New to GST Law? In this post, we will cover the basics, which will help you develop an understanding of the GST Law in India. This comprehensive guide will cover-
The full form of GST is Goods and Service Tax. It is an indirect tax introduced in India from 1st July 2017. It is a value-added tax levied on the manufacture, sale, and consumption of goods and services. Alternatively, GST can be defined as a destination based tax where the tax is collected on the place where the ultimate consumption is done, no matter how long the journey of good otherwise had been!! At every stage of supply, credit for, the taxes already paid on purchases or inward supply is allowed. And, the final payout occurs from the pocket of the consumer of goods or service. There are differential rates prescribed by Central Board of Indirect Tax & Customs (CBIC). There is also a GST council set up to make and implement the by laws. Here are some of the key changes which GST has brought to the old taxes system :
With a lot of constitutional amendments and years of delay the Goods and Service tax finally been made applicable in India from 1st July 2017. Although the foundation was laid way back in 2004 when the idea was initiated by the Kelkar Task Force. Since then after a lot of discussions, approvals and debates GST successfully rolled out in the year 2017 as one of the biggest taxation reform witnessed by the Indian economy after the eve of Independence.
GST which is the biggest tax reform brought into INDIA post-independence has paved its way to resolving major inherent flaws in the Indian indirect taxation system. Such as,
VAT system was the biggest victim of cascading effect i.e. double tax or tax on taxes already paid. The same has been resolved with the implementation of GST. Earlier, a manufacturer was paying excise on production on goods which formed part of goods for the dealer selling the same on a later stage. And while making the sales he was either paying VAT or CENVAT on price inclusive of excise. Which lead to double taxation and ultimately increased the burden on the consumer. GST has addressed this flaw efficiently.
The major talked about the issue of Classification of a product as a good or service has been redressed by the newly introduced Goods and Service Tax. There were a lot of confusions and litigations over the subject matter whether as to classify a product as a good or service also it leads to dispute in deciding the rate of taxes. With the concept of supply introduced by GST, all such paradoxes have settled down.
All these led to a lot of inconvenience in complying with different procedural requirements under different laws and statues. Also, Central taxes like CENVAT were not allowed to be set off against State taxes.
Trying to do 1000 things at a time obviously leads to mismanagement and ineffectiveness. The same goes for our old indirect tax structure. So many taxes with different constitutional bodies was not an easy task to do. GST has made compliances easier, as separate records or compliance under varied provisions of the law are no longer needed.
Easy compliances have led to better monitoring. The synergies arising out of GST can now be used to take the much-needed actions timely. Which will help to build a sound structure of indirect taxes into India.
GST has made tracking a lot easier. A person who was aggrieved or had a query previously was redirected from one place to other in name of different prevalent laws. Also no conclusion to disputes pending could be concluded because of multiple legislations applicable. All these grievances would be reduced after implementation of GST. As it is One Nation One Tax.
Multiple registrations and formalities under different laws led a person running the business into a pathetic situation. GST is like a blessing for all those who were running to different offices for compliances procedures. After GST, taxpayers would be happy to follow the simple set of rules under just one tax norm.
Old tax regimes led people to file taxes differently for different taxes. GST has eradicated the problem from its root. Now common tax payments are required to be made. Additionally, a simple set of returns called GTSRs are required to file under GST law and no separated due dates as per varied laws need to be bookmarked.
The savings of resources like time, cost and efforts will enable both a taxpayer and the nodal officers to improvise and effectively use the available assets. The Taxpayers can now invest the same in business expansion and the government in better implementation.
Taxes were being levied both at Central and State level, along with inconvenience and added costs it also led to the problem with setting up of tax credits. GST being one single tax both at central and state level has proved to be a boon for the taxpayers by ensuring maximum credit sett offs.
With the introduction of GST majority of Indirect taxes have been wiped out. The one nation one tax has subsumed in itself many existing taxes both at Central and State Level. Here is a list of Central Taxes which merged in GST-
Central Surcharges and Cess in relation to supply of goods and services
The State levies which have been integrated with GST-State Surcharges and Cess in relation to the supply of goods and services
In India, we have the federal government, which means we have ministers both at centre and state levels. The same modal has been adopted under GST. The government has adopted GST in its Dual or concurrent model. As a result of which both Centre and State government will levy GST simultaneously. The implemented GST structure is categorised under four heads, namely –
A big applicative tax reform brought by GST is that it extends to the whole of India including the State of Jammu and Kashmir, unlike the Service Tax Act 1994.
