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What is GST?

The Goods and Services Act was introduced in parliament on 29 March 2017 and was come into
force on 1st July 2017, GST denotes to the “Goods & Services Tax” in India. GST is the biggest
indirect tax reform of India the aim of this Act is to ensure a single taxing system that means one
nation one tax which tremendously enhances the ease of doing business and will increase the
accesses base in India by fetching in millions of small businesses in India. By abolishing and
listing multiple taxes into a single system, the tax complications would be reduced while tax base
is enlarged substantially. GST amalgamate all the indirect taxes the rationale behind the
amalgamation is to reduce the tax liability of taxpayer, earlier indirect tax structure comprises of
many different taxes such as: a) Central Tax such as levied by the Central government (which
includes central sales tax, Excise Duty etc.), b) State Tax levied by the various state government
(VAT, Service Tax, Octroi now GST is the sole indirect tax on the supply of the Goods and
Service. GST subsumed taxes like Central Excise tax, Service Tax, VAT, Entry Tax, etc.
GST being a tax on the event of “supply”, every supplier needs to get GST registration in India.
However, a small business having all Indian aggregate turnovers below Rupees 20 lakh (10 lakh
if the business is in Assam, Arunachal Pradesh, J&K, Himachal Pradesh, Uttarakhand, Manipur,
Mizoram, Sikkim, Meghalaya, Nagaland or Tripura) need not register.
Introduction of the GST in India tax regime is a significant step, the aim of the GST is to reduce
the cascading effect. Cascading effect refers to the charging of tax over tax. GST eliminates the
cascading effect of the tax that was seen earlier. It is so because, under GST, the indirect taxes
are managed in such a way that all sorts of indirect taxation are fallen under one roof.

What is the Difference between Direct Tax and Indirect Tax?


Direct taxes such as income tax bear by the person liable to pay the tax; this means that the tax
burden cannot be shifted to anyone else. The liability on indirect tax, on the other hand, can be
shifted to another person. So, if a person is liable to pay the tax he can collect the tax from
someone else and then pay it to the government, this shifting is called shifting of tax burden.
 A Direct tax is imposed and paid for by individuals, Hindu Undivided Families (HUF),
firms, companies etc. whereas indirect tax is eventually paid for by the last consumer of
the goods and services.
 The burden of tax cannot be transferred in case of direct taxes while burden can be
transferred for indirect taxes.
 Lack of management in pooling of direct taxes can occur tax evasion possible, while
indirect taxes cannot be evaded as the taxes are imposed on goods and services.
 A Direct tax can help in dropping inflation, whereas indirect tax may increase inflation.
 Direct taxes have better-assigning effects than indirect taxes as direct taxes put lesser
load over the collection of sum than indirect taxes, where a collection is dispersed across
parties and consumers’ preferences of goods are slanted from the price variations due to
indirect taxes.
 Direct taxes help in dropping inequalities and are considered to be progressive while
indirect taxes increase inequalities and are considered to be relapsing.
 Indirect taxes involve slighter managerial costs due to convenient and stable collections,
while direct taxes have much immunity and involve advanced administrative costs.
 Indirect taxes are concerned with more towards growth as they depress consumption and
help improve savings. Direct taxes, on the other hand, decrease savings and dishearten
investments.
 Indirect taxes have a broader exposure as all members of the society are taxed through
the sale of goods and services, while direct taxes are claimed only from people in
particular tax brackets.
 Additional indirect taxes imposed on harmful commodities such as cigarettes, alcohol etc.
deter over-consumption, thereby serving the country in a social context.

