Goods and Services Tax is a comprehensive tax levied on supply of goods and services across India. GST is a destination based consumption tax, and the taxable event is supply as against the existing taxable events of sale, manufacture or provision of service.
The federal structure of India has resulted in indirect taxes being administered by both Centre and State. The lack of the facility to utilize credits across these two entities had resulted in the cascading of taxes across the supply chain and across state borders. In addition, the burden of compliance had also increased due to involvement of multiple agencies. It was in keeping with this sentiment, that GST was conceived, wherein it strives to address these concerns by driving uniformity across India through a single tax and ensuring an unrestricted flow of tax credit.
GST Regime – Some Salient Features
Some of the salient features of the GST regime are:
- Dual GST : In consideration of the federal structure of India, Dual GST has been chosen as the apt model wherein tax would be jointly levied by both Centre and the states on supply of goods and services.
- Components of GST :
- CGST (Central GST)
- SGST (State GST)
- IGST (Integrated GST)
- Levy of GST : On intrastate transactions CGST + SGST will be applicable and on interstate transactions & Imports, IGST will be applicable.
- Taxes Subsumed under GST : Central Excise, Service Tax, CST, VAT, Entertainment Tax, Luxury Tax, Octroi and Entry Tax, Purchase Tax
- Taxes not subsumed under GST:Basic Customs Duty, Stamp Duty, Property Tax, Toll Tax
- Items exempt from GST:Petrol / Diesel / Aviation fuel / Natural Gas, Electricity
The GST rates in India have been determined as follows:
- Exempt – 0%
- Precious Stones – 0.25%
- Gold – 3%
- Merit Rates – 5%
- Standard Rates – 12% & 18%
- Demerit Rates – 28%
- Compensation Cess – levied over and above the demerit rates
Under the GST regime, the registration threshold is INR 10 Lakh for special category states (Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand) and INR 20 Lakh for Rest of India. Small dealers with turnover below INR
Existing dealers would be auto-migrated into the GST regime and given a 15-digit PAN based GSTIN – 2 digits to represent state code, 10 digits of PAN, 1 entity code digit applicable for taxpayers having multiple business verticals within the state, 1 blank digit and 1 checksum digit. All taxable persons will need to process the GST registration online on the portal.
The GST regime requires all businesses to mandatorily file GST returns online every month along with the requisite quarterly or annual returns. Even businesses which now file returns quarterly or half-yearly (such as returns for service tax etc.) now need to file GST returns every month.
- Regular Dealer: Monthly filing
- Composition Dealer: Quarterly filing
In the GST regime, there will now be 3 compliance events every month – wherein businesses will need to comply with the requirements of filing Form GSTR-1, Form GSTR-2 and Form GSTR-3, with specific details.
- Mandatory e-payment for amount > INR 10,000
- Pay GST Online via NEFT/RTGS/IMPS
- Pay GST Offline via Cash/Cheque/DD/NEFT/RTGS etc.
- Challan is auto-populated, and can be downloaded
- Automated refunds process
Clearly the biggest indirect tax reform since Independence, the GST regime is bound to herald a golden age of tax transparency, and seamlessness of tax credit across businesses, which will hopefully reduce costs for the end consumer in the long run.