied on every value addition. The tax rates, rules and regulations are governed by the GST council with the idea of one nation, one tax. The council comprises of finance ministers of the centre and the state. This means that the taxation is now governed by both Union and State governments through Central GST and State GST. The Central GST (CGST) by the Central government and the State GST(SGST) by the state government is levied on the transactions made within a single state. In case on inter-state transactions and imported goods and services Integrated GST (IGST) is levied by the Central Government. However, this complicates the tax collection process for the state governments as they are now disabled to collect the taxes that they earlier owed from the Central government. To determine whether CGST, SGST & IGST are applicable, one should first know if the transaction is;

1. Inter-state: when the location of the supplier is same as the location of the buyer i.e. same states.
2. Inter-state: when the location of supplier and the location of the buyer are in different states.

The split has been made keeping in mind the federal structure of the country where both Centre and State have been assigned powers by the Constitution to levy collect the tax. Both have distinct responsibilities to perform, for which they need to raise tax revenue. Such a structure of tax helps the taxpayers take a credit against each other.

Different Types of GST:

GST has supplanted numerous Indirect Taxes in India. The Goods and Services Tax Act was passed in the Parliament on 29th March 2017. The Act into existence on 1st July 2017.

As well as GST tax is differentiated in 4 types which are mentioned below:

• SGST (State Goods and Services Tax)

SGST implies State Goods and Services Tax, one of four classifications under Goods and Services Tax (CGST, IGST and SGST) with an idea of one tax in one country. SGST falls under State Goods and Services Tax Act 2016. The current state taxes of State Sales Tax, Luxury Tax, Entertainment tax (unless it is levied by the local bodies), VAT, Taxes on the lottery, betting and gambling, Entry tax not in lieu of Octroi, State Cesses are subsumed in SGST tax. It is against CGST and IGST.

• CGST (Central Goods and Services Tax)

CGST is a Central Goods and administrations tax. It is liable on providers managing inside the state.

Expenses which are gathered will be shared with the focal expert body.

This infers that both the Central and the State governments will consolidating their levies with 8 of the GST Act that the charges are imposed on all Intra-State supplies of products or potential benefits yet the rate of expense will not be surpassing 14 percent, each.

• IGST (Integrated Goods and Service Tax)

IGST (Integrated Goods and Services Tax), one of the three categories under Goods and Services Tax (CGST, IGST, and SGST) with a concept of one tax one nation. IGST falls under Integrated Goods and Services Tax Act 2016.

IGST is charged when movement of goods and service is done with one state then into the next. If goods are moved from Tamil Nadu to Kerala, IGST is collected on such products. The income out of IGST is shared by the state government and local government according to the settled by the specialists.

• UTGST (Union Territory Goods and Services Tax)

UTGST is known as Union Territory Goods and Services Tax. The Union GST is applied to union territories of India namely Chandigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli, Andaman and Nicobar Islands.

Why is GST needed in India?

GST is tax considered as a change in the taxation method. There are various central and state taxes which are now integrated into a single tax named as GST which can lead to a common national market.

VAT rates differ from state to state, but GST makes it uniform and remains constant all over. Here, the tax would be partitioned between the Central and State government. Let us have a gist at the impact of GST in several sectors.

Impact of GST on Indian Economy

• GST helps to create a common national market in India, which also helps to boost foreign investment.
• GST leads the foreign investors to invest with make in India campaign.
• As India is a developing nation with a huge amount of population, leads to lack of employmet.Therefore GST will help to reduce poverty and generate more employment.
• SGST (States Goods and Services Tax) and IGST (Integrated Goods and Services Tax) helps to reduce incentive from tax.

Impact of GST on Traders

• Multiple taxes are integrated into one tax.
• It helps to reduce the cascading effect to pay tax on each stage.
• Neutralization of tax for exports.
• Simple tax.
• There is no more difference between goods and services.
• Development of common national market.

Impact of GST on Consumers

• Simple taxation system.
• Reduction in the price of goods and services.
• Transparency in the taxation system.
• Tax is uniform all over country.
• Employment opportunities have increased.

