Everything you should know about GST

In India, taxes are of two types: direct and indirect. Income tax is an example of direct tax, while GST, or Goods and Services Tax, is an example of indirect tax. This article explores how GST works, its benefits, its types and objectives, its eligibility for GST registration, and many more. 

All About GST – A Primer

Goods and Services Tax, or GST, is a type of indirect tax in India. It was introduced on 1st July 2017 by the Government of India. The primary objective of GST was to make the indirect tax structure much less complicated by reducing the cascading effect of indirect taxes. GST achieved its objective by replacing multiple indirect taxes, such as Central Excise Duty, Service Tax, State Value-Added Tax, Sales Tax, Entertainment Tax, Countervailing Duty, etc.

GST is applied directly to the sale, manufacture, and consumption of goods and services in India. It is often considered a complete consumption tax. Since GST has multiple stages, its nature is comprehensive.

How GST Works – The Categories of Tax Payers

GST has four broad categories of taxpayers: manufacturers, service providers, retailers, and consumers. Let’s understand each category in detail:

• Manufacturer – A manufacturer pays GST in two ways: on the raw material and the value added to manufacture the product.
• Service Provider – A service provider pays GST on a product’s buying price as well as the value added to the product. However, the service provider may deduct the manufacturer’s tax payment from the net GST payable.
• Retailer – A retailer must pay GST on all products purchased from distributors as well as the margin they added to the products.
• Consumer – A consumer pays GST on the products purchased from various merchant establishments or the services they avail of from institutions/organisations.

Now that you know how GST works, discover the four types of GST in the following section.

Understanding the Types

There are four types of GST in India:

• CGST: CGST, or Central Goods and Services Tax, is levied on intra-state supply or delivery of goods and services.
• SGST: SGST, or State Goods and Services Tax, is levied on goods and services sold within a particular state.
• IGST: IGST, or Integrated Goods and Services Tax, is levied on the interstate supply or delivery of goods and services.
• UTGST: UTGST, or Union Territory Goods and Services Tax, is charged on the supply or delivery of goods and services in any Union Territory, such as Daman and Diu, Chandigarh, Andaman and Nicobar Islands, Lakshadweep, etc.

GST Objectives

The objectives of GST are as follows:

• Reduce the cost associated with taxes
• Increase the overall efficiency and productivity of the tax ecosystem in India
• Simplify taxation by abolishing multiple tax systems
• Increase the country’s revenue
• Fulfil the government’s vision of ‘One Nation, One Tax’
• Increase the Indian taxpayer base
• Decrease the cascading effect of multiple taxes

Who Is Eligible To Register For GST?

GST registration is not only essential but also mandatory for the following types of individuals or business entities:

• e-commerce aggregators or individuals supplying through e-commerce aggregators
• Individuals paying taxes according to the reverse charge mechanism
• Input service suppliers and distributors’ agents
• Non-resident Indians (NRIs) who are liable to pay taxes
• Businesses having a turnover higher than the threshold limit
• Individuals who registered before the introduction of the GST law

The Registration Process

The Government of India has created a GST portal for smooth registration. You will get a unique GSTIN, or Goods and Services Identification Number, and a GST certificate after registering on the GST portal. It is important to note that GST registration is compulsory for all buyers, sellers, and service providers in India. According to Indian laws, any business with an income of over Rs. 20 lakh in a financial year must register for GST. The registration process usually takes between two and six days.

A GST certificate is a legal document provided to taxpayers registered with the GST Network. The certificate is issued in Form GST REG-06. Remember that you cannot get the certificate physically since it can only be accessed digitally. The information in the GST certificate includes the GSTIN, Legal and Trade Names, Business Constitution, Date of Liability, Address, Approving Authority’s particulars, and signature.

GST Returns: What Is It?

GST Returns refer to a document containing information about a taxpayer’s income as is available with the tax authorities. The tax authorities use this information to calculate a GST certificate holder’s tax liabilities in a particular financial year. 

As per GST laws, registered entities and individuals must file their GST returns containing details about their sales, purchases, output GST, and input tax credits. Filing two monthly returns and one annual return is mandatory.

Conclusion

Ensure you stay updated with the concept of Goods & Services Tax, how GST works, its benefits, eligibility, and more. If you haven’t already registered for GST, now is the best time to do it to get your GSTIN and take your business to new heights!