GST Services
GST, or Goods and Services Tax, is a comprehensive, multi-stage, destination-based indirect tax that has transformed India’s taxation landscape. It replaced a complex web of central and state indirect taxes with a single, unified tax system.
What is GST?
Comprehensive
It has subsumed almost all indirect taxes previously levied by the central and state governments, such as Central Excise Duty, Service Tax, VAT (Value Added Tax), Luxury Tax, Entertainment Tax (except those levied by local bodies), Entry Tax, and more.
Multi-stage
GST is levied at every stage of the production and distribution process, from manufacturing to the final consumption.
Destination-based
The tax is collected at the point of consumption, not at the point of origin. This means the state where the goods or services are consumed receives the tax revenue.
Value Added Tax Principle
Tax is only levied on the “value addition” at each stage. Businesses can claim Input Tax Credit (ITC) for the GST paid on their purchases, effectively ensuring that only the final consumer bears the tax burden.
When was GST Implemented?
GST came into effect in India on July 1, 2017, through the implementation of the One Hundred and First Amendment to the Constitution of India. July 1st is now celebrated as “GST Day.”
Types of GST
India adopted a dual GST model, meaning both the Union (Central) and State governments administer the tax. This leads to four main types of GST
CGST (Central Goods and Services Tax)
Levied by the Central Government on intra-state (within the same state/UT) supply of goods and services.
SGST (State Goods and Services Tax)
Levied by the State Government on intra-state supply of goods and services. (For Union Territories, it’s UTGST – Union Territory Goods and Services Tax).
IGST (Integrated Goods and Services Tax)
Levied by the Central Government on inter-state (between different states/UTs) supply of goods and services, as well as on imports and exports. The revenue from IGST is apportioned between the Central and State governments.
GST Rates
Goods and services are categorized into different tax slabs for GST collection. The primary slabs are
- 0% (Nil-rated)
- 5%
- 12%
- 18%
- 28%
There are also a few lesser-used rates like 3% (for gold) and 0.25% (for certain precious stones). Petroleum products, alcoholic beverages, and electricity are currently outside the GST ambit and are taxed separately by individual state governments.
Objectives of GST
“One Nation, One Tax”
To create a unified national market by replacing multiple indirect taxes with a single tax, ensuring uniform rates for goods and services across states.
Reduce Cascading Effect
To eliminate the “tax on tax” effect (cascading) that existed in the previous tax regime, leading to a reduction in the overall tax burden for consumers.
Simplify Compliance
To ease tax administration and compliance for taxpayers by providing a unified and online system for registration, return filing, and payments.
Boost Economic Growth
By streamlining taxation, improving efficiency, and enhancing the ease of doing business, GST aims to increase India’s competitiveness in domestic and international markets.
Increase Transparency
To bring greater transparency in the indirect tax system.
GST Council
The GST Council is a constitutional body that plays a crucial role in shaping the GST framework in India. It consists of the Union Finance Minister (Chairperson) and representatives from all States and Union Territories.
Functions of the GST Council include
- Making recommendations to the Union and State Governments on all matters related to GST.
- Recommending tax rates, exemptions, and threshold limits for GST.
- Formulating model GST laws, principles of levy, and place of supply rules.
- Deciding on the goods and services that may be subjected to or exempted from GST.
- Addressing state-specific provisions and special tax rates during calamities.
- Resolving disputes between the Centre and States or among States regarding GST.
Key Features and Concepts
GSTIN (GST Identification Number)
A 15-digit PAN-based unique identification number allotted to every registered person under GST.
Input Tax Credit (ITC)
The mechanism that allows businesses to reduce the tax they pay on their output by the tax they have already paid on their inputs.
E-way Bill
An electronic bill required for the movement of goods exceeding a certain value.
E-invoicing
A system where business-to-business (B2B) invoices are electronically uploaded and authenticated by the Invoice Registration Portal (IRP).
GST Returns
Taxpayers are required to file various periodic returns (GSTR-1 for outward supplies, GSTR-3B for summary of outward/inward supplies and payment of tax, etc.) to report their transactions and tax liabilities.
Given the dynamic nature of GST laws and frequent updates, it is highly recommended for businesses to utilize reliable to ensure, accurate and timely GST help from our experts.