Key features of GST in India:

1. Multi-stage: An item goes through multiple changes of hands till it reaches the end consumer. The process usually followed is; buying raw materials, manufacture, sale to the wholesaler, sale to the retailer, and then it finally reaches the end consumer. GST will be levied on each of these stages. Thus, it becomes a multi-stage tax.
2. Value Addition: The manufacturer who makes the product buys raw materials. The value of raw materials increases as they are processed. The manufacturer then sells to the wholesaler or warehousing agent who packs and labels the product. This is another value-addition that the wholesaler puts in order to sell it to the retailer. The retailer further packages the product in smaller quantities and may choose to market the product for better sales. At each stage, monetary worth is added to the product and GST Registration will be levied on all these value additions.
3. Destination-Based: State the tax burden falls on the consumer, GST Filing is a consumption based tax levied at the point of consumption. This means if goods are manufactured in a state and sold in another, the tax revenue reaches the state where the goods are consumed and not where they are manufactured.

Benefits of GST:

1. Advantages of GST

GST will mainly remove the cascading effect that is created by the tax on tax regime on the sale of goods and services. The effect will directly have an impact on the cost of goods. It has reduced the price of many items including; prices of movie tickets, dining in restaurants, television, washing machine, stoves and many more. GST is a technologically driven tax as all the activities like registration, return filing, application for refund, and response to notices have to notices have  to be done through online GST portal. This speeds up the process. Also, it has no hidden cost to registered retailers, and so the cost of doing business will be lower.

1. Disadvantages of GST

While the imposition of GST Registration has reduced the tax burden for many items, it has increased the prices of some items for the common man. The items that have become costlier include; mobile bills, residential rent, school feed, aerated drinks, cigarettes and tobacco products, commuting by metro, and many more. Also, since the all the activities for GST proceed online, one should not forget that India is a country with low literacy rate Many people may not know the process of Online GST portal or may not know how to operate it and would thus require assistance.

In the earlier tax regime, the tax liability was passed on at every stage of the transactions. This means the taxes levied on each stage would increase the value of the item (in terms of the price). Therefore, the final liability that rests on the consumer in terms of the price paid for a good or a service would be higher. The scenario is different in case of GST. There is a way to claim credit for tax paid in acquiring input. This means an individual who has paid taxes can claim for tax when after he submits the tax. Therefore, every time one claims an input tax credit, the sale price is reduced.

The recent introduction of the E-way bills for inter-state movement of goods has allowed the movement of goods in a staggered manner. All the stakeholders in the process of moving goods from one place to another within a state; manufacturers, traders, and transporter are benefitted. The tax authorities are also in vantage as this has reduced the time check posts and tax evasion. However, since it is a completely new tax system, it creates a confusion in the minds of taxpayers who may end up paying the wrong type of GST or wrong amount of GST. One should not hesitate to take assistance for the same.

GST Explained with Help of an Example

Let us have a look where and how the GST tax is segregated:

Manufacturers

When a manufacturer of a particular apparatus or product buys raw materials, such as a pant manufacturer needs a zip, cloth, buttons and various equipment to make a pant and these raw material costs rupees 500. This 500 rupees includes 10 percent of tax as per GST rules which will be rupees 50.

As soon as the product is made, the manufacturer has to include his value in the product which can be assumed as rupees 40. Then the total cost of the product will be 540 (500 + 40). And when we count 10 percent tax which is 54 rupees. Now, the manufacturer has already paid rupees 40 while purchasing the raw materials, so now the tax will be Rs.14 (Rs 54 – Rs 40).

Wholesaler

The wholesaler will purchase the product at rupees 540 and find some profit margin in it. For that, he would assume a specific amount which is rupees 30. So, now the total cost of the clothing becomes rupees 570. When we apply the same 10 percent principle, the tax amount will be 57.

