All you need to know about goods and services tax (GST) in India


Goods and Services Tax or GST is a comprehensive indirect tax that is imposed on the sale of goods and services in India. It is a multi-stage taxation system that curbs the cascading effect of all other indirect taxes such as service tax, purchase tax, value-added tax, and excise duty.

The good service tax is the only tax that is currently imposed across India.

While there are quite a few products and services that don’t attract GST, there are many that come at 5 per cent, 12 per cent, 18 per cent, and even 28 per cent GST. Since the implementation of GST in July 2017, the GST rates have been changed for several goods and services.

How Goods and Services Tax is Paid

The manufacturer of a product first pays the Goods and Services Tax on the purchase of raw material and the value that it adds to make the product. The service provider would be responsible to pay this.

The retailer will then pay GST on the product that he purchases from the distributor as well as on the margin that he adds. Finally, the consumer pays GST on the product that he purchases. However, the manufacturer’s tax payment as well as the retailer’s tax payment would be deducted from the total GST that is finally paid.

Types of Goods and Services Tax in India

After the implementation of a one-nation, one-tax regime, there has been a three-fold breakup of GST. This is mainly to allow the Central Government as well as the State Governments to levy taxes. The three types of GST implemented in India are:

  • SGST or State Goods and Service Tax: This is the tax levied by the State Government on intra-state goods and service transactions. In Union Territories like Chandigarh or Andaman and Nicobar Islands SGST gets replaced by UGST or Union Territory Goods and Service Tax.
  • CGST or Central Goods and Service Tax: This is levied by the Central Government on intra-state goods and service transactions, along with the SGST or UGST. The revenues generated by CGST would be shared between the central government and the state government.
  • IGST or Integrated Goods and Service Tax: This is also levied by the Central Government but on inter-state goods and service transactions. IGST is applicable to import and export transactions too. Like CGST, IGST’s revenues also will be shared between the central government and the state government.

Who is supposed to register for Goods and Services Tax?

As per the Goods and Services Tax Act of 2017, any business that has a turnover of INR 20 Lakhs (10 Lakhs in North-eastern and Hill states) or above has to register for Goods and Services Tax. Apart from this, the following individuals and entities also are required to register for GST and acquire their 15-digit GSTIN:

  • Individuals who supply taxable goods and services to other states.
  • Individuals who are paying tax under the reverse charge mechanism.
  • NRIs or Non-Resident individuals who are paying tax.
  • Individuals who are eligible for tax deductions under Section 37.
  • E-commerce aggregators.
  • Individuals who have been supplying taxable goods and services via e-commerce aggregators.
  • Agents who have been supplying goods and services on behalf of other registered taxpayers.
  • Individuals who were registered before the introduction of the GST law.

Registration of GST

GST registrations should be done on the official GST portal that has been created by the Government of India. Once registered, the applicant will get GSTIN, which is a unique 15-digit registration number.

The GSTIN can be used to avail loans, claim refunds, make corrections, and get verifications. Apart from GSTIN, the registered taxpayer will also get a GST Certificate that can be downloaded from the GST portal.

How to File GST Returns

Every registered taxpayer will have to submit a document called GST Returns. This will include information about their income, which will be used to compute their tax liability. It should contain details about their purchases, sales, input tax credit, as well as output GST. The GST Returns have to be filed twice a month and also two additional times a year.

How is Goods and Services Tax calculated?

Calculating GST while filing your returns is quite a tedious process. There are several things you need to consider, including the ITC, reverse charge, as well as exempted supplies. If you don’t pay the full GST amount that is due, you will be required to pay an 18 per cent interest on the outstanding amount.

Luckily, there is a GST calculator that you can use to calculate the Goods and Services tax you have to pay. Many GST services websites have this feature. Once you enter all the required details, the tool will calculate the amount of GST that you have to pay in that month.

You have to file GSTR-1 and GSTR-3B. For refunds, you will have to submit the relevant forms. You can pay GST either online or offline. However, a challan needs to be generated once you have made the payment.

Advantages of GST

  • GST curbs the cascading impact of tax.
  • Only businesses with more than Rs. 20 Lakh turnover will have to register for GST.
  • Small businesses can reduce taxes by using the Composition Scheme.
  • Easy and simple online payment procedure.
  • Fewer number of compliances.
  • No more differential treatments for eCommerce organizations.
  • Higher efficiency in logistics with lesser restrictions on inter-state goods movement.
  • Regulation of unorganized sectors.

The Conclusion

The implementation of Goods and Services Tax has changed the way businesses have been operating in India. With the processes being streamlined, many businesses are experiencing higher efficiency in their operations. You can try taking the help of one of the GST services to get GST-compliant.

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