In India, now GST tax must be paid on buying any goods or availing any services. From July 1, 2017, it has been implemented in the whole country. Even after more than 6 years have passed, many things about it are not understood by ordinary people. Keeping this problem of people in mind, we have prepared this article in easy language.

In this article, we will know what GST is. What is its full form? What is the meaning of GST, Which people must register for this? Apart from this, we have also covered the important rules and facts of GST.

What is the GST?

The full form of GST is – Goods and Services Tax. It must be paid for the purchase of goods or the use of services. By removing many types of taxes (Excise Duty, VAT, Entry Tax, Service Tax, etc.) that existed earlier, a single tax GST has been brought into their place. It has been implemented in India since 1 July 2017. This system has been implemented in all the states and union territories.

What was the flaw in the earlier tax system?

Before July 1, 2017, there were many different tax systems in place across the country and states. Traders had to pay various taxes at various stages from production to sale. For example, as soon as the goods left the factory, excise duty had to be paid on them first. Added excise duty (Additional Excise Duty) was levied separately on many goods. If the same goods were being sent from one state to another, then entry tax was levied as soon as they entered the state. After this, the tolls are different at various places.

While selling the goods, Sales Tax or VAT had to be paid. In many cases, Purchase Tax was also levied. If any item comes under the category of luxury, then luxury tax had to be paid separately. If those goods were being made available in a hotel or restaurant etc., then service tax had to be paid separately.

Thus, we see that from the factory to reaching the hands of the consumer, any goods or service had to pass through many duties or taxes. By implementing GST, an attempt has been made to save businesspeople from this web of taxes, and the same tax has been imposed on all.

Why was there a need to implement GST?

In the old rules related to tax in the Indian Constitution, the central government had the right to levy tax on the production/manufacturing of goods and services. Whereas the right to levy tax on the sale of goods was given to the State Governments.

Everyone made taxes according to their own and decided the categories. In this affair, many taxes were imposed on each item. Sometimes even the situation of tax on top of tax has also been created. For small traders and companies, it was a challenging task to deal with their rules and regulations.

Remove these anomalies, GST has been brought in the form of a unified law that can be applied to both goods and services. And which can be applied from production to sale.

Drop the separate issue of production and sale, only one base of GST has been fixed, Supply. For this, changes were made in the tax laws, and the process of the constitutional amendment was adopted in Parliament.

Salient Features of GST | Major Features Of GST?

Rectify the shortcomings of the old tax system existing in the country, the government implemented GST. The key features of this new tax system implemented in July 2017 are as follows-

1. Tax on consumption instead of production. Tax on Consumption

In the GST system, tax is collected when a good or service is sold. The closing price of the goods or services also includes the GST tax applicable to it. The supplier of goods or services (seller) recovers it from the consumer (consumer). Later it is deposited in the account of the government. This means the responsibility for recovery of GST lies on the supplier of goods or services. With any goods or services, GST must be paid every time there is a process of buying and selling.

2. Tax refund through Input Credit System. Input Credit System

From the time a commodity is produced, till it reaches the hands of the final consumer, there is a process of buying and selling many times. Now since, in the GST system, tax must be paid on every purchase and sale. As such, the commodity must have become expensive by the time it reaches the end consumer. But this does not happen. Because Input Credit System applies to this. In this system, wherever the tax has been deposited before the tax is levied at the last stage, there is also a system to get it back.

If you are not the final or actual consumer and you have deposited GST at any earlier stage, then you get credits in return. You can use these credits to pay GST to the government.

You can adjust your GST through Tax Credit System while filing GST returns every month. What is this Tax Credit System, we have separately explained it below with an example?

3. Tax will not be levied on tax. No Cascading of Taxes

In the tax system that was in force before GST, not only were many different taxes levied on one commodity, but in many cases, taxes were also levied on top of taxes. This used to happen because many items fell into two or more categories. Now this problem is over. Because now the consumer must finally pay GST only. In between, if someone must pay GST, then his money gets adjusted through the tax credit system.

4. Completely online system. the error will be detected

The information on all the deals in the GST system must be kept updated online. The receipt for each transaction will be with both the supplier and the supplier. Both will be able to get Tax Credits with the help of their respective receipts. If the deals are not matched, then online, the problem will be caught. Due to the responsibility of depositing GST at every stage of the top businessperson, the chain of tax payments will not be broken. Because no businessperson would like to lose his credit.