With this rupees 57, rupees 54 have already been paid by the manufacturer. Therefore, the in all tax paid by the wholesaler is 3 rupees. (Rs 57 – Rs 54)

Retailer

The last stage is when the retailer buys the shirt at rupees 570. He will also look after keeping some profit on the product. If we assume that he had set the margin of rupees 10. Then the total price of the product is 580 rupees (Rs 570 + Rs10). After a 10 percent tax On the product, the levied tax is 58 rupees. Here Rupees 57 is already given by the manufacturer and the wholesaler, the retailer has to pay only rupees 1 (Rs 58 –Rs 57). The entire tax from manufacturer to wholesaler to retailer the tax is segregated as (40 + 14 + 3+ 1).

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FAQs

What is GST registration?

GST (Good and Service Tax) in India is an Indirect tax in India. As per the GST laws it is necessary to apply for GST registration when a business fall under certain criteria. GST registration can be done easily by the help of Legal Sahayak experts.

Who can register for GST?

Below mentioned taxpayers have to apply for GST registration:

1. Individuals registration under the Pre-GST law (i.e. Excise, VAT, Service Tax etc)
2. Taxable person who supplies goods and the annual turnover of his business is above 40 lakhs and the one who service with annual turnover of rupees 20 lakhs.
3. Casual taxable person / Non-Resident taxable person.
4. Agents of a supplier & Input service distributor.
5. Those paying tax under the reverse charge mechanism.
6. Person who supplies via e-commerce aggregator.
7. Every e-commerce aggregator.

How long does it take to get GST Number?

GST registration takes 7-10 working days for the entire process to complete and receive the GST number.

How to register for GST?

For Online GST registration, you can consult Legal Sahayak experts and follow the steps mentioned below:

1. Login to Legal Sahayak website.
2. Draft the documents.
3. Make the Online Payment.
4. Upload the requires documents.
5. Generate ARN.
6. You will receive the GST number on your Email Id.

How to apply for GST number?

To apply for GST number online you need to follow the steps mentioned below:

1. Contact details
2. Email address
3. PAN (Permanent Account Number)
4. Draft all the documents
5. Make online payment
6. Upload the documents
7. Generate ARN

How much does a GST registration cost?

Legal Sahayak provides you the cheapest price for GST registration. GST registration will cost you 399 rupees, if you apply it through Legalsahayak website. For Today’s offer, please click here

What is GST (Goods & Service Tax)?

GST (Goods & Service Tax) the name itself defines that the tax is levied on Good and services. This tax will be levied from all stages from manufacturing till consumption.

What is the concept of a destination-based tax on consumption?

The tax would be received by the taxing authority which has jurisdiction over the place of consumption which is also termed as a place of supply.

Which of the existing taxes are proposed to be subsumed under GST?

A). Central Taxes:

1. Central Excise duty.
2. Duties of Excise (Medicinal and Toilet Preparations)
3. Additional Duties of Excise (Goods of Special Importance)
4. Additional Duties of Excise (Textiles and Textile Products)
5. Additional Duties of Customs (commonly known as CVD)
6. Special Additional Duty of Customs (SAD)
7. Service Tax
8. Central Surcharges and Cesses so far as they relate to supply of goods and services.

B). State taxes that would be subsumed under the GST are:

1. State VAT
2. Central Sales Tax
3. Luxury Tax
4. Entry Tax (all forms)
5. Entertainment and Amusement Tax (except when levied by the local bodies)
6. Taxes on advertisements
7. Purchase Tax
8. Taxes on lotteries, betting and gambling
9. State Surcharges and Cesses so far as they relate to supply of goods and services

What is the status of Tobacco products after GST?

Tobacco % Tobacco products will subject to GST.

What types of GST is proposed?

GST is differentiated in three types CGST (Central Goods and Service Tax), SGST (State Goods and Service Tax), IGST (Integrated Goods and Service Tax).

Which authority will levy and administer GST?

Central will levy and administer CGST & IGST while respective states / UTs will levy and administer SGST.

What is IGST?

An Integrated GST (IGST) would be levied and collected by the Centre on the inter-State supply of goods and services. The GST on supplies in the course of inter-state trade or commerce shall be levied and collected by the Government of India such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Who will decide rates for levy of GST?

