GST – One nation, one tax is surely a game-changer.
As the Indian taxation scenario revamps, a singular tax regime promises to eradicate complexities, stemming from a bunch of indirect taxes and manual filing.
To give you a ready reckoner, here’s an exclusively crafted, quick guide to the Goods and Services Tax, commonly known as GST.
This article discusses the following in detail:
Goods and Services Tax, commonly known as GST, is an indirect, value-added consumption-based tax, which will replace about 17 direct and indirect, Central and State taxes, from 1st July, 2017.
GST was introduced and passed as “The Constitution 122nd Amendment Bill” on 29th March, 2016. It would be governed by The GST Council reporting to The Chairman, Union Finance Minister of India, presently Shri Arun Jaitley.
The GST roots its origin in the year 2000, about seventeen years ago, when the then ruling Vajpayee government, under the leadership of Shri Asim Das Gupta [ the then, Finance Minister, Government of West Bengal ] set up the first committee for discussion and applicability of a consolidated tax structure, now evolved as GST.
According to IMF, this radical change will take the Indian GDP to above 8% by creating a single national market, facilitating the efficacy of inter-state transactions and movements. Here’s a quick compilation of the major benefits.
- Simple and easy life:
By replacing 17 indirect taxes, the compliance costs will see a sharp drop.
- A common centralized market:
Currently, it’s scattered and decentralized, causing a whopping, 20-30% additional costs.
A common centralized market would significantly fuel the number of participants and transactions, while simultaneously diminishing the operating costs.
- Aggregating investments:
Presently, input tax credit does not exist, for many capital goods. The cost of capital goods will see a 12 – 14% drop, owing to a cent percent input tax credit in GST. Expectations reveal that it will resolve to a 6% rise in capital goods investment, 2% overall.
- Fueling Make in India:
GST embeds countervailing duty, which ensures increased protection from imports.
Manufacturing will tend to be more competitive, addressing issues like central and inter-state tax cascading, fragmented markets and high logistics costs.
- Squeezing inventory and logistics costs:
Less paperwork and reduced waiting time for goods carriers at the state borders.
The daily commercial vehicle travel average for India is 280 kms. against a whopping 800 kms. in US.
- Simpler and online procedure:
GST is a 100% automated environment – registration to returns. No more running around and queuing up in the tax offices.
- Complete clarity for E-commerce:
Currently, the complicated inter-state restrictions and confusing levies forbid many e-tailers to sell across states, resulting in a kind of restricted and choked e-commerce environment.
GST will put a full stop to all these, encompassing smooth sailing with utmost clarity through a single code for PAN India transactions.
- Larger tax base:
GST is expected to upsurge the tax spread. The overall tax liability for businesses is projected to reduce overtime as more and more businesses comply.
GST would use all the available data from Aadhaar and PAN to ensure a seamless GST registration and GST return filing.
According to the APAC Tax Complexity Survey, Indian tax laws are perceived to be second most complex in the APAC region, after China.
The root cause stems from the diversity, in the taxation modules of central and state governments. The businesses today maintain books, which tend to capture and adhere to a heap of compliances, yet leaving a few, unknowingly, in the absence of blur guidelines.
E-commerce is the most effected vertical, in terms of suffering, from the lack of clarity in taxation laws.
The ripple effects of such complexities have been hitting the economy since long, hampering businesses, markets and tax collections.
GST will subsume a whole lot of direct and indirect, central and state taxes and will reappear in a consolidated makeover. A comprehensive list of taxes, which GST will subsume taxes at both the Centre and State level, is as under:
- Central GST:
Central Excise Duty | Additional Excise Duty | Service Tax | Additional Duties of Customs / Countervailing Duty / CVD | Special Additional Duty of Customs / SAD.
- State level GST:
State Value Added Tax / State Tax | Entertainment Tax (other than levied by local bodies) | Central Sales Tax (levied by Centre, collected by States) | Octroi and Entry Tax | Purchase Tax | Luxury Tax | Taxes applicable on lotteries, betting and gambling.
GST brings with it a new breed of glossary, which you should be aware of.
This is largely about the individualistic taxes, which Centre, State and the Union Territories would collect.
Since India is a federal country, the Constitution of India allows both the Centre and States to levy and collect taxes for their individualistic and varied responsibilities.
The different taxes would enable the taxpayers to take credit of each of them against each other, enhancing ease and transparency in the taxation cycle.
