Complete Overview of GST in India
What is GST?
Why GST in India?
How to register for GST?
How to apply for GST number?
How to check GST number?
What is GST with example?
How does GST work?
How to register for GST online?
What is Ewaybill?
GST – Pros and Cons
Are you obligated to obtain a GST number and comply with the underlying requirements?
Not sure how to get yourself registered and how to file timely return?
This article is dedicated to impart understanding on GST and how to comply with the underlying requirements. It is quick guide to swiftly navigate you through all the nitty-gritty of GST.
If you have any doubts or need clarification on certain points, drop in your queries.
Let’s quote the facts first,
GST: An indirect tax
Came into effect from: 1st July 2017
Levied on: Value addition
Applicable: All over India
Base line: ‘One country, one indirect tax’
Let’s dive in...
GST is a replacement of all the indirect taxes that were levied before pre-GST tax regime. With the advent of GST, the tax regime in India has simplified manifolds.
It is a comprehensive, multi-stage, destination-based tax which is levied on every value addition.
As the name suggests, it is an indirect tax levied on the supply of goods and services. As simplified as it sounds, there is an extended understanding of the words ‘multi-stage’, ‘destination-based’ and ‘value addition’.
In order to appreciate the true essence of GST, you need to have an understanding of these terms in-depth first.
There are several stages in a well-defined supply chain right from the manufacturer to the consumer.
Purchase of raw material
Production or manufacture
Warehousing of finished goods
Sale to wholesaler
Sale of the product to the retailer
Sale to the end consumer
GST is levied on each of these stages which is why it a multi-stage tax.
Well, this one is easy. The tax is levied only on the value-added at every stage to achieve the final sale to the end customer. (stages as enumerated above)
Purchase of raw material (Rs.10)
↓ Tax levied at Rs.10
Production or manufacture (Rs.10+5=15)
↓ Tax levied at 15, rebate can be taken for paid tax at Rs.10, effectively only Rs.5 is taxed
Warehousing of finished goods(15+1=16)
↓ Tax levied at 16, rebate can be taken for paid tax at Rs.15, effectively only Rs.1 is taxed which is the value addition made at this stage
Sale to a wholesaler(16+2=18)
↓ Tax levied at 18, rebate can be taken for paid tax at Rs.16, effectively only Rs.2 is taxed which is the value addition made at this stage
Sale of the product to the retailer(18+1=19)
↓ Tax levied at 19, rebate can be taken for paid tax at Rs.18, effectively only Rs.1 is taxed which is the value addition made at this stage
Sale to the end consumer (19+1=20)
↓ Tax levied at 20, customer bears the tax liability which is why it is an indirect tax
GST is levied at the point of consumption. This is a very crucial point. Say, goods are manufactured in Madhya Pradesh and are sold to a final consumer in Gujarat.
The tax revenue will go to Gujarat government and not Madhaya Pradesh. As goods will be consumed in Gujarat and GST is levied at the point of consumption.
In the pre-GST tax regime, there were several indirect taxes and levies like central excise duty, services tax, additional customs duty, surcharges, state-level value added tax , Octroi, levies applicable on inter-state goods transportation.
A single GST have subsumed (replaced) all these taxes and have left no room for confusion or cascading effect of tax (tax levied on tax).
For all transactions like sale, barter, transfer, lease, purchase, or import of goods and/or services, only GST will be levied.
Many countries already had GST tax regime and India was trying to catch up for a long time. We had our own system to levy taxes but the multiplicity and complex tax laws were encouraging tax evasion and black money propagation.
For a developing country like India, taxes both direct and indirect, are the chief source of revenue for government. Any future development plans entirely depends on the tax collection.
Introducing GST tax regime has improved the tax collection system, reduced tax evasion, and enhanced transperancy.
It is a remarkable step in the history of India and it’s manifolds implications has a return to be yielded in future.
The GST model in India is dual which means the tax is administered by both the Union and State Governments.
For intra-state transaction (within the state): Central GST (CGST) & State GST (SGST) is levied by respective governments.
For inter-state transaction: Integrated GST (IGST) is levied by the central government.
When the GST registration is required for the business owner?
In the following circumstances it is mandatory for you register for GST and have a GSTIN:
- You have intrastate business with an annual turnover limit above Rs.20 lakh
- Your business located in any of the listed special states (such as Assam, J&K, Himachal Pradesh, etc.) and your annual business turnover of over Rs.10 lakh
- You have an e-commerce business
- Your business is inter-state business
- You are obligated to pay tax under reverse charge mechanism
- Under section 9 & sub-section (5) you are required to pay tax.
- You are an NRI who is liable to pay taxes for producing taxable supply
Registering for GST is quite simple and completely online. All you need to do is:
- Use your PAN, mobile number, and email ID to fill the form GST REG-01 and submit it
- Verify your mobile number and email ID with the OTP generated followed by PAN verification
- Save the application reference number [ARN] received on your mobile number and email ID after verification is done
- Provide your ARN number and attach supporting documents whereever necessary
- In case additional information is required, fill the automatically generated GST REG-03 form
- After all the information submitted is verified, a certificate of registration will be issued within 3 working days
What are the documents required for GST registration?
- Certificate of Incorporation
- Authorised signatory’s photo
- Stakeholder’s photo (Promoter / Partner)
- Proof of business address including electricity bill or legal ownership document
or property tax receipt or Municipal Khata Copy
- Copy of Resolution passed by Managing Committee or BoD and letter of authorisation
- Proof bank accounts details (a copy of your bank statement, cancelled cheque, or the first page of your Pass Book)
How you can track the status of your GST registration?
You can track the status of your for GST registration appliction as follows:
- Log on to http://gst.gov.in
- Click on the ‘Services’ tab
- Select ‘Registration’
- Click on the ‘Track application status’ option
- Enter your ARN and click on search
- Your application status will be displayed on the screen and wil be sent to your registered email ID and mobile number
Electronic Way Bill (Eway Bill) is an electronic bill for movement of goods which can be generated on the eWay Bill Portal. With Eway bill the transit of goods has eased out to a great extent.
Also, accountability has increased as now any GST registered person or company can not transport goods whose value exceeds Rs.50000 without an e-way bill.
An e-way bill can be easily generated on ewaybillgst.gov.in. Also, there are alternate options available to generate and cancel an e-way bill like SMS, site-to-site integration through API, and Android app.
With the generation of an e-way bill, a unique Eway Bill Number (EBN) is generated and made available to the recipient, supplier, and the transporter.
GST reform has changed the landscape of Indian tax regime. This act attracted many controversies as well.
Also, it is known that any reform comes with its own set of pros and cons. We have outlined the pros and cons of GST below:
Pros of GST
- GST offers a composition scheme for small businesses
- Higher threshold for registration
- It eliminates the cascading tax effect
- Easy online procedures and complying requirements
- Lesser compliances
- The efficiency of logistics improved
- GST regulates the unorganized sector as well
- The treatment for e-commerce operators is defined in GST
Cons of GST
- Increase in operational costs
- GST increased the cost of software purchases
- Higher tax burden will fall on SMEs
That’s the necessary backdrop of GST required to pace up with the ongoing compliances. If you have any queries, you can mail us at: email@example.com