The CGST and SGST rates will be levied by States and Central Government.

How will imports be taxed under GST?

Import of goods will be treated under IGST (Integrated Goods and Service Tax). The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.

How will exports be treated under GST?

Exports will be treated as zero-rated supplies. No tax will be payable on exports of goods or services, however, the credit of input tax credit will be available and same will be available as a refund to the exporters. The Exporter will have an option to either pay tax on the output and claim refund of IGST or export under Bond without payment of IGST and claim a refund of Input Tax Credit (ITC).

When did GST come into effect?

GST came into effect on 1st April, 2017.

Will B2B transaction be subjected to GST?

Yes, B2B transaction are subjected to GST.

What is an Input Tax Credit?

The taxes you pay on input goods/services can be used as an Input Tax Credit (ITC) against output tax liabilities.

How can Input Tax Credits be applied?

Input tax credits can be used as follows:

CGST input tax credit can only be used to pay CGST and IGST

SGST input tax credits can only be used to pay SGST and IGST

IGST input tax credits can be used to pay CGST, SGST and IGST

How and when should the returns be filed?

Returns will trigger a tax credit, however, replacement products will be subject to GST, so cash flow may be impacted by returns.

Can we claim GST interest refund after two years of payment?

No, we cannot claim GST interest refund after two years of payment

How does GST apply to business?

GST regulations are applicable of your annual turnover is Rs.20 lakhs or above.  In case of North Eastern states (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura) and hilly regions i.e. Himachal Pradesh, Uttarakhand, Jammu & Kashmir and Sikkim the threshold limit is Rs.10 lakhs.

Is PAN required to apply for GST?

Yes, PAN card is required to apply for GST.

Is there any specific time period for GST registration?

Yes, GST is applicable from 1st July and the registration limit is until 31st Jan.

Who is a Casual Taxable Person?

If you occasionally make the supply of goods/services as a principal or agent or any other capacity, in a taxable territory, where GST applies but where you don’t have a fixed place of business. As per GST, you will be treated as a Casual Taxable Person.

Who are exempted from GST registration?

The following shall not be required to obtain registration and will be allotted a UIN (Unique Identification Number) instead. They can receive a refund of taxes on notified supplies of goods / services received by them.

Any specialized agency of UIN (United Nations Organisation) or any multilateral financial Embassy of foreign countries

Any other person notified by the Board / Commissioner

The Central Government or State Government may be based on the recommendation of the GST Council, notify exemption from registration to specific persons.

Is there any provision in GST for the Tax treatment of goods returned by the recipient?

Yes, section 34 will deal with such situations.

Are all goods and services taxable under GST?

All goods and services are taxable except alcoholic liquor. Petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be taxable with effect a future date. This date would be notified by the Government on the recommendations of the GST Council.

What is meant by Reverse Charge?

It implies to settle Government obligation that is no the beneficiary of supply of goods and services rather than the provider of such products or administrations in regard to informed classifications of supply.

What is the registration process for GST in India?

GST registration can be done in three simple steps:

Application Drafting

ARN Number

Registered GST Number

Can a person without GST registration claim ITC and collect the tax?

No, a person without GST registration cannot claim ITC and collect the tax.

What is an aggregate turnover?

An aggregate turnover for a business in a financial year exceeds Rs.20 lakhs is bound to register under GST. For the North-Eastern and hilly states, it is set at Rs.10 lakhs.

Can a person with no GST registration collect GST?

No a person with no GST registration cannot collect GST.

If I buy raw material from a supplier unregistered under GST, do I have to pay GST in RCM and can I avail ITC of the same?

Yes, you have to pay GST.

Can an unregistered dealer supply good to other states if his turnover is below Rs.20 lakh?

No the unregistered dealer cannot supply goods to other states if his turnover is below Rs 20 lakhs.

If I’m starting a new business today, do I still need to get TIN and then apply for GST? Or can I directly register with GST?

