GST - Everything you need to know

India is one of the largest economies in the world, and also a complex one. Both central and the state governments have their share of powers to charge multiple direct and/or indirect taxes throughout the value chain. This has, in due course, complicated the economic activities across the nation, and led to increase in prices for everyone.

Goods and Services Tax (GST) is an attempt by central government to ease the indirect taxes. The implementation of GST is expected to bring in numerous benefits for all the stakeholders. The consumers would benefit from lower prices; trade and industry will benefit from a uniform single indirect tax throughout the country. The manufacturers will find sourcing of raw materials and locating facilities easier, and the central and the state governments will experience tax buoyancy along with shrinkage in tax collection costs.

Here's everything you’d want to know about GST:

What is GST (Goods & Services Tax)?

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. GST is aimed at making India one unified common market, reduce the administrative complications, and simplify the indirect tax system. The Constitution (122nd Amendment) Bill was introduced throughout India on 1^st  July 2017, replacing the indirect taxes being levied by the central and state governments.

GST will now replace at least 17 state and federal taxes, and be far simpler than the current system, where goods are taxed several times at varying rates. The whole idea is to tax goods at the point of consumption rather than during production, thus steering clear of double taxation. This means that the end consumer will only bear the GST charged by the last dealer in the supply chain.

GST is governed by GST Council, chaired by Mr. Arun Jaitley, the Union Finance Minister of India. Introduction of Goods and Services Tax is a step towards reforming the indirect taxation process in India and comes with several benefits, which include:

• Avoids double taxation
• Easier administration and enforcement
• Reduction in overall tax burden on goods for customers
• Free movement of goods from one state to another without having to stop at every state border for hours to pay state or entry tax
• Reduction in paperwork

For an efficient implementation of GST, the central government will bear all the losses incurred by the states and will offer compensations for the first five years as well.

Which taxes will be included into GST?

The GST rate slabs finalized by the council will be applicable across 1,200 goods and 500 services in the tax brackets of 0, 5, 12, 18 and 28%. To know more about the rate slabs click here The taxes that will be subsumed under GST are:

• Central Taxes:
  • Central Excise duty
  • Duties of Excise (Medicinal and Toilet Preparations)
  • Additional Duties of Excise (Goods of Special Importance)
  • Additional Duties of Excise (Textiles and Textile Products)
  • Additional Duties of Customs (commonly known as CVD)
  • Special Additional Duty of Customs (SAD)
  • Service Tax
  • Central Surcharges and Cess
• State Taxes:
  • State VAT
  • Central Sales Tax
  • Luxury Tax
  • Entry Tax
  • Entertainment and Amusement Tax
  • Taxes on advertisements
  • Purchase Tax
  • Taxes on lotteries, betting and gambling
  • State Surcharges and Cess

How will GST be Administered?

Taxes will be levied on supply of goods and services. Keeping in mind India's federal structure, India will assume a dual GST model, wherein GST will be administered and collected by both, Central and the State Governments across the value chain. There will be three components to this GST model –

Central GST (CGST): Revenue will be collected by the central government

State GST (SGST): Revenue will be collected by the state governments for intra-state sales

Integrated GST (IGST): Revenue will be collected by the central government for inter-state sales

Technological optimization of GST

Goods and Services Tax Network (GSTN) has been set up jointly by the central and state governments to help in the implementation of GST by providing three front end services, namely registration, payment and return to taxpayers. In addition to this, GSTN will develop back-end IT modules for all the participating States.

What are the main components of registration?

Businesses carrying out supply of goods or services with turnover exceeding specified threshold limits of Rs. 20 Lac and 10 Lac respectively will be required to do GST registration, which will enable them to avail various benefits including seamless input tax credit.

• Existing VAT / Central Excise / Service Tax payers will not be required to apply afresh for registration under GST.
• New dealers will have to file a single application online for registration under GST.
• Unified application to both central and state tax authorities will be required.
• Each dealer will be given a unique ID called GSTIN.
• The approval will be received within three days.

The registration process will be performed online through a portal maintained by Central Government of India. GSPs (GST Suvidha Providers) will also be appointed by the government to help in the registration process.

What are the documents required for registration?

• PAN card of the Company
• Proof of constitution like Partnership Deed, Memorandum of Association (MOA) /Articles of Association (AOA), Certificate of Incorporation
• Details and proof of place of business (for e.g.: rent agreement or electricity bill)
• Cancelled cheque of your bank account showing name of account holder, MICR code, IFSC code and bank branch details
• Authorized signatories (for e.g.: List of partners or List of directors with their identity and address proof)

Migration to GST

To migrate to GST, all existing Central Excise and Service Tax assessees and VAT dealers will be provided a Provisional ID and Password, which they can use to login to the GST Common Portal (https://www.gst.gov.in) and submit duly filled Form 20 along with supporting documents.

An assesses may not be provided a Provisional ID if: 1. The PAN associated with the registration is not valid 2. The PAN is registered with a State Tax authority and Provisional ID has been supplied by the said State Tax authority.

What are the main components of returns filing?

The main components of the proposed returns filing procedures are as follows:

• There will be common returns for CGST, SGST and IGST, eliminating the need to file separate tax returns with different authorities.
• Common GST Portal created and managed by GSTN will do the matching of Business to Business (B2B) invoices submitted by taxpayers to check the claim of Input Tax Credit (ITC).
• A similar exercise will also be done for inter-state supplies for goods or services moving from the state of origin to the state of consumption.
• Most used forms by average tax payers for filing returns include (out of total 8)
  • Return for Supplies
  • Return for Purchases
  • Monthly Returns
  • Annual Returns
• Filing of returns shall be completely online. All taxes will also have the option of being paid online.

How can you make payments under GST?

Under GST, all challans will have to be prepared by taxpayers on the GST portal. This is to ensure that bank tellers do not enter wrong information from hand written challans. Once a challan is created, the taxes can be paid using either of the options given below:

• Pay Online using the GST portal through any agency banks (banks authorized by RBI to collect GST on their behalf) using online banking, or Credit Card/Debit Card. The paid challan can then be downloaded from the GST portal.
• Pay ‘Over the Counter Payment’ (OTC) by printing the challan and presenting it in the relevant bank (as cash/cheque). After payment realization, the bank will transfer the money to RBI and send confirmation of payment to GST Portal for accounting.

Every business will need to become GST compliant. Hence updating your accounting software too becomes an imperative step, as it will help you generate GST compliant invoices, record expenses, and automate preparation of GST-ready tax returns.

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