Economics

GST (Goods And Services Tax): A Comprehensive Introduction

January 11, 2023

Definition of GST (Goods And Services Tax)

“GST is a single, destination-based tax that is levied on every value addition.”
– Department of Revenue, India

GST (Goods And Services Tax) is a type of indirect tax that is applied to the supply of goods and services, from the manufacturer to the consumer. This tax is collected by the government and is meant to be a single, unified taxation system for goods and services, replacing many of the existing taxes.

GST is charged and collected at each stage of the goods and services supply chain, from the manufacturer to the end consumer. It is based on the value added to the goods or services at each stage of the supply chain, and is ultimately paid by the end consumer. GST is a form of Value Added Tax (VAT), and is applicable in many countries around the world.

Types of GST (Goods And Services Tax) in India+

GST in India is divided into four main types – CGST, SGST, IGST, and UTGST.

CGST is collected by the Central Government and SGST is collected by the State Government. IGST is levied on inter-state transactions and UTGST is charged on goods and services in union territories.

CGST (Central Goods and Services Tax)

CGST stands for Central Goods and Services Tax. It is a type of indirect tax that is levied on the supply of goods and services in India. It is applicable to intra-state supplies of goods and services and is administered by both the Central and State governments.

The CGST rate is set by the GST Council and typically ranges from 0% to 28%. The revenue generated from CGST is split between the Central and State governments, with the Central government receiving the larger share.

SGST (State Goods and Services Tax)

SGST stands for State Goods and Services Tax and is applicable to goods and services sold within the state. It is applicable to all goods and services sold within the state, except those which are exempt or outside the scope of GST.

SGST is levied by the state government and is collected by the state government. The proceeds of SGST are credited to the respective state government’s account. SGST is one of the two components of Goods and Services Tax (GST), the other being Central GST (CGST).

IGST (Integrated Goods and Services Tax)

IGST is an indirect tax levied by the Government of India on inter-state supply of goods or services. This tax is collected by the Central Government and is set at a rate of 18%. It is applicable for all the states and union territories of India and is applicable in addition to other taxes like Central GST and State GST. The proceeds of IGST are shared between the Centre and the State Governments in accordance with the principles of fiscal federalism.

UTGST (Unified Goods and Services Tax)

UTGST stands for the Unified Goods and Services Tax. It is an indirect tax levied on the supply of goods and services, which was implemented in India from 1 July 2017. The tax system replaced many of the existing indirect taxes such as the Value Added Tax (VAT), service tax, central excise duty, etc. The UTGST is applicable to all goods and services throughout the country with a few exceptions.

Current Tax Slab of GST in India

The current tax slab of GST in India is divided into 5 categories, namely; 0%, 5%, 12%, 18% and 28%.

Items such as fresh fruits, vegetables, grains, pulses, jaggery and other essential food items are exempt from GST and are charged at 0%.

Commonly used items like food grains, edible oil, spices and other daily used items are charged at 5%.

Products like processed food, footwear, stationery items and readymade garments are charged at 12%.

Items such as electronic items, refrigerators, air conditioners and other luxury items are charged at 28%.

Products like soaps, toothpaste, hair oil, shampoos and other toiletries are charged 18%.

Registration Process in GST

The registration process in GST is simple and straightforward. To register, the taxpayer needs to fill out an online form and submit it to the GST authorities.

The taxpayer must provide valid documents such as PAN, Aadhar, bank details, address proof, etc., to register.

Upon successful registration, a unique GSTIN (Goods and Services Tax Identification Number) will be issued to the taxpayer.

The GSTIN will be used for filing GST returns and other GST related activities.

Additionally, taxpayers are also required to obtain registration in each of the states in which they are carrying out business operations. To do this, the taxpayer needs to fill out the appropriate form for the state and submit it along with the necessary documents.

Once the registration is approved, the taxpayer will be issued a separate registration number for each state.

Filling Process of GST Returns

Filling out the GST form is a straightforward and easy process. The first step is to register for GST. You can do this online or through a registered tax practitioner. Once registered, you will be sent a GST registration number. This number must be used when filing your GST returns.

The next step is to file your GST returns. This is done online and requires information about your business, such as income and expenses. You must also report any GST credits or refunds you are claiming. Once the return is filed, you must make the payment of any GST due.

Finally, once the GST return is filed and the payment is made, you will receive a GST receipt. This receipt is important as it confirms that you have paid the correct amount of GST. It also serves as proof of payment for any future audit or review.

Due Date to Filling GST Returns

In India, Goods and Services Tax (GST) returns must be filed on a regular basis. Generally, the due date for filing GST returns is the twentieth day of the month following the end of the tax period. For example, for the month of March, the due date for filing GST returns will be April 20th.