No, you can directly apply for GST registration with the help of Legal Sahayak.

A firm dealing exclusively in exempted products has GST registration. Does it need to file a return?

In case you have registered, then you need to file GST returns or else you can choose to cancel the registration.

Is GST registration mandatory for small retailers to buy from dealers / wholesalers?

No, there is no such requirements for small retailers to buy from dealers/wholesalers.

After the implementation of GST, will the EOU scheme continue or nor?

GST has no implementation for EOUs (Export oriented units). As to whether they exist for any other purpose may be seen from the FTP.

Is there any format for invoice under GST?

No, there is no particular format for invoice under GST.

Can tax pay in one State be used as ITC by the same firm in another State?

No, if a firm is registered in more than one State, then each such registration will be treated as a separate registered person. Cross-utilization of credit available with two different registered persons in not allowed.

Who is the person liable to take a registration under the Model GST law?

Any supplier who carries on any business at any place in India and whose aggregate turnover exceeds threshold limit as prescribed above in a year is liable to get himself registered. However, certain categories of persons mentioned in Schedule of MGS are liable to be registered irrespective of this threshold.

What is the annual turnover threshold limit for GST registration?

The annual turnover should be above 20 lakhs rupees.

Is GST registration necessary for bookseller?

Yes, if you are eligible under criteria for GST registration then you need to do the GST registration.

How to get GST registration for new business?

Visit Legalsahayak website, where you can complete the registration process easier.

Is a current account necessary for GST registration?

No, it depends on the business. It not necessary for a business to have a current account for GST registration.

Is two GST registration possible under one PAN card?

No, it is applicable for only one registration but you can add multiple businesses while registration.

Is GST mandatory for selling online?

GST is not mandatory unless the annual turnover exceeds 20 lakh rupees.

Can I raise GST invoice before GST registration?

No, you can raise GST invoice before GST registration.

Is GST registration required for an E-commerce startup?

Yes, GST registration is required for an E-commerce startup.

When can be GST registration cancelled?

The GST registration can be cancelled in a few cases such as when the business is terminated or the business constitution is changed and not updated.

Is GST registration mandatory for a startup advertising firm?

No, for startup advertising firm GST registration is not mandatory.

Can a GST registration be cancelled?

Yes, a GST registration can be cancelled.

Is GST registration compulsory for an optical shop that has a turnover of under 10 lakhs?

No there is no requirement for GST registration if the annual turnover is below 20 lakhs.

How can I sell without GST?

If the annual turnover is below 20 lakhs then you sell the product without GST and in case it exceeds 20 lakhs rupees then GST registration is mandatory.

Is VAT registration required for GST registration?

VAT registration is not required for GST registration.

Does candle making business requires GST registration?

It does not matter what the business is, GST registration needs to be done if the business annual turnover exceeds 20 lakhs rupees.

Is GST mandatory for rental properties?

If the income is above 20 lakhs then you need to register under GST for rental properties.

Do part-time bloggers need to apply for GST?

Until and unless the annual turnover is 20 lakhs rupees you don’t need to apply for GST registration.

What is GST registration online procedure?

Visit legalsahayak website and know the entire procedure to do GST registration.

Does a transporter requires GST registration?

If the transportation is done outside your state then you need to do GST registration.

Is it compulsory to take GST registration in multiple states?

If you have introduced your business in other states then you need to apply for GST registration in multiple states.

Is GST registration required for recharge coupon shop?

It depends on the annual income, if it exceed 20 lakhs rupees then you need to apply for GST registration.

Is GST registration necessary for importing equipment for personal use?

No GST registration is not required if the equipment is imported for personal use.

Is account number mandatory for GST registration?

Yes, the account number is mandatory for GST registration.

One mobile number is required for one registration?

Yes, one mobile number is required for one GST registration.

Is GST registration compulsory for cloth commission agent or brokerage received from a supplier?

Yes, if the annual turnover exceeds 20 lakhs rupees the GST registration is compulsory for cloth commission agent or brokerage received from the supplier.