Central GST [CGST] is the GST, to be levied by the Centre, on intra-state businesses.
State GST [SGST] is the GST, to be levied by the State, on intra-state businesses.
Integrated GST [IGST] is the GST, to be levied by the Centre, on inter-state businesses and imports.
Union Territory GST [UTGST] is the GST, to be levied by the Union Territory States on inter-state business.
- Cess and Surcharges:
Although majority [16 precisely] of the cesses and surcharges levied by the Centre and the States would stand abolished, it would still be levied on certain products like tobacco, pan masala, soft drinks and luxury vehicles.
The GST council on 18th May 2017, revealed a detailed chapter-wise tax structure in Srinagar.
Here’s, at a glance for you to know, understand and feel the difference, at proposed taxes on the major day-to-day items.
Impact of GST on household expenses [ % ]
|Food||Entertainment||Transportation||Household Personal Care||Mobile Phone Services|
There are total four taxation slabs incorporated in GST, as under:
|GST Rates Slab||Items|
|5%||Edible oil, Sugar, Spices, Tea, Coffee (except instant)|
|Coal (currently @ 11.69%)|
|Mishti/Mithai (Indian Sweets)|
|12%||Computers, Processed food|
|18%||Hair oil, Toothpaste and Soaps (currently @ 28%)|
|Capital goods and industrial intermediaries (big boost to local industries)|
|28%||Small cars (+1% or 3% cess)|
|Consumer durables such as AC and fridge|
|Luxury and sin items like high end cars, cigarettes and aerated drinks (+15% cess)|
|High-end motorcycles (+15% cess)|
|Beedies not included here.|
Any business of goods or services falling in the GST regime, exceeding the threshold of Rs. 10 LPA [North Eastern states] and 20 LPA [ rest of India], is bound to register as a normal GST payer.
GST registration is critical for your business, as it enables you to avail various benefits, under the GST umbrella. For instance, one such subsidy is to avail seamless input tax credit.
GST registration will produce a unique Goods and Services Tax Identification Number [GSTIN], which will be your passport for conducting a cohesive business, nationally.
You can dig deeper into the step by step process of GST registration, the documents required in GST registration and other fine details, here.
A normal taxpayer will be required to furnish three monthly returns and one annual return. The GST returns vary for different taxpayers under different schemes.
A taxpayer registered under the Input Service Distributor will file a different return than the one enrolled under the Composition Scheme.
There are a total of eleven types of regular GST returns, starting from GSTR-1 to GSTR-11, capturing and catering to different forms of taxpayers.
A few amongst the eleven, look like this:
|Return form||What does it capture?||Who should file?||By when?|
|GSTR-1||Details of outward supplies of taxable goods and/or services effected||Registered Taxable Supplier||10th of the next month|
|GSTR-2||Details of inward supplies of taxable goods and/or services effected claiming input tax credit||Registered Taxable Recipient||15th of the next month|
|GSTR-3||Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of the amount of tax||Registered Taxable Person||20th of the next month|
|GSTR-4||Quarterly return for compounding taxable person||Composition Supplier||18th of the month succeeding quarte|
GST is a FULLY automated ecosystem, from registering to returns. No room for manual hiccups and tax evaders.
GSPs and ASPs, which are private and government authorized bodies, are aimed to provide the much needed technical support for the taxpayers in the IT ecosystem for GST.
GSP (GST Suvidha Providers) is an enabler for the taxpayer to comply with the provisions of GST through its various online compliance channels.
An ASP [Application Suvidha Providers] is a facilitator, focusing on taking raw data of sales and purchase and converting it into GST returns [GSTRs]. These GSTRs will then be filed to GST [GST Network, the server] via the GSP.
Masters India, technologically equipped with the state of the art infrastructure, is amongst one of the thirty-four authorized GSP. Backed by a squad of GST enabled professionals from the financial, logistics and IT domains, Masters India is fully geared up to deliver a seamless GST compliance automation.
GST is expected to serve as a strong antidote to numerous direct and indirect economic ailments, Indian taxation has been struggling with, since independence. It surely seems to be a much simpler and ideal tax net.
Assuming the average rate of GST to be 18%, the consumers at large, have reasons to believe, that for most goods, there would be a significant reduction in the overall costs, while bringing more businesses and taxpayers on board.
India Inc. is surely geared up and rapidly marching towards being GST-fied.