The full form of SGST is State Goods and Services Tax. It is a tax levied by the State Government on the supplies of both goods and services within the state i.e. intrastate. The tax liability under SGST will be first set off against SGST or UTGST and then the balance can be set off against IGST input tax credit only. The tax amount collected under SGST is used by the State Government of the state where the transaction took place. The rate of State Goods and Services Tax shall be equal to the rate of CGST on a particular product or service.
The full form of CGST is Central Goods and Services Tax. It is a tax levied by the Central Government on the supplies of both goods and services within the state i.e. intrastate. The tax liability under CGST will be first set off against CGST and the balance can be set off against IGST input tax credit only. The tax amount collected under CGST shall be transferred to the Central Government. On a particular product or service, the rate of Central Goods and Services Tax shall be equal to the rate of SGST.
The full form of UTGST is Union Territory Goods and Services Tax. It is a tax levied by the Government of Union Territory on the supplies of both goods and services within the state i.e. intrastate. The tax liability under UTGST will be first set off against UTGST and the balance can be set off against IGST input tax credit only. The concept of this tax is the same as SGST, the only difference is that instead of SGST this tax is applicable in the union territories of India. The tax amount collected under UTGST shall be transferred to the Government of Union Territory. The rate of Union Territory Goods and Services Tax shall be equal to the rate of CGST on a particular product or service.
The full form of IGST is Integrated Goods and Services Tax. It is a tax levied by the Central Government on the supplies of both goods and services outside the state i.e. intrastate as well as on imports. The tax liability under IGST will be first set off against IGST and the balance can be first set off against CGST and then against SGST/ UTGST input tax credit only. Integrated Goods and Services Tax shall be collected by the Central Government and then distributed to various States.
CGST, SGST or UTGST and IGST are the different levies introduced under the GST framework in India from 1st July 2017. Since GST has been implemented in India in its dual modal i.e. both Central and state government can levy and collect taxes simultaneously there was urge to give them specific legislative powers. The above mentioned different Acts lay down the foundation guidelines on the scope and powers to different authorities.
GST has dual modal where both central and state government concurrently levy taxes. Because of which matters like import/export or supply of goods and services to another state was a subject of dispute. The decision will directly affect revenue interests of both states, hence, the government came out with a way out via IGST. Also, harmony has been kept in IGST rate. It is approximately aggregate of CGST and SGST. For eg, if CGST is 9% and SGST is 9%, then the rate of IGST for the same transaction would be 18% (approx).
Note: Union territories such as Delhi and Puducherry have their own legislature hence are governed under SGST and not under UTGST.
Goods in GST means every kind of movable property like pen, car, food, animals etc. It also includes actionable claims and growing crops or grass, although these things are not normally construed as movable and are attached to earth. Reason for the same being, these things can be sold separately or sold under a combined contact with land. But, goods in GST does not include
The definition of goods has been given under section 2(52) of CGST Act 2017
Services under Goods and Service Tax means anything which is NOT
Goods and Service Tax has covered broadly each and every good under its ambit. The two exceptions remaining out of the purview of GST for the time being are
Talking about services there is a notified list given by the government to which GST does not apply
| 1. | Sale of Land and Building |
| 2. | Court or Tribunal services |
| 3. | Services by an employee to the employer (in relation to employment) |
| 4. | Duties performed by
|
| 5. | Actionable Claims like bill of exchange etc (excluding Betting, Lottery and Gambling) |
| 6. | Services of Funeral, Burial, Crematorium, Mortuary (including transportation of the deceased) |
Though GST was outlooked as One Nation, One Tax and One Rate but the later part could not be successfully implemented. Numerous reason contributed to the same such as economic disparities in India, people’s attitude to accept change, the feasibility of merging existing varied tax rates into one etc. As a result Goods and Service Tax was introduced in India with different tax rates. The GST Tax Rates for Composition Taxpayers are-
The rates have kept changing since the introduction of GST and are supposed to evolve more over the time. More harmonization in rates can be witnessed in the next financial year but the dream of One Rate is yet far to be fetched. For checking what is the tax rate of your goods/services click here..
