GST Basics GST in India: Everything You Need to Know About the LawGST Basics

Last modified on : February 1st, 2024 at 6:16 pm

GST Basics GST in India: Everything You Need to Know About the LawGST Basics

GST is a uniform tax system combining several indirect taxes that were previously in function on the sale of goods and services. This law is pertinent to the manufacture, sale, and consumption of all the goods and services in India. It is not evident whether this will become economical for the common man however this would surely be going to affect our profession, our business, and the entire economic environment.

What do you mean by GST?

GST (Goods and Service Tax) is referred to as an Indirect Tax. The GST bill was introduced in the parliament in the year 2011 and got reintroduced in 2014. This law was approved by both the Rajya Sabha and the Lok Sabha in the year 2016 and commenced in India on the 1st of July, 2017. It is a tax that is applied to the supply of goods and services in India. GST is a thorough, phased, and destination-based tax that is applied to every value addition. It is a unified indirect tax law structured for the entire country.

Application of GST in India

  • Manufacturer – For the manufacturer, the GST will be applicable on the purchase of the raw materials and on the value that was added for the development of the product.
  • Service Provider – Here the service provider pays the GST on the purchase price and the value added to it. But, here, the manufacturer’s GST may get discounted from the GST amount that is to be paid.
  • Retailer – The retailer pays the GST on the product purchased from the distributor and on the added margin. Similarly, here the additional GST will be deducted from the total GST amount that should be paid.
  • Consumer – The consumer pays the GST on the product that has been purchased.

What are the various types of GST in India?

Four types of GST were identified in the Indian Tax System:

  • Central Goods and Services Tax (CGST): Central GST applies to the sales governed within the state and the GST amount goes to the Central Government.
  • State Goods and Services Tax (SGST): State GST applies to the sales executed within the state and is paid to the State Government.
  • Integrated Goods and Services Tax (IGST): Integrated GST is applied to sales outside the state and is paid to the Central Government.
  • Union Territory Goods and Services Tax (UTGST): It is a type of tax that is charged on transactions made in the Indian union territories like Daman and Diu, Andaman and Nicobar Islands, Lakshadweep, Chandigarh, Dadra, and Nagar Haveli. Note that UTGST is charged along with CGST.

Tax Structure Before the Implementation of GST

Before the introduction of GST in India, this was the tax structure that used to follow:

  • Purchase of Raw Materials—(VAT)—Manufacturing
  • Manufacturing—(VAT + Excise Duty)—Sold to Wholesaler or Warehousing
  • Sold to Wholesaler or Warehousing—(VAT)—Sold to Retailer
  • Sold to Retailer—(VAT)—Sold to Consumer

Different GST Rates in 2023

It is the GST Council that ascertained the GST rates for several goods and services. The GST amount is charged differently for different items.

For the items that come with GST, the amount varies between 5% to 28% GST, depending on the category of the product. Then certain items do not require paying any GST while purchasing.

The GST rates for goods and services had revised a few times since the inception of the GST in 2017.

Calculation of GST

Since the arrival of GST, the calculation of taxes on goods and services has been much simpler. The GST rates on the different goods and services are now calculated based on the nature of their transactions, i.e., inter-state and intra-state.

Intra-State tax calculation

  • CGST = Applied GST Rate / 2 (for 28%, CGST will be 28/2=14%)
  • SGST / UTGST = Applied GST Rate / 2 (for 28%, SGST will be 28/2=14%) Thus, the equation is, CGST+SGST/UTGST= Applied GST Rate

Inter-State GST tax calculation

IGST= Applied GST Rate
To note, where applicable, GST compensation cess needs to be added to the applied GST Rate for accurate tax calculation.

Therefore,

  • GST Amount = (Original Cost x GST Percentage) / 100
  • Net Amount = Original Amount + GST Amount

Payment of GST

Currently, the GST must be paid every month. Forms like GSTR-1 and GSTR-3B are required to be filed. During refunds, the necessary forms need to be submitted as well. The payment facility is available both online and offline. Post payment, a challan must be generated for future reference.

E-Way Bill

An e-Way bill is an electronic way bill that is needed for the movement of goods. It can be generated from the e-Way bill portal. As per the rules, no individual can transport goods on a vehicle worth exceeding Rs. 50,000, without an e-Way bill. The website to generate an e-Way bill is ewaybillgst.gov.in

Benefits of GST

Below listed the advantages of GST in India:

  • Uniform Tax Rate: The primary advantage of GST is to have a tax structure that maintains its uniformity across the country. It generates flexibility and simplicity in doing business.
  • Higher Revenue: The cost of collection of tax revenues of the government has been reduced due to GST and thus leads to better revenue efficiency.
  • Enhanced Competitiveness: Lower transaction costs of doing business gave rise to improved competitiveness in trade within the industry.
  • More profit for Manufacturers and Exporters: