Which country first implemented GST?
France was the first country to implement GST in 1954 to reduce tax evasion. Since then, many countries have implemented GST. GST was introduced to supplant multiple indirect taxes levied on the same goods or services by both states as well as central governments.
When was GST introduced in India?
GST was introduced on 1st July 2017, but its process started a long time ago. In India, Atal Bihari Vajpayee, then Prime Minister of India, has put an idea of adopting GST in 2000. In 2004, a task force headed by Vijay. L. Kelkar has mentioned that there were many issues in the present tax structure, therefore a new tax structure had to be put in force. In 2005, Finance minister P. Chidambaram had said to implement a uniform GST structure across the country. In 2006, Finance Minister declared a deadline for the introduction of GST (i.e., on 1st April 2010). In 2009, new Finance minister Pranab Mukherjee announced a basic sketch of the GST system. In 2016, the President of India gives consent to the Constitution Amendment bill to become an Act. After finalizing GST rates and GST rules, the Government of India declares that the GST bill will be applicable from 1st July 2017. This is about the history of the implementation of GST in India.
What is GST?
GST is known as Goods and Services Tax. It is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017.
In other words, Goods and Service Tax (GST) is levied on the supply of goods and services. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.
Before and after implementation of GST
Under the old taxation method, there was VAT (Value Added Tax). Before the introduction of GST, the central taxes like custom duty, central sales tax, surcharges, and cesses. The state taxes included state VAT, luxury tax, etc.
Under GST, all the central and state taxes are classified and a single tax was levied on commodities and services.
Before GST, a tax was levied at the place where goods are manufactured or sold or services are rendered. After GST, a tax was levied at the place of consumption.
4 Types of GST in India
4 taxes are applicable under the GST tax system, they are:
- CGST (Central Goods and Service Tax)
- SGST (State Goods and Service Tax)
- IGST (Integrated Goods and Service Tax)
- UTGST (Union Territory Goods and Service Tax)
CGST (Central Goods and Service Tax)
CGST is imposed on intra-state supply of goods and services (e.g., a transaction happening within the state). CGST has replaced all the earlier central taxes such as customs duty, service tax, etc. It is charged along with SGST. The rate charged under CGST is the same as that of the SGST rate. The tax collected is sent to the Central Government.
SGST (State Goods and Service Tax)
SGST is imposed on the intra-state supply of goods and services. (e.g., a transaction happening within state). SGST has replaced all the earlier taxes such as Value-added Tax, Entertainment tax, state sales tax, cess, and surcharges. It is charged along with CGST. The rate charged under SGST is the same as that of the CGST rate. The tax collected under SGST is sent to the State Government.
IGST (Integrated Goods and Services Tax)
It is a tax collected by the Central Government for an inter-state sale (e.g., Karnataka to Tamil Nadu). IGST is levied when there is an inter-state sale of goods and services. The central government gets IGST and distributes it among states.
UTGST (Union Territory Goods and Service Tax)
Union Territory Goods and service taxes are essentially levied upon all transactions on goods and services that are carried out in any of the Union Territories of India which include Daman, Lakshadweep, Andaman & Nicobar Islands, Chandigarh, Diu etc. UTGST is levied along with CGST.
What are the GST Slab Rates in India?
In India GST rate for various goods and services is divided into four slabs they are:
- 5% GST
- 12% GST
- 18% GST
- 28% GST
5% GST
It includes basic household necessities and daily essentials. A list of goods and services that fall under the slab rate of 5% is given below:
| GOODS | SERVICES |
|---|---|
| Baby Food | Takeway Foods |
| Spices | Tailoring |
| Tea/Coffee | Cab Rent |
| Oil | Newspaper Printing |
| Life-saving drugs | Restaurants |
| Fertilisers | |
| Handmade Ornaments | |
| Walking Sticks (For disabled) |
12% GST
It includes the following items:
| GOODS | SERVICES |
|---|---|
| Dry Fruits and Nuts | Room Tariff |
| Dairy Products | Mining and drilling of Natural GAs |
| Ornaments | Railway Coaches |
| Handmade matches | Building construction |
| Photographs | Temporary basis IP rights |
18% GST
It includes the following items:
| GOODS | SERVICES |
|---|---|
| Electrical Appliances | Theatre |
| Suitcase | Circus |
| Leather clothing | Event Management |
| Doors/ Sanitary wares | Catering |
| Household Products | IT Services |
| Few eatables like pasta, mineral water, chocolate, etc. | Telecom Services |
28% GST
It includes the following items:
| GOODS | SERVICES |
|---|---|
| Instant Coffee | Sports Events |
| Fuel- Petrol, LPG | Entertainment Services |
| Moto Vehicles (except motor cycles) | Amusement Parks |
| Spare parts | |
| Tiers |
The Advantages of adopting GST in India
- GST has helped the country in reducing corruption and sales without proper receipts in the country.
- GST simplified the tax collection process for goods and services related to businesses as well as individual people.
- The introduction of GST has led to uniformity in tax rates and structures.
- Service providers and business owners who have a turnover of Rs. 20 lakhs and below are exempted from paying GST as per the Indian government, which is a huge benefit to such companies. In North Indian states, this cut-off is at Rs. 10 lakhs.
- The introduction of GST has reduced frauds of making sales without bills or receipts eventually.
- Tax evasion is also reduced after the introduction of GST.
- Filing of taxes became simple due to the online option of registration, filing returns, and other due procedures.
- Seventeen indirect taxes have been replaced by one tax and that is GST. This helped in reducing the unorganized way of collecting taxes.
The Disadvantages of adopting GST in India
- Adoption of GST have increased the operational cost of businesses in terms of software required to update the older version of accounting software.
- It led to higher burden for small and medium enterprises, because under the old regime, businesses with annual turnover of Rs. 1.5 crore had to pay excise duty, but under new regime, businesses with an annual turnover of over Rs.40 lakh must pay GST.
- Insurance premium has become costlier after levying GST.
- Penalties were imposed for non-GST compliant firms.
What is the procedure for GST registration?
Following is the registration process of GST:
- Applicants can apply for a GST number along with the filing on the online portal for GST on https://cbic-gst.gov.in/.
- Once the application is submitted, the portal instantly generates an ARN (Application Reference Number) status.
- Applicants then can regularly check the status of their application also can seek help if there are any queries regarding the portal.
After ARN is generated, it takes 7 working days to receive the GST registration certificate as well as GSTIN.
List of Documents required for GST registration
Below are the documents required for GST registration:
- PAN card
- Aadhar card
- Proof of address
- Bank account details
- Photograph of the owner
- Copy of partnership deed (for partnership firms)
- Registration certificate (for LLP)
- Photographs of all partners and/or signatories
- Proof of appointing the authorized signatory
- Article of association or Memorandum of association
- Certificate of incorporation which is provided by the Ministry of corporate affairs
6 Types of GST returns
GSTR-1
Goods and Services Tax Return -1 is a report that all GST registered taxpayers need to file every month or quarter. It contains the details of sales made during the period. Outward supplies (Sales) can be B2B and B2C.
GSTR-2
Goods and Services Tax Return-2 is a report that contains all details of purchases (Inward supplies) made for that month. It contains all the details like taxpayers’ information, period of return, invoice number and date, etc.
GSTR-2A
Form GSTR-2A is a system-generated statement of inward supplies (Purchases) when the supplier uploads the B2B transactions. Note that for suppliers it is an outward supply.
GSTN portal auto generates Form GSTR-2A by collecting the following details:
Form GSTR-1 – Details of sales (outward supplies) of goods and services.
Form GSTR-5 – Return filed by Non-resident taxable person.
Form GSTR-6 – Return filed by Input service distributor.
Form GSTR-7– Return filed by a person liable to deduct tax (TDS)
Form GSTR-8– Return filed by a person liable to collect tax (TCS)
GSTR-2B
GSTR-2B is an auto-generated Input Tax Credit Statement (ITC). It is generated to simplify ITC claims for registered taxpayers. It is auto-generated based on documents like GSTR-1, GSTR-5, and GSTR-6.
GSTR-3
GSTR-3 includes both outward and inward supplies during a month. GSTR-3 is a monthly GST return that must be filed by the 20th of every month. It is auto-generated by using the documents like GSTR-1 (Sales), GSTR-2 (Purchases).
GSTR-3B
GSTR-3B includes both outward and inward supplies during a month. Since small and medium businesses have been using the manual and complicated methods of accounting. Here tax to be paid after deduction will be auto-generated from GSTR-3.
What is GST Identification Number (GSTIN)?
Goods and Services Tax Identification Number (GSTIN) is 15-digit identification number assigned to all the registered tax payers.
Format of GSTIN
Let us consider an example of a GSTIN: 29AEBIT7814K1Z8
- Here first 2 digit implies state code, the above-given code (i.e., 29) is a code of Karnataka.
- Some of the state codes are:
Maharashtra- 27
Andhra Pradesh-37
Delhi- 07
West Bengal- 19
Gujarat- 24
Haryana- 06
Kerala- 32
Telangana- 36
Tamil Nadu- 33
Madhya Pradesh- 23
Orissa- 21
Punjab- 03
- The next 10 alphanumerics will be the PAN number of the taxpayers/business. (AEBIT7814K)
- 13TH digit will be assigned based on the number of registration within a state. (1)
- 14th alphabet will be “Z” by default.
- 15th digit i.e last digit will be a check code, it can be either alphabet or a number (8)