For registration under Goods and Service tax in India, the government has prescribed an exhaustive list. Which can be better understood in these two parts
| Registration on Turnover Basis | Mandatory registration(No turnover limit applies) |
|---|---|
| Suppliers with an annual aggregate turnover exceeding Rs.20 Lakhs – including J & K(From 1 April 2019 this limit has been revised as For Supplier of goods – Rs 40 Lakhs For Supplier of services – Rs 20 Lakhs) Rs.10 Lakhs other North-Eastern States except J & K. Note: Turnover shall be sum total of all sales whether intrastate, interstate, export, exempted or NIL rated etc | The person paying tax under RCM (Reverse Charge Mechanism) |
| CTP (Casual Taxable Person) | |
| NRTP (Non-Resident Taxable Person) | |
| The agent of a principal | |
| Notified E-commerce operator | |
| ISD (Input Service Distributor) | |
| TDS deductor | |
| CTP dealing in handicrafts shall get registration if turnover exceeds Rs 20 lakh threshold | Those giving OIDAR (Online Information and Database Access or Retrieval) services from outside India to a non-registered person in India. |
| Those selling through e-commerce operator – 20 lakh condition apply | Who was already registered under old indirect tax laws |
As GST is a consumption based tax and the revenue goes in the treasury of state where goods are finally consumed. The same proved out to be an issue for states having main capacities in manufacturing. Goods and Service Tax Compensation Cess as the name suggests, has been introduced to compensate states facing the problem of lower revenue collections. It is levied on certain notified goods like
Compensation Cess or GST Cess has been introduced for a period of 5 years from the date of GST implementation in India. It is collected from all taxpayers dealing with notified goods (except composition dealers) at certain % of the transaction value of goods, and later on, distributed amongst the compensated states.
Compensation Cess is like all other GST taxes and its input tax credit is also available. But, can be adjusted only against Compensation cess and no inter-head set-offs are allowed.
The Goods and Service Tax has bought manifold synergies to the entire tax regime. GST can be overlooked as a boon to both stakeholders and the government, by minimizing compliance requirements at both ends. Which will resultantly bring into effect increased economies of overall national resources? Let us understand one on one forecasted benefits of GST
One of the major drawbacks in the indirect tax system was the cascading effect i.e. tax imposed on taxes paid on an earlier stage. For an example: A manufacturer was required to pay excise on raw materials + VAT was also imposed when the finished goods were sold. The excise so paid at earlier stage formed part of the cost of raw material and hence when final payout for VAT was made it included a component of excise on which VAT is being paid.GST has given freedom to taxpayers form this biggest ill of the tax system.
Previously, there were so many different taxes levied both at Central and State level. GST has come as a common roadmap which has subsumed various Central And State Levies like Excise, VAT (except on some products), Sales tax, Entertainment tax etc
Before GST was implemented, there were a lot of litigations on whether a supply is a good or service and the same involved lot of debates, cost, and operational difficulties. For Example a free service with a car and a nominal amount charged for it, etc. With the introduction of GST, all these seem to have ended, because GST has just one concept that is supply and the year-old fights of goods or services are no more in existence.
Introduction of GST is foreseen to bridge the gap between international and domestic market prices of the commodities, through the reduced burden of taxes. Which can be proactively be seen as a base to grow in domestic industries and support of Governments “Make in India” initiative.
Increased transparency and easy compliances through GST have also lead to effective monitoring by the authorities. Resultantly, over the time span, it can be traced in revenue collections by the tax department.
The foundation of GST lies in submerging different taxes prevalent on different levels in the Indian economy into ONE single tax i.e. Goods and Service Tax. GST aims to build a common platform and a unified national market by integrating the economic barriers.
| Abbreviation | Full Form |
|---|---|
| BG | Bank Guarantee |
| FI | Financial Institution |
| JV | Joint Venture |
| MF (DR) | Ministry of Finance (Department of Revenue) |
| PC | Principal Commissioner |
| Rs. | Rupees |
| AAR | Authority for Advance Ruling |
| AOP | Association of Persons |
| ARN | Application Reference Number (or Acknowledgement Reference Number) |
| B2B | Business to Business |
| B2C | Business to Customer |
| BOI | Body of Individuals |
| BRC | Bank Realisation Certificate |
| CIF | Cost, Insurance & Freight paid |
| CIN | Challan Identification Number |
| DBK | Duty Drawback |
| ECL | Electronic Credit (or Cash) Ledger |
| ELR | Electronic Liability Register |
| EOU | Export Oriented Unit |
| EWB | E-way Bill |
| FOB | Free on Board |
| FSI | Floor Space Index |
| FTP | Foreign Trade Policy |
| GOI | Government of India |
| GST | Goods and Services Tax |
| GTA | Goods Transport Agency |
| GTO | Goods Transport Operator |
| HSN | Harmonised System of Nomenclature |
| HUF | Hindu Undivided Family |
| ICD | Inland Container Depot |
| IDC | Internal Development Charges |
| IEC | Import Export Code |
| ISD | Input Service Distributor |
| ITC | Input Tax Credit |
| LLP | Limited Liability Partnership |
| LUT | Letter of Undertaking (for export of goods) |
| NAA | National Anti-Profiteering Authority |
| OTP | One Time Password |
| PAN | Permanent Account Number |
| PLC | Prime Location Charges |
| POS | Place of Supply |
| RBI | Reserve Bank of India |
| RCM | Reverse Charge Mechanism |
| SAC | Service Accounting Code |
| STP | Software Technology Park |
| TCS | Tax Collection at Source |
| TCS-1 | Third Country Shipment (TCS)- International trading in Goods |
| TDR | Transferable Development Rights (of land) |
| TDS | Tax Deduction at Source |
| TOS | Time of Supply |
| TRU | Tax Research Unit in CBI&C |
| UIN | Unique Identity Number |
| UJV | Unincorporated Joint Venture |
| URD | Un-Registered Dealer |
| USD | United States Dollar |
| AAAR | Appellate Authority for Advance Ruling |
| CBDT | Central Board of Direct Taxes |
| CBIC | Central Board of Indirect Taxes and Customs |
| CGST | Central Goods and Services Tax |
| DFIA | Duty Free Import Authorisation |
| DGFT | Director General of Foreign Trade |
| EPCG | Export Promotion Capital Goods Scheme |
| IGST | Integrated Goods and Services Tax |
| NBFC | Non-Banking Financial Company |
| NEFT | National Electronics Fund Transfer System |
| RCMC | Registration cum Membership Certificate ( from Export Promotion council) |
| RERA | Real Estate( Regulation Development) Act, 2016 |
| RFID | Radio Frequency Identification Device |
| RREP | Residential Real Estate Project |
| RTGS | Real Time Gross Settlement |
| SGST | State Goods and Services Tax |
| CENVAT | Central Value Added Tax |
| CESTAT | Customs, Excise and Service Tax Appellate Tribunal |
| GSTIN | Goods and Services Tax Identification Number (GST Registration Number ) |
| ICEGATE | Indian Customs Electronic Commerce/Electronic Data interchange (EC/EDI) Gateway |
| NACIN | National Academy of Customs, Indirect Taxes and Narcotics |
| OIDAR | Online information and database access or retrieval services |
| UTGST | Union Territory Goods and Services Tax |
In case of intra state (within the same state) supply of goods and services, both CGST & SSGT is charged which implies that half of the tax you pay will go to the state treasury while the other half goes to the central government treasury.
GST Returns can be filed online. You can either prepare and submit these returns online through Government Portal or use the offline utilities. Also, there are various third party softwares which can help you in filing GST returns with an ease.
Composition scheme is available for small taxpayers which is simple & easy wherein there is less compliance, limited tax liability and requirement to furnish quarterly returns.
Harmonized system of Nomenclature (HSN) and Services Accounting Code (SAC) are meant to standardise the classification of goods & services in systematic and logical manner.
This problem is to be resolved with the help of Advance ruling and introduction of new schemes like Sabka Vishwas (Legacy Dispute Resolution Scheme, 2019).