GST Registration in India – A Brief


Registration will confer the advantage of legal recognition as supplier of goods or services,
authorized to collect taxes from his customers and pass on the credit of taxes paid on the goods
or services supplied to the purchasers/recipients, registered entity can claim Input Tax Credit of
taxes paid and can utilize the same for payment of taxes due on supply of goods or services, and
another advantage is that there is a seamless flow of Input Tax Credit from suppliers to recipients
at the national level.
In GST regime, all entities involved in buying or selling goods or providing services or both are
obligatory to register for GST. Entities without GST registration would not be entitled to collect
GST from a customer or entitlement for an input tax credit of GST paid or can be penalized.
Further, registration under GST is compulsory once an entity passes the minimum threshold
turnover of starts a new business that is expected to cross the given turnover.
According to the GST Council, entities in special category states with an annual turnover of
Rs.10 lakhs and above will be obligatory to register under GST. All other entities in rest of India
will be obligatory to register for GST if annual turnover exceeds Rs.20 lakhs. There are also
several other criteria's, that can make an entity liable for obtaining GST registration - regardless
of annual sales turnover. Entities which are required to register for GST as per procedures must
file for GST application within 30 days from the date on which the entity became accountable for
registration under GST.
The GST registration in India is PAN-based and State specific. The supplier has to register in
each of such State or Union territory from where he supplies goods or services. After the GST
registration in India the supplier gets a 15- Digit GST identification number called “GSTIN”, and
a certificate of registration incorporating therein this GSTIN is made available to the applicant on
the GSTIN common portal. The first 2 digits of the GSTIN is the State code, next 10 digits is the
PAN of the legal entity, the next two digits are for entity code, and the last digit is checksum
number. GST registration is not tax specific, which means that there is single registration for all
the taxes i.e. CGST, SGST/UGST/, IGST and ceases. The GST application in India can be filled
online on the official website of the GST registration.
Different types Of GST in India
IGST – Integrated GST, is collected by the Central Govt.
Integrated GST (IGST) is appropriate on interstate transactions of goods and services, as well as
on imports. This tax will be claimed by the Central government and will additionally be
distributed among the particular states. IGST is imposed when a product or service is transferred
from one state to another. IGST is in place to safeguard that a state has to transact only with the
Union government and not with every state government separately to settle the interstate tax
amounts. The following illustration will be helpful for the sake of simplification:

Example – Ram is a manufacturer in U.P. who sold goods worth Rs 10,000 to Laxman in U.P. as
it is an interstate deal, IGST will be applicable here. We assume that the GST rate is 18% for the
particular item. So, the IGST amount imposed by the Central Government will be Rs 1800 (18%
of Rs 10,000), and the refined rate of the product will be Rs 11,800.
Now, GST is an ingestion tax that means only the state where the goods are actually consumed
will get the tax profits, notwithstanding of the manufacturing state.
CGST – Central GST, is collected by the Central Govt.
CGST refers to the Central GST tax that is imposed by the Central Government of India on any
business of goods and services tax taking place within a state. It is one of the two taxes levied on
every intrastate transaction. CGST swaps all the existing Central taxes including Service Tax,
CST, Customs Duty, Central Excise Duty, SAD, etc. The rate of CGST is usually equivalent to
the SGST rate. Both taxes are levied on the base price of the product. The following illustration
will be helpful for the sake of simplification:

Example – In the example above, when Ram sales a product to Laxman in the same state
(Rajasthan), he has to pay double taxes. CGST is for the central government and SGST is for the
state government. The rate of CGST is 9%, the same as SGST’s Rate. After the presentation of
CGST (9% of Rs 10,000), the ultimate cost of the product will be Rs. 11,800.

As you can probably predict, all the taxes in all the conditions above are allowed by the end
consumer in the final cost, not by the producer or the dealer of the product or service. Since GST
is imposed on consumption, the state where the product is originally manufactured is not eligible
for the tax collected. If the manufacturing state imposes a tax, the same will be shifted to the
overwhelming state through the Central government.

SGST – State GST, is collected by the State Govt.


