[ecis2016.org] Here is everything you need to know about the goods and services tax regime in India, launched to revolutionise the indirect tax system in the world’s biggest democracy.
What is GST?
GST, short for Goods and Services Tax, is an indirect tax imposed in India on the supply of goods and services. A value-added tax, GST is imposed at each stage of the supply chain on the exact amount of value-addition achieved. Applicable across India, GST can also be described as a destination-based tax on consumption.
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Types of GST |
GST is divided into four types:
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[ecis2016.org] All about types of GST
GST history
GST was introduced in India on July 1, 2017, 14 years after it was first discussed in a report on indirect taxes by the Kelkar Task Force in 2003. Before the introduction of GST, states and the centre could collect separate taxes. The Goods and Services Tax was introduced in India to cut down the number of indirect taxes on the consumption of products and services, curb instances of tax evasion and bring uniformity to India’s taxation system. With its tagline, ‘One Nation One Tax’, GST is touted as a ‘significant step in the field of indirect tax reforms in India’.
GST timeline |
| 2000: GST conceptualised; a committee is set up to design the GST model
2003-04: Committee formed to recommend the introduction of GST 2006: In the 2006-07 Budget Speech, FM announces the introduction of GST from April 1, 2010 2009: First discussion paper on GST released 2011: Constitution (115th Amendment) Bill 2011 for incorporating relevant provisions of GST introduced in the Parliament 2011-13: GST bill referred to Standing Committee 2014: Constitution (115th Amendment) Bill lapsed with the dissolution of the 15th Lok Sabha 2014-15: Constitution (122nd Amendment) (GST) Bill 2014 introduced and passed in May 2015 August 2016: Constitution (101st Amendment) Act enacted September 2016: Constitutional changes made to 101st Amendment come into force. GST Council was created; the first GST Council meeting held Read also : Proprietorship: Meaning, advantages, disadvantages and registration May 2017: GST Council recommends rules July 2017: GST launched |
Taxes that GST subsumed
Upon coming into effect, GST subsumed 17 large taxes and 13 cesses.
Major central-level taxes that GST subsumed:
- Central excise duty
- Additional excise duty
- Service tax
- Additional customs duty or countervailing duty
- Special additional duty of customs
Major state-level taxes that GST subsumed:
- Value-added tax
- Sales tax
- Entertainment tax other than the tax levied by the local bodies
- Central sales tax levied by the Centre and collected by states
- Octroi and entry tax
- Purchase tax
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GST Council
The GST Council is a joint forum of the centre and the states. The GST Council is responsible for making recommendations to the union and the states on GST-related issues. Decisions at the GST Council are taken with the concurrence of the union and the state governments. A decision is taken with a 75% majority of the weighted votes of members present and voting.
The GST Council consists of the following members:
- Union finance minister as the chairperson.
- Union minister of state, in charge of revenue of finance as a member.
- Minister in charge of finance or taxation or any other minister nominated by each state government as members.
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Who is liable to pay GST?
Businesses with annual sales of more than Rs 20 lakhs must pay GST. This limit is, however, capped at Rs 10 lakhs for north-eastern and special category states. Businesses involved in inter-state trade are liable to pay GST, irrespective of this threshold.
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How does GST work?
Stage 1: Manufacturer
Suppose, a constructor buys raw materials to build a housing project for Rs 1,000. He also pays Rs 100 in taxes. Once the project is finished, let us assume, he has added value to it to the extent of another Rs 1,000. Thus, the value of the project is Rs 2100. Since it is a housing project, he is liable to pay GST at 5% (Rs 105). However, under the new tax regime, the constructor will be able to set off his tax liability against the money he has already paid as tax, i.e., Rs 100. This means the builder will pay only Rs 5 as GST.
Stage 2: The service provider
Let us assume the constructor transfers the housing project to a builder to sell the units in this housing project. The builder buys it for Rs 2,105 and adds value to the extent of Rs 95, bringing the overall price to Rs 2,200. At 5% GST, he is liable to pay Rs 110 as GST. However, the builder can set off the tax on his output of Rs 100 against the tax on his purchased project. He is, thus, required to pay only Rs 10 as GST.
Stage 3: Consumer
For a homebuyer, the total cost of the unit is Rs 2,210. At 5%, he is liable to pay Rs 110.5 as GST. However, he gets to set off the tax already paid by the constructor and the builder, i.e., Rs 15. That way, he will pay only Rs 95.5 as GST.
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GSTN
Goods and Services Tax Network or GSTN provides the shared infrastructure for the centre, the states and the taxpayers to come to a single platform to perform all GST payment-related tasks. These include GST registration, GST returns, GST payments and GST verification.
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GST benefits
- Easy compliance
- Uniformity of tax rates and structures
- Improved competitiveness
- Gain to manufacturers and exporters
- Simple and easy to administer
- Better controls on leakage
- Higher revenue efficiency
- A single and transparent tax proportionate to the value of goods and services
- Relief in overall tax burden
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HSN code
HSN stands for Harmonized System of Nomenclature. Under the GST regime in India, all products and services are classified under the Services and Accounting Code or SAC codes. The SAC code is based on the globally-accepted HSN codes. The HSN code is an internationally standardised tariff nomenclature for goods, issued by the World Customs Organization.
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GST rate
GST rates are different for different categories of goods and services. To check the detailed list of GST rates for goods and services, click here.
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GST helpline number
CBI Mitra help desk
Toll-free helpline: 1800-1200-232
Email: cbicmitra.helpdesk@icegate.gov.in
GSTN help desk
Helpline: 0124-4688999
Email: helpdesk@gst.gov.in
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FAQs
When was GST implemented in India?
GST in India was implemented on July 1, 2017.
What kind of tax is GST?
GST is an indirect tax.
What is an indirect tax?
An indirect tax is a tax charged on goods and services. A direct tax, on the other hand, is the tax implemented on income or profits.
What is the official GST portal?
The official GST website is www.gst.gov.in.
What is GST full form?
GST is short for Goods and Services Tax.
Why was GST introduced?
GST was introduced as a unified and centralised tax in India to subsume several indirect taxes that made tax-paying multi-layered and complex.
What are the three types of GST?
The three types of GST in India include CGST, SGST and IGST.
Who pays GST?
GST is paid by the consumer for any goods and services.
When should GST be paid?
GST payments have to be made every month by all registered businesses. GST payment due date is the 20th of every month.
What are the various GST rate slabs in India?
GST rates are divided into the following slabs: 1%; 5%; 12%; 18%; 28%.
How to get a GST refund?
Taxpayers can claim a GST refund by filing an online form, GST RFD-01, on the GST common portal. This can also be done at a GST facilitation centre.
What if I don’t pay GST?
In case you fail to pay the due GST, you will have to pay a minimum penalty of Rs 10,000. The upper limit in such cases can be 10% of the unpaid tax.
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