This article has been written by Ambika Lokre pursuing a Remote freelancing and profile building program from SkillArbitrage.

This article has been edited and published by Shashwat Kaushik.

Introduction

GST in India was introduced as the 101 Amendment Act. Initially, the Central Act was enacted, followed by state GST laws by various state legislatures. GST was launched at midnight on July 1, 2017. The late Arun Jaitley was the first chairman of the Goods and Services Tax (GST) council at the time of its implementation. GST is a revolutionary indirect tax reform that aims to establish a unified national market.

Download Now

The goods and services tax is a broad-based Value added tax and Destination based tax. It is technically paid by suppliers but it is borne by consumers. GST is collected at multiple stages of production and distribution of goods and services, in which taxes paid on  inputs are allowed to be set off against taxes payable on output.

GST has been adopted by 175 countries around the world. In many countries, a unified GST is followed, with a single tax applicable nationwide. However, federal governments like Brazil and Canada have a dual GST system where both the federal and state governments levy GST. India has adopted a dual GST model due to its distinctive federal structure.

Under the earlier tax regime structure, certain transactions were subject to double taxation and were taxed as both goods and services without any benefit of input tax credit.

Benefits of GST

Creation of a unified national market: GST aims to make India a common market with common tax rates and procedures and remove economic barriers, thus paving the way for an integrated economy at the national level.

Mitigation of the ill effects of cascading: By subsuming most of the central and state taxes into a single tax and allowing a set-off of prior stage taxes for transactions across the entire value chain, it would mitigate the ill effects of cascading, improve competitiveness and improve the liquidity of businesses.

Elimination of multiple taxes and double taxation: GST will subsume the majority of existing indirect taxes into one tax having a dual nature, i.e., GST is leviable uniformly on goods and services, eliminating double taxation. Due to this, it will be easy to do business.

Manufacturers have also benefited from GST, as they get an Input tax credit, so manufacturing costs have been reduced. Apart from manufacturers, exporters now have many benefits, like eligible input tax credits and a zero percent GST rate for exported goods and services, subject to the condition that proceeds of income are received in convertible foreign exchange.

Input Tax Credit

Under the CGST Act, to claim input tax credit, stringent provisions are included, Section 17(5) of the CGST Act deals with blocked credit, which includes GST paid for Food and Beverages, Outdoor catering, Beauty treatments, Health Services, Cosmetic / Plastic surgery, leasing, renting or hiring of vehicles, vessels or aircraft. An exception to this list is that if the above services are procured for further business, then the taxpayer can avail input tax credit.

Section 16(2) deals with conditions for availing of ITC. A registered person shall have an invoice in his possession; details of the invoice or debit note are to be furnished. Goods or services must be received; ITC concerning supply can be availed only if such credit has not been restricted u/s 38. Tax must have been paid to the government; the GSTR 3B return is filed by recipient. The GST department is very concerned about the availing and utilisation of Input tax credits; wrong utilisation leads to interest at the rate of 18 percent

GSTIN portal

The GST site, https://www.gst.gov.in/ is the primary tool used to file GST returns: The CGST Act mandates that all registered persons file GST returns GSTR 1 (in which details regarding outward sales are to be mentioned). The due date for the same is the 11th of the subsequent month. The details entered by the supplier in GSTR 1 of the registered person are auto-populated in GSTR 2A of the receiver, and then while filing GSTR 3B, the supplier can set off the eligible input tax credit that has been auto-populated and pay the remaining GST through banking channels. The CGST Act has provided flexibility to submit returns on either a monthly or quarterly basis.

One of the drawbacks of GST is that, at present,  taxpayers don’t have the option to revise the GST return. However, they can amend the details while filing GSTR 9. Also, registered persons whose turnover exceeds Rs. 2 crore and Rs. 5 crore are required to file GSTR 9 and GSTR 9C annually. Nevertheless, Taxpayers are not allowed to revise GSTR 9 & 9C.