SGST (State GST) is one of the dual taxes imposed on every intrastate operation of goods and
services. Another one is CGST by Central govt. SGST is imposed by the state where the goods
are sold or purchased. It will interchange all the existing state taxes including VAT, State Sales
Tax, Luxury Tax, Entry Tax, Entertainment Tax, State Ceases and Surcharges on any kind of
business including goods and services. The State Government is the only claimer of the revenue
received under SGST. The following illustration will be helpful for the sake of simplification:

Example – Ram from Utter Pradesh wants to sell some goods to Laxman in Utter Pradesh. The
product, originally priced at Rs 10,000, will attract GST at 18% rate involving of 9% CGST rate
and 9% SGST rate. The SGST tax sum here is Rs 900 (9% of Rs 10,000) which is fully claimed
by the Utter Pradesh State Government. The rate of the product afterwards SGST will be Rs
10,900.
What are the various GST Rates?
There are various slab categories under GST and these are discussed below-
 No Tax

Goods- No taxes will be levied on goods like milk, fruits, vegetables, bread, salt, bindi, curd,
sindoor, natural honey, bangles, handloom, besan, flour, eggs, stamps, printed books, judicial
papers and newspaper
Services- All hotels and lodges who carry a tariff below INR 1000 are exempted from taxes
under GST.
 GST Tax Slab of 5%

Goods- The goods which will attract a taxation of 5% under GST include skimmed milk powder,
flash fillet, frozen vegetables, coffee, coal, fertilizers, tea, spices, pizza bread, kerosene,
ayurvedic medicines, agarbatti, sliced dry mango, insulin, cashew nuts, unbranded namkeen,
lifeboats etc.
Services- Small restaurant along with transport services like railways and airways, Standalone
ACs non-AC Restaurants and those which serve liquor, Takeaway Food, Restaurants in hotels
with a room tariff less than INR 7,500 ( no input credit for these restaurants), will come under
this category.
 GST Tax Slab of 12%

Goods – items coming are tax slab of 12% include frozen meat products, butter, cheese, ghee,
pickles, sausage, fruit juices, namkeen, tooth powder, medicine, umbrella, instant food mix, cell
phones, sewing machine, man-made yarn, etc.
Services – Business class air tickets are come under12% GST slab.
 GST Tax Slab of 18%

Goods- Substantial amount of items are part of this tax slab. Some of the items are flavored
refined sugar, cornflakes, pasta, pastries and cakes, detergents, washing and cleaning
preparation, safety glass, mirror, glassware, sheets, pumps, compressors, fans, light fitting,
chocolate, preserved vegetables, tractors, ice-cream, sauces, soups,, mineral water, deodorants,
suitcase, briefcase, vanity case etc.
Services- Restaurants located inside hotels with tariffs of INR 7,500 and above, outdoor catering
(an input tax credit to available), IT and Telecom services and financial services along with
branded garments will be part of this tax slab.
 GST Tax Slab of 28%

Goods – Over 200 goods will be taxed at a rate of 28%. The goods which will be part of these
categories under GST are sunscreen, pan masala, dishwasher, weighing machine, paint, cement,
vacuum cleaner. Other items include automobiles, hair clippers, motorcycles, etc.
Services- In this head services of five-star hotels, racing, movie tickets and betting on casinos is
covered.
So before filling tax, we need to find out in what categories our Goods/Services have been fallen.
The Process of GST Registration in India
Step- 1 Taxpayer need to visit on GST Registration Portal which is given in the GST official
website, Step 2- Click on registration>New registration option, Step 3 The application form is
separated into two parts Part A and B. Step 4 – In Part A – The New Registration page is
displayed on the screen. Select the New Registration option. Step 5 – In this stage, you have to
select the type of Taxpayer i.e. Partnership, Sole Proprietor, HUF or a Company. Step 6 – You
have to register the Business legal name. Step 7 –Then you have to enter your Email Address and
contact number of the Primary Authorized Signatory. Step 8 – Then you have to fill cpatcha text
displayed on the screen and then enter the “proceed button”. Step 9 – Then the One Time
Password (OTP) Verification page is displayed on the screen, after you enter the mobile number
you will receive an OTP. OTP will expire after 10 minutes. In Part B of GST registration – Step
11 – Now login again by using “Temporary Reference Number” and Captcha Code, Step 12 –
The My Saved Application page is displayed. Under the Action column, click the Edit icon (icon
in a blue square with a white pen). Step 13 – The registration Application form will display on
your screen. Step 14 - On the top of the page, there are ten tabs and in this step, you have to fill
the detail of the representative of the business. Step 15 – Fill the detail of principal place of
business Step 16 Enter the business commodity detail and Save & Continue. Step 17 – Fill the
detail of Bank account and upload a document. Step 18 – Verification tab: This tab page display
the details of the verification for authentication of the details submitted in the form. Step – 19
Click Proceed. Step 20 – Click sign from the Pop-up window Step 20- Click Sign from the Pop-
up window Step – 21 on successful submission it will show a message on the screen.

Documents required for GST registration in India


For GST registration we need not send any types of physical documents anywhere it is registered
through online. For registration, we will have to upload all scan copies of original documents at
GSTN portal. The documents which are required for GST registration in India are as follow:
GST Registration- Documents

 Business owner’s documents: The documents which are required from the owner of the
business are PAN card, Aadhar number, Photos etc.
 Business Documents: The documents which are required from the business are business
address proof (Ownership or rent agreement), Authorized Signatory, Bank statement or
Passbook, MOA (Memorandum of Association), AOA (Article of association),
Registration certificates.

Documents required of sole proprietorship/ Individual: For the registration of sole


proprietorship/ Individual the following documents are required as follow:

 PAN card, identity proof, address proof and photograph of the proprietor.
 Address proof for a business place like electricity bill, landline bill etc.
 A scan replica of the first page of bank passbook.

Document required for normal partnerships: For the registration of normal partnerships
the following documents are required as follow:

 PAN card of the partnership


 Partnership deed
 Copy of bank statement
 Declaration to comply with the provisions
 Letter for the appointment of authorized signatory
 Copy of electricity bill, water bill, NOC of the owner rent agreement.
Documents required for Pvt. Limited Company/ Public Company / One Person Company
(OPC) :

 Directly related documents: PAN and ID proof of directors.


 Registration office documents: Copy of electricity bill, water bill etc. NOC of the owner,
rent agreement (in case premises are rented).

Document required for Limited Liability Partnership (LLP):

 LLP Documents: PAN card of the LLP, Registration certificate of the LLP, LLP
partnership agreement, a copy of bank statement of the LLP, a copy of Board resolution,
and letter for the appointment of authorized signatory.
 Designed partner related documents: PAN and ID proof of designated partners.
 Registered office documents: Copy of electricity bill, water bill etc; NOC of the owner,
rent agreement (in case premises are rented).

Major Reasons for Online GST Registration in India


 Exceed the threshold limits - Generally, the liability to register under GST arises when
you are a supplier within the meaning of the term, and also your aggregate turn over
exceed the threshold limits of 20 lakhs in the financial year.
 Specified Supplier -The GST law enlists certain categories of suppliers who are required
to get compulsory registration irrespective of the turnover, that is to say, the threshold
exemption of 20 lakhs is not available to them. Some suppliers who need to register
themselves compulsorily irrespective of the size of their turnover are:
 Inter-state suppliers.
 A person receiving supplies on which tax is payable by the recipient on a reverse charge
basis.
 A Casual taxable person who is not having a fixed place of business in the State or Union
territory from where he wants to make supply
 Non- resident taxable persons who are not having a fixed place of business in India.
 A person who supplies on behalf of some other taxable person (i.e. an Agent of some
principal)
 E-Commerce Business – It mandatory for the E-commerce business to have GST
registration in India, GST law divide e-commerce business into three part firstly E-
commerce operators, who provide platform to the suppliers to supply through it, secondly
Suppliers who supply through an e-commerce operator and thirdly those e-commerce
operators who are notified as liable for GST payment under Section 9.
 Taxable Activities –A person who is engaged in any kind of taxable activities in India
need to register himself under GST portal.
 Free inter-state trade without restriction – The registered business enterprise can
freely sell their product in another state. Thus it widened the market for small scale
enterprises.
 Tax input credit – If you wanted to get benefits from the government like tax input
credit on your own purchase then you should go for the GST registration in India, the
government also provide various other benefits to the registered business,
 The Penalty for non- registration – If it is mandatory for the business to be register and
still business is not registered then under GST law business is subject to the penalty of
10% of the total tax due.

Benefits of GST Registration in India


GST registration helps business to be recognized legally and also an open number of
opportunities for the business. Benefits of the GST registration are as follows-
 Removal of cascading effect and reduction in tax liability.
 Tax collection and payment becomes easier
 GST define the treatment of e-commerce very well, old tax regime is very not so clear
about the tax liability of e-commerce trader.
 Proper bookkeeping of taxes paid on the input goods or services which can be used for
payment of GST due to the supply of goods or services or both by the business
 GST provides special benefits to the startup business in India

Various Advantages of GST Registration Certificate in India


 If you are planning to blow into e-commerce like Flipkart Amazon and PayTm then it is
mandatory for you to have GST registration in India, you cannot sell product or services
online without GST registration, therefore GST registration will give you the opportunity
to trade in the online market.
 If your business is registered then it will give you a competitive edge in comparison to
the unregistered competitors because generally MNC’s does not like to deal with small
entities unless they have GST registration proof
 GST registration provides legal recognition to the business, legal recognition is very vital
in the advancement of a loan, in the establishment of a contractual relationship with other
private entities.
 The registered business enterprise can freely sell their product in another state. Thus it
widened the market for small scale enterprises.
 In case you are the owner of sole proprietor business then it important for you to have a
GST registration because Banks & other financial does not open a current account in case
of sole proprietor unless you carry any government proof in name of your business. GST
registration certificate can help you to open a current bank account because it acts a proof
for your business.
 Some government tender requires GSTIN for the application of the tender if you do not
have GSTIN then you may miss the opportunity.
 If you wanted to get benefits from the government like tax input credit on your own
purchase then you should go for the GST registration in India, the government also
provide various other benefits to the registered business.
 A registered business will find a better place for him in the market; it is also easier for the
business to a get loan from the Banks and other financial institution.
 Registered business is legally authorised to collect taxes from the customer and can avail
the benefit of an input tax credit. Registered owner is also legally authorised to sell their
product anywhere in the country.
 GST registration certificate is very helpful in the government dealings.
Frequently Asked Questions
1. When to register for GST?
If the turnover of the business exceeds Rs 20/10 lakh or the business is engaged in the inter-state
transaction or in e-commerce then the registration under GST is mandatory.
2. What are the major consecutive actions that have led to the introduction of GST?
GST is being presented in the country after a 13-year long period since it was first debated in the
report of the “Kelkar Task Force” on indirect taxes. A brief chronology outlining the main marks
on the proposal for an overview of GST in India is as follows:

a) In 2003, the Kelkar Task Force on indirect tax had proposed an inclusive Goods and
Services Tax (GST) created on VAT principle.
b) A proposal to present a National level Goods and Services Tax by April 1, 2010, was first
proposed in the Budget Speech for the financial year 2006-2007.
c) Since the proposal involved improvement/ restructuring of not only indirect taxes
imposed by the Centre but also the States, the accountability of preparing a Design and
Road Map for the application of GST was allocated to the Empowered Committee of
State Finance Ministers (EC).
d) Based on contributions from Govt. of India and States, the Empowered Committee
released its First Debate Paper on Goods and Services Tax in India on November; 2009.
e) In order to take the GST connected work supplementary, a Joint Working Group
containing officers from Central as well as State Government was instituted on
September; 2009.
f) In order to amend the Constitution to permit the introduction of GST, the Constitution
(115th Amendment) Bill was presented in the Lok Sabha in March 2011. As per the
prescribed protocol, the Bill was denoted to the Standing Committee on Finance of the
Parliament for inspection and report.
g) Meanwhile, in an enactment of the decision taken in a meeting among the Union Finance
Minister and the Empowered Committee of State Finance Ministers on 8th November;
2012, a ‘Committee on GST Design’, containing the officials of the Government of India,
the Empowered Committee was constituted and State Governments.
h) This Committee did a comprehensive conversation on GST design including the
Constitution (115th) Amendment Bill and succumbed its report in January; 2013. Based
on this Report, the Empowered Committee suggested certain modifications in the
Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.
i) The EC in the Bhubaneswar meeting also decided to constitute three committees of
officers to talk over and report on various characteristics of GST as follows:-
 Committee on Place of Revenue Neutral Rates and Supply Rules;
 Committee on dual control, exemptions and threshold;
 Committee on GST on imports and IGST.
a) The Parliamentary Standing Committee succumbed its Report in August, 2013 to the Lok
Sabha. The endorsements of the Empowered Committee and the endorsements of the
Parliamentary Standing Committee were inspected in the Ministry in discussion with the
Legislative Department. Most of the endorsements made by the EC and the Parliamentary
Standing Committee were approved and the draft Amendment Bill was appropriately
revised.
b) The ultimate draft Constitutional Amendment Bill combining the above-stated
modifications was sent to the Empowered Committee for deliberation in September 2013.
c) The Empowered Committee once again made definite endorsements on the Bill after its
meeting in Shillong on November 2013. Certain endorsements of the EC were integrated
into the draft Constitution (115th Amendment) Bill. The revised draft was referred for
deliberation of the Empowered Committee on March, 2014.
d) The 115th Constitutional (Amendment) Bill, 2011, for the institution of GST introduced
in the Lok Sabha on March 2011 failed with the dissolution of the 15th Lok Sabha.
e) In June 2014, the draft Constitution Amendment Bill was referred to the EC after
sanction of the new Government.
f) Based on a broad agreement reached with the EC on the outlines of the Bill, the Cabinet
on 17/12/2014 permitted the proposal for the institution of a Bill in the Parliament for
amending the Constitution of India to ease the introduction of Goods and Services Tax in
the country. The Bill was presented in the Lok Sabha on 19/12/2014, and was approved
by the Lok Sabha on 06.05.2015. It was then transferred to the Select Committee of
Rajya Sabha, which submitted its report on 22/07/2015.
3. Will all traders mandatorily have to register their business under GST?
A trader dealing only in excused goods or where his turnover is less than Rs.20 Lakhs in the
financial year (but not engaged in inter-State transactions i.e. supply) is not mandatorily required
to register under GST.

4. Under GST, will traders be obligatory to declare their IEC at the period
of imports and exports?
For the time being both GSTIN and IEC have to be revealed. But over a period of time, traders
need to reveal only their GSTIN in its place of IEC at the period of imports and exports.
5. Is there any scheme for the sum of taxes under GST for small traders?
Yes. Composition charge is an alternative technique of levy of a tax intended for small taxpayers
whose turnover is up to Rupees 75 lakhs (Rupees 50 lakhs for special category States). The basic
moto is to bring simplicity and reduce the cost of submission for the small taxpayers. The
scheme is noncompulsory and is essential for small traders, manufacturers and restaurants.

6. What is the tax rate under Composition levy?


The tax rate for traders shall be 1% i.e. 0.5% CGST inclusive 0.5% SGST of the turnover in the
state.

7. When will a trader require to pay tax?


A trader, if registered under Goods and Services Tax, will require paying tax on a monthly basis
on or before 20th of the succeeding month. A person who has chosen for composition levy will
be required to pay tax on a quarterly basis on or before 18th of the month successive the quarter
linking to supplies.

8. Can a person who has chosen to pay tax under the composition scheme
gain Input Tax Credit on his input supplies?
No. An accesses opting to pay tax under the composition scheme is out of the credit hierarchy.
He /She can’t take credit on his input supplies.
9. Can a registered person, who buys goods from a trader paying tax
under the composition scheme, take credit on purchases finished from
the composition dealer?
No. A trader electing to pay tax under the composition scheme is out of the credit chain. He / She
can neither take credit on his/her input supplies, nor issue a taxable invoice to his/her buyer. He/
She is obligatory to issue a bill of supply and can’t charge tax from the recipient. Therefore, the
person purchasing from him/her can’t take any credit.

10.What if a trader or businessman is unable to undertake compliances


under GST himself?
Under GST, the government will permit qualified persons to act as GST Practitioners. In the case
where the trader is unable to undertake compliances himself, he can exploit the services of such
GST practitioners to do the compliances for him. There will also be a Facilitation Centers, help
desks in each GST Commissioner. There would also be facility of GST Suvidha Providers
(GSPs) who will be developing software for updating data on to the GSTN portal.
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