5. E-Invoicing is mandatory for big businesspeople

From October 1, 2022, E-Invoicing has been made mandatory for all such businesspeople whose annual turnover is Rs 10 crore. This means that such businesspeople will now have to issue all their bills and receipts in electronic form only through the GST portal. After 3 months, i.e., from January 1, 2023, this condition will also be made applicable to traders with a turnover of 5 crores. Three months after that, from April 1, 2023, this system will also apply to businesspeople with a turnover of Rs 1 crore.

It is worth mentioning that earlier from April 1, 2022, this system (E-Invoicing) was reduced from 50 crores to 20 crores for businesspeople with turnover. In the next quarter i.e., from October 1, it has been reduced to 10 crore turnover and applied to companies and businesspeople. This system of E-Invoicing is being implemented for the purpose of increasing transparency in the tax system and preventing tax evasion. Especially this will curb those who take input tax credits by making fake bills. Also Read: What is GST e-invoice? how to make

6. No arbitrariness on the tax rate. No Arbitrary Rates

In earlier tax systems. The state governments used to levy tax on the goods sold at their own will. Its rate was also fixed according to its own. Now this will not happen. The GST Council has been formed for any change in the rate of GST. The Union Finance Minister will be the chair of this council. Finance ministers of all the states will also be its members.

On any decision of the GST Council, the Centre will have one-third of the voting power, and two-thirds of the power will be with the state governments. The voting power of every state will be equal. For any decision of the Council to be approved, it will need three-fourths of the Council’s votes.

Top 10 Credit Card In India?

New Rule of GST?

How GST is Beneficial to Every Class?

With the implementation of the GST system, there has been an increase in transparency and accountability in the tax system. On the one hand, this has helped the government, on the other hand, it will be beneficial for businesspeople and consumers as well. Let us understand how-

Benefits for Common People

• Diverse types of taxes on goods have been gotten rid of. Due to the abolition of tax on tax, there is no unnecessary increase in the cost of goods. This is a beneficial situation for the general consumer.
• Tax rates have been kept low on many essential things for life. With this, the things which are more useful for the common people will be available cheaply. There will be relief for poor and low-income people.
• The government’s income will increase as increased businesses come under the purview of GST. With this, it can be used to improve the facilities of common people like education, health, and transport.

Benefits for Businessmen

• Due to the different structure of taxes in every state, it was not easy for the goods traders to understand it. Several types of tools are used to increase the burden separately. Tax officers and employees are also used to take advantage of the intricacies of the rules. Now businesspeople will not have to go through these hassles. The business will be easy and fast. Eventually, the amount of profit will also increase.
• All business-related documents are online in the GST system. With this, facts will not be distorted. In case of any mistake or loss of the document, there will be a facility to rectify it online. Businesspeople will not have to go around the offices unnecessarily.
• Promote small-scale industries and entrepreneurs, the central and state governments give concessions. Take advantage of this, big businesspeople also used to show their big enterprises in many small parts. In the GST system, this will not be needed. Companies will be able to make more cheap and more competitive goods. Goods worth competing in the international market can be made.

Benefits For Government and Administration?

• In the earlier system, a large part of the market used to be underground. In many places in the chain from production to sale of goods, the work was not shown at all. The government does not even get tax on them. Now such people left out of GST will also join this chain of tax. This will reduce the scope of tax evasion and increase the income of the government.
• It will be necessary to match the purchase and sale receipts at every stage. Only then the businesspeople will be able to get the benefit of tax credit deposited in earlier stages. Since in this chain it will be necessary to give the bill to everyone and later present their receipt. That is why the market will be fully accounted, and the black market will be controlled.
• In the earlier tax system, the same commodity was available at different prices in different states. Some people took advantage of this and started smuggling cheap goods from nearby states. Now, due to the uniform tax in the whole country, the prices of goods will be the same. This will curb smuggling.
• Due to the reduction in the number of taxes, the burden on the officers and employees of the Centre and the State will be reduced. With all the details related to registration and tax payment being online, monitoring will be extremely easy. Recovery costs will come down. The work of tax administration and management will become extremely easy for the governments.

Which taxes were removed by GST? Which Taxes Replaced by GST?

More than three dozen Indirect Taxes levied on goods and services in the country and states have now been subsumed under GST. Here we are giving the list of taxes that are included in it.

GST is charged by four names. 4 types of GST

Although GST is a single tax, it is charged under four different names-

CGST: Central Goods and Service Tax

If a deal (transaction) is taking place between two parties (businesspeople) of the same state, then CGST must be paid as a share of the central government.

SGST: State Goods and Service Tax

If a deal (transaction) is taking place between two parties (businesspeople) of the same state, SGST must be paid as part of that state government.

UTGST/UGST: Union Territory Goods and Service Tax

If a deal (transaction) is taking place between two parties (businesses) of a Union Territory (UT), then UTGST must be paid as part of that Union Territory. This is also called UGST.

IGST: Integrated Goods and Service Tax

If a deal (transaction) is taking place between businesspeople from two different states, both the central government and the state government’s share must be paid as IGST together. It is deposited with the Central Government alone. Later, on behalf of the central government, the state government’s share of the tax is sent. The share in IGST is received by the state to which the supply is sent.

Note: In the case of intra-state transactions, you will have to pay two taxes simultaneously on each transaction. CGST to the Central Government and SGST to the State Government. If a transaction between two states, only one tax will have to be paid, IGST. That too only to the Central Government. However, the consuming state gets a share in this IGST later.

GST Rates?

An attempt has been made to make GST as fair as possible by imposing a minimum tax on essential items and a maximum tax on luxury and less important items for life. While zero tax has been fixed on raw materials like grains and fresh vegetables etc. Similarly, education and health facilities have been kept out of the purview of tax. The GST Council has approved a total of five slabs of GST for several types of goods. These are-

00% GST: On essential goods and services for life, such as food grains, salt, jaggery, fresh vegetables, etc.

05% GST: On goods and services common to live, such as sugar, oil, spices, tea, coffee, fertilizers, etc.

12% GST: On goods and services used in everyday life, such as snacks, toothpaste, umbrella, medicines, etc.

18% GST: Items used by middle-class people such as detergent, chocolate, mineral water, ice cream, shampoo, refrigerator, etc.

28% GST: On goods and services falling in the category of luxury and harmful, such as Pan Masala, Automobiles, Staying in Five Star Hotel, etc.

How to pay tax in GST?

How to be paid tax in GST System

Now it is understood how the government will recover the tax which will be given to the government in the form of GAT.

Let us assume that there is a pant cloth, it reaches the consumer by moving from the producer company (manufacturing site). Meanwhile, he must pass through some stages. Here we have taken only three steps to explaining the concept easily. It can be more or less than this.

• First, the goods from the producer company go to the wholesaler
• From Wholesaler then the goods go to the Retailer
• From the retailer, the goods then reach the consumer, i.e., the customer.

values we mentioned above, GST will be recovered from the buyer. But before this, the GST must be collected every time there has been an increase in the price of the goods, i.e., when the goods are imported. Value Addition (due to change in the nature of the goods or any other cost). The earlier buyer who had paid GST will collect GST from him when he sells the goods to another. So now the situation will be-

• While taking goods from the producer company, GST will be levied on the Wholesaler. But the company will fill it.
• GST will be levied on the Retailer while taking the goods from the Wholesaler. The wholesaler shall recover the same along with the value of the goods.
• The consumer will pay GST while taking the goods from the retailer. Fulfilment will be the responsibility of the retailer. The final consumer is not responsible for paying GST.

Here we see that everyone has paid GST while buying the goods. First by Wholesaler, then by Retailer, and then by Consumer. Then what is the fund of what was told earlier that only the consumer will pay GST? Let us understand. The GST deposited by Wholesaler and Retailer in their turn, they can get it back from the government through Tax Credit later. While filling the Monthly Return of GST, they can adjust it in the liability being made on them.

This process of tax adjustment has “been named as Tax Credit System in GST. The businesspeople who come in the middle stages will be able to take advantage of this tax credit system only when they have the receipts of the sales made at those stages. Because the receipts of the buyer will also be available online with the government and of the one who has sold. When the matching of receipts of both levels is correct, only then the businesspeople in between will be able to get the benefit of the Tax Credit.

Whom GST Registration Mandatory?

The necessity of getting GST registration has been decided according to two conditions.As per the turnover limit for general traders

It is mandatory for businesspeople of normal states to take registration in GST if their annual turnover is Rs 40 lakh. (Except for the special states, all the remaining states have been considered normal states. The names of the special states are given below in this paragraph)

It is mandatory for businesspeople of special states to take registration in GST on an annual turnover of 20 lakh rupees (see the name of special states in the list below).

• Jammu and Kashmir
• Assam
• Arunachal Pradesh
• Manipur
• Meghalaya
• Mizoram
• Nagaland
• Sikkim
• Tripura
• Uttarakhand
• Himachal Pradesh

Registration is necessary even without a turnover in certain types of business

Interstate suppliers: People who sell goods or services to other states must take GST registration, irrespective of how high or low their turnover is.

• Casual businesspeople (casual taxable persons.): Those who do business from season to season, moving to different states without any fixed place. They get registration for 90 days at a time, which can be extended later. Know in Detail: What is a Casual Taxable Person in GST?
• Reverse charge mechanism: Normally, the seller of goods or services handles collecting the tax in GST. But, in certain cases, the onus of collecting GST lies with the businessperson who is buying the goods or services. This reverse GST collection is called Reverse GST. It is mandatory for businesspeople with reverse GST to take registration in GST. Know in detail: What is reverse charge in GST? When is it applicable?
• Agent of Registered Person: It is mandatory for a person acting as an agent of a registered person under GST to obtain registration. Know in detail, see our article: What are Principal and Agent in GST?
• Distributors or Input Service Distributors: Traders who sell goods from several different centres, buying goods from one head office or regional centre, are also needed to take registration under GST. They are also called Input Service Distributors. Because they can use the input credits available to the head office to pay GST. Know in detail, see: What is Input Service Distributor in GST?
• E-commerce companies and suppliers: It is mandatory for online shopping or online service-providing companies (E-Commerce operators) to take registration in GST. Such as Flipkart, Amazon, Snapdeal, Myntra, India Mart, and so on.
• Aggregators: A company that leads to the services or products of other companies through links on its website or portal is called an aggregator. Such companies describe the features of other companies’ products, offer comparisons, and supply links to buy. Such as Policy bazaar, Paisa Bazaar, Ola, and Uber, etc.
• Companies providing OIDAR service: Companies supplying services through the internet or networking from any other country must also register under GST. Such as online courses, music videos, movies, E-books, cloud service, data storage, etc.

What is the GST Returns?

Whatever you buy and sell during a fiscal year, you must give details to the government. You fill these details in the GST return form and give it. Distinct categories of businesspeople must fill out and give several types of GST return forms. Below we are giving a separate introduction to all the returns of GST.

GSTR-1

All normal GST-registered businesspeople and casual taxable persons must file this return. Those who have adopted the QRMP scheme (Quarterly Return Filing and Monthly Payment of Taxes) of GST, must give the return form GSTR-1 every quarter, and those who have not adopted the QRMP scheme, must give the GSTR-1 return form every month. You must fill it out and deposit it.

It is noteworthy that businesspeople with an annual turnover of less than Rs 5 crore are exempted from adopting the QRMP scheme of GST. Know in detail: What is the QRMP scheme of GST? What are its advantages?

GSTR-2 and GSTR-3 (postponed for the time being)

At present, the government has put a hold on both GSTR-2 and GSTR-3 returns. In the first phase, the government postponed them to save the businesspeople from more complexities of the GST system. They can also be closed permanently. That is why we will not give more details about them here. But, for the information of the readers, let us say that

The GSTR-2 return had to be submitted by filling in the details of every month’s purchases.

A summary of sales and purchases for each month must be given in the GSTR-3 return.

GSTR-3B

All GST-registered general traders must file and submit GSTR-3B before GSTR-1. In this return form, the businesspeople must give a brief description of their sales and purchases. Also, details about the tax paid and input credits availed and tax liabilities must be given.

Those who have adopted the QRMP scheme of GST must give Form GSTR-3B for every quarter of turnover. On the other hand, those who have not adopted the QRMP scheme, must fill out and submit a GSTR-3B return for every month’s business.

GSTR-4

Under GST, businesses opting for a composition scheme must file this return (GSTR-4) at the end of each fiscal year. In this, you do not have to give all the details of your business, nor do you have to worry about giving receipts. You just must pay GST tax at a fixed rate according to your turnover.

GSTR-5

Doing business in India on behalf of foreign businesspeople (non-resident foreign taxpayers) requires registration in GST. They must file a return GSTR-5 every month.

Similarly, businesspeople supplying services through the internet or networking from abroad must file GSTR-5A returns every month. These are called Online Information and Database Access or Retrieval Services (OIDAR). Such as foreigners supplying music videos, movies, E-books, online courses, cloud service, data storage, etc.

GSTR-6

Businesses running as Distributors or Input Service Distributors (ISD) in GST must file return Form GSTR-6 to supply details of business every month. Know in detail about ISD, see: What is Input Service Distributor in GST?

GSTR-7

In the GST system, individuals or entities who have the right to deduct TDS from their payments, must give the account every month by filling out the return form GSTR-7. In this, they must give details of the TDS deducted every month. Also, details of TDS liability and TDS refund must be given.

GSTR-8

GST-registered e-commerce companies must give their business details every month by filling in the return form GSTR-8. In this, they must give details of TCS (collect tax at source) collected along with supplies made through their e-commerce platform.

So, readers, this was valuable information about GST. Keep watching our articles for other useful information related to tax, saving, and money.

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