EWAY Bill

With the implementation of GST in India, interstate movement of goods has become hassle-free, subject to the requirements of the Eway Bill, which can be generated through https://ewaybillgst.gov.in/ portal. The Eway Bill system has several benefits. It has streamlined the process of transporting goods across states, making it more efficient and cost-effective. It has also reduced the need for physical verification of goods at state borders, leading to faster movement of goods. Additionally, the Eway Bill system has helped curb tax evasion and facilitated better tax compliance.

Overall, the Eway Bill system is a key component of the GST regime in India that has made the interstate movement of goods hassle-free, transparent, and efficient.

GST destination-based tax

As mentioned earlier, since GST is a destination-based tax, the state where there is more consumption has more tax revenue compared to states which have less consumption. Tamil Nadu is the top state for manufacturing; however, Maharashtra has ranked one among all the states that earn more GST revenues due to more consumption in the state. In a nutshell, states that have more consumption power earn more GST Revenue than states that are into manufacturing. In the public interest, the government, on recommendation of the Council, has, by special order, exempted goods and services.

Composition scheme

The CGST Act has given an option for small taxpayers to opt for a composition scheme whose turnover is less than Rs. 1.5 crore; however, for the states of Manipur, Sikkim, Tripura, Uttarakhand, Mizoram, Meghalaya, Arunachal Pradesh, and Nagaland, the threshold limit is Rs. 75 lakhs.

The definition of turnover under the composition scheme includes all taxable supplies, exempt supplies, and exports of persons having the same PAN to be computed on an all India basis but excludes CGST, SGST, UTGST, IGST, Cess, and inward supplies on which tax is to be paid by the recipient of services and the value of exempt supplies provided by way of extending loans or advances. The Composition Scheme is not available for the Service sector except for Restaurants. To claim the benefit of the Composition Scheme Registered persons have to make only intra-state sales; that is, movement of goods shall happen only within the state, and relaxation is provided when procuring goods from outside the state. This scheme is also not available to those who supply through an e-commerce operator.

The composition scheme lapses once the aggregate turnover exceeds the threshold limit. Registered composition suppliers are not allowed to collect tax and are also not eligible to claim input tax credit. All registered persons having the same PAN must opt to pay under composition scheme.

Demand and recovery

CGST Act has provisions relating to Demand and recovery; in case of any discrepancies, the taxpayer has to face a huge amount of penalties. Proper officers can issue a notice in the following cases where tax has not been paid, tax has not been paid, tax has been erroneously refunded, or ITC has been wrongly availed and utilised.

The GST Department has the right to conduct a provisional assessment for determining the tax liability in case a taxable person is unable to determine the value of taxable goods and/or services or the rate of tax applicable at the time of supply.

Appeals and revisions

Any person aggrieved by any order or decision passed under the GST law or an officer directed to appeal against any decision or order under the said law may appeal within 3 months, and in the case of an appeal by a department, the time limit will be  6 months instead of  3 months from the date of communication of said decision or order.

In the CGST Act, orders passed by the Revisional Authority can be revised by subordinate officers. On examination of case records, if revisional authority is of the view that the decision or order passed under the CGST Act / SGST Act / UTGST Act by any officer subordinate to him is erroneous, in so far as it is prejudicial to the interest of the revenue and is illegal or improper or where the proper officer has not taken into account material facts.

GST and socio-economic development

The Goods and Services Tax (GST) regime in India has been a significant step towards promoting socio-economic development in the country. Here’s how:

1. Increased tax compliance

  • The Goods and Services Tax (GST) has simplified tax structures and reduced the number of indirect taxes, making it easier for businesses to comply with tax regulations.
  • This has encouraged more businesses to come into the formal economy, widening the tax base and increasing government revenue.
  • The GST has also made it easier for businesses to file their taxes online, reducing the compliance burden and improving the overall efficiency of the tax system.

2. Reduced cascading effect

  • The GST has replaced multiple indirect taxes with a single, comprehensive tax, eliminating the cascading effect.
  • This has reduced the cost of doing business and made goods and services more affordable for consumers.
  • The GST has also made it easier for businesses to claim input tax credits, which further reduces the cost of goods and services.

3. Simplified tax administration

  • The GST has introduced a centralised and streamlined tax administration system, making it easier for businesses to file returns and pay taxes.
  • The GST portal provides businesses with a single point of contact for all their tax needs, including filing returns, paying taxes, and tracking refunds.
  • The GST portal is also integrated with other government systems, such as the e-way bill system, which makes it easier for businesses to comply with tax regulations.

4. Improved inter-state trade

  • The GST has removed the barriers to inter-state trade by creating a uniform tax rate across the country.
  • This has facilitated seamless movement of goods and services between states, reducing logistics costs and boosting economic activity.
  • The GST has also made it easier for businesses to set up warehouses and distribution centres in different states, which has further improved inter-state trade.

5. Enhanced transparency

  • The GST has brought greater transparency and accountability to the tax system.
  • The online GST portal provides real-time access to tax information, enabling businesses to track their tax payments and refunds.
  • The GST portal also provides businesses with access to their electronic invoices and other tax-related documents, which makes it easier for them to comply with tax regulations.

6. Increased government revenue:

  • The GST has led to an increase in government revenue, which can be used for various socio-economic development programmes.
  • The additional revenue has been used to fund initiatives such as healthcare, education, infrastructure development, and poverty alleviation.
  • The GST has also helped reduce the fiscal deficit and improve the overall health of the economy.

7. Formalisation of the economy:

  • The GST has encouraged informal businesses to enter the formal economy by providing them with simplified tax procedures and reducing compliance costs.
  • This has led to an increase in tax revenue and has helped reduce the size of the informal economy.
  • The formalisation of the economy has also led to increased job creation and improved working conditions for workers.

8. Job creation:

  • The GST has stimulated economic growth and created new job opportunities, particularly in the logistics, transportation, and retail sectors.
  • The increased demand for goods and services has led to an expansion of businesses and job creation.
  • The GST has also made it easier for businesses to set up shop in different parts of the country, which has further boosted job creation.

9. Enhanced competitiveness:

  • The GST has made Indian businesses more competitive in the global market by reducing the cost of production and improving the ease of doing business.
  • This has attracted foreign investment and boosted exports.
  • The GST has also made it easier for Indian businesses to compete with foreign businesses in the domestic market.

10. Promotion of the digital economy:

  • The GST has encouraged the adoption of digital technologies by businesses, including e-invoicing, e-payments, and online filing of returns.
  • This has led to increased efficiency, reduced paperwork, and improved transparency in business transactions.
  • The GST has also made it easier for businesses to reach new customers online, which has boosted e-commerce in India.

Overall, the GST regime in India has played a crucial role in promoting socio-economic development by simplifying the tax system, reducing compliance costs, boosting economic activity, and improving government revenue. Its impact has been significant in both urban and rural areas, contributing to the overall growth and prosperity of the country.

Essential features of GST

The Goods and Service Tax (GST), introduced in India on July 1, 2017, is a comprehensive indirect tax levied on the supply of goods and services. It has replaced multiple indirect taxes levied by the central and state governments, such as excise duty, service tax, value-added tax (VAT), and octroi.

Here are some essential features of GST:

GST rates

GST is levied at different rates depending on the nature of the goods and services. The rates are broadly classified into four categories:

  • 0% GST: Essential items like unprocessed food grains, milk, salt, and educational services are exempted from GST.
  • 5% GST: Goods and services like processed food items, books, and newspapers are taxed at 5%.
  • 12% GST: Most goods and services, including consumer durables and clothing, fall under the 12% GST bracket.
  • 18% GST: Luxury items like cars, electronic goods, and air travel attract an 18% GST.
  • 28% GST: Certain luxury goods, such as tobacco products and alcoholic beverages, are taxed at 28%.

The GST rates are designed to ensure that the tax burden is evenly distributed across different sectors of the economy. The lower rates are applied to essential goods and services, while the higher rates are applied to luxury goods and services. This ensures that the tax system is progressive and does not disproportionately burden the poor.

The GST rates are also subject to change from time to time. The GST Council, which is the apex decision-making body for GST, may revise the rates based on various factors, such as the economic situation, the need to promote certain sectors, or to address administrative issues.

GST return filing

Businesses registered under the Goods and Services Tax (GST) are required to file regular returns, typically on a monthly or quarterly basis. The frequency of filing returns depends on the turnover of the business. Businesses with a turnover of up to Rs. 5 crore per annum can file returns on a quarterly basis, while businesses with a turnover exceeding Rs. 5 crore must file returns on a monthly basis.

The GST returns include details of sales, purchases, and tax liabilities. Businesses are required to file their returns electronically using the GST portal. The returns must be filed by the due date specified by the government. Late filing of returns may result in penalties.

The GST return filing process can be complex and time-consuming. Businesses may need to seek professional help to ensure that their returns are filed correctly and on time.

Here are some of the key points to remember when filing GST returns:

  • The due date for filing GST returns is the 20th of the month following the end of the tax period.
  • Businesses can file their returns online using the GST portal.
  • The returns must be filed in the prescribed format.
  • Businesses must keep a record of all invoices and other documents related to their GST transactions for at least five years.
  • Late filing of GST returns may result in penalties.

Businesses can avail of various benefits by filing their GST returns on time. These benefits include:

  • Reduced compliance burden
  • Improved cash flow
  • Enhanced reputation
  • Eligibility for government incentives

Filing GST returns on time is a critical responsibility for businesses registered under GST. By understanding the requirements and following the procedures correctly, businesses can ensure that they comply with the law and avoid any penalties.

GST Council

The GST Council is a crucial constitutional body in India, playing a pivotal role in overseeing the implementation and functioning of the Goods and Services Tax (GST). It consists of the Union Finance Minister, State Finance Ministers of all states and union territories, and other nominated members.

The GST Council was constituted under Article 279A of the Constitution of India. Its primary objective is to ensure a smooth and effective implementation of GST across the country. The Council is responsible for making recommendations to the Central Government on various aspects of GST, including tax rates, exemptions, and procedures. It also has the authority to resolve disputes between the Centre and the States regarding GST.

The GST Council meets regularly, usually once every quarter. The meetings are chaired by the Union Finance Minister. The agenda of the meetings includes discussions on GST rates, policy changes, and any other GST-related issues. The Council takes decisions through a consensus-based process.

The GST Council has played a significant role in shaping the GST regime in India. It has made several important decisions, such as the introduction of a four-tier GST rate structure, the exemption of certain goods and services from GST, and the implementation of the e-way bill system.

Anti-profiteering measures

GST laws include anti-profiteering measures to ensure that the benefits of GST are passed on to consumers. Businesses are required to reduce prices or provide equivalent benefits to consumers if the GST rate on their goods or services is reduced.

Reverse charge mechanism (RCM)

Under the reverse charge mechanism, the recipient of goods or services is responsible for paying GST instead of the supplier. This mechanism is applicable in certain cases, such as when goods are imported or when services are provided by an unregistered supplier.

The implementation of GST has brought about significant changes in the indirect tax regime in India. It has simplified tax laws, reduced compliance burdens, and created a unified national market for goods and services.

Conclusion

According to the source, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1992123 There has been a 12 percent year-on-year growth rate of Rs. 14.97 lakh crore collected for the period April 2023 to December 2023, whereas for the period April 2022 to December 2022, GST collected was Rs. 13.4 lakh crore. Given the key difference between GST and earlier tax regimes, the implementation of GST on Goods and services has proved to be more efficient and transparent in many ways.

References

RELATED ARTICLESMORE FROM AUTHOR

LEAVE A REPLY

Please enter your comment!
Please enter your name here