Late filing of GST returns may result in penalties and interest being charged. However, for small taxpayers, the due date for filing GST returns is the end of the month following the end of the tax period.

All taxpayers must ensure that their GST returns are filed on time to avoid penalty and interest. In addition, non-filing of returns for more than three months will result in cancellation of GST registration. Therefore, it is important for taxpayers to be aware of the due date for filing GST returns and ensure that they file their returns on time.

Suggestions for Reforms in GST

1- Create a comprehensive and user-friendly GST filing system for taxpayers
2- Introduce an online GST calculator to help taxpayers understand their obligations and liabilities
3- Allow taxpayers to receive GST refunds in a timely manner
4- Introduce a GST e-invoicing system to make filing taxes simpler and faster
5- Allow taxpayers to pay GST taxes in installments
6- Offer incentives and discounts to small business owners who comply with GST regulations
7- Introduce a GST credit scheme to reduce the burden on taxpayers
8- Provide GST education and training to taxpayers to increase awareness and compliance
9- Streamline GST procedures to reduce the compliance burden on taxpayers
10- Allow taxpayers to file GST returns online through an integrated platform

What is GST?

GST stands for Goods and Services Tax, which is a tax imposed on the supply of goods and services in India. It is a single tax on the supply of goods and services, right from the manufacturer to the consumer. It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. It is therefore considered as an indirect tax.

How does GST work?

GST works by applying a tax to the sale of goods or services. The tax rate is determined by the government and is usually a percentage of the total sale price. The seller then collects the tax from the purchaser and remits it to the government.
The GST also applies to imports, meaning that a tax will be applied to imported goods or services. The seller then pays the GST to the government and the purchaser pays the seller for the cost of the goods or services plus the GST. The GST is the same across the country and all businesses regardless of size must register for the GST and collect and remit the tax.

What services are subject to GST?

Services that are subject to GST include telecommunications, transportation, construction and related services, professional services, financial services, admissions to places of amusement, and sales of goods and services related to real estate.

What are the different types of GST?

The different types of GST are:
• Central Goods and Services Tax (CGST)
• State Goods and Services Tax (SGST)
• Integrated Goods and Services Tax (IGST)
• Union Territory Goods and Services Tax (UTGST)
• Goods and Services Tax (GST) Compensation Cess.

What are the GST rates?

The GST rates are divided into three categories in India, including 5%, 12%, and 18%. These rates are applicable on different types of goods and services, depending on the type of product or service. Additionally, there is a special rate of 0% for certain essential items, such as food and medicine.

How do I register for GST?

To register for GST, you must first determine if you meet the requirements of the Goods and Services Tax/Harmonized Sales Tax (GST/HST). Generally, if you provide taxable goods or services in Canada and your total revenue from these activities is more than $30,000 in the last four consecutive quarters or in a single quarter, you must register for GST/HST. To register, you will need to complete and submit a GST/HST registration form online or by mail.

What is the process for filing GST returns?

The process for filing GST returns is relatively straightforward. First, you will need to register for a Goods and Services Tax Identification Number (GSTIN). Once you have registered, you can access the GST portal to file your returns. You will need to enter details such as your GSTIN, the period for which you are filing, and the type of return you are filing. Once you have entered all the required details, you can submit the return and make payment to complete the filing process.

What is the due date for filing GST returns?

The due date for filing GST returns depends on the type of return you are filing. Generally, the due date for filing monthly or quarterly GST returns is the 20th day of the month following the month in which the return is filed. For example, the due date for filing the monthly GST return for April is 20th May. However, the due date for filing annual GST returns is 31st December of the subsequent financial year.

What are the penalties for non-compliance with GST?

The penalties for non-compliance with GST vary depending on the severity of the breach. Generally, the penalties range from a warning letter, to a fine or even imprisonment in extreme cases. In cases of serious non-compliance, such as fraud, the penalties can be significantly higher. Additionally, a business may be required to pay back any GST that was improperly claimed, as well as interest and any other costs associated with the breach.

Is GST applicable on imports?

Yes, GST is applicable on imports, just like any other domestic transaction. Depending on the type of goods being imported, a different rate of GST may be applicable. The GST rate is also dependent on the type of import, whether it is a direct import or an indirect import. In addition, other taxes such as customs duty or import duty may also be applicable.

How do I claim GST credits?

You can claim your GST credits through the Australian Taxation Office (ATO). The ATO website provides detailed instructions on how to do this. You can also contact the ATO directly to ask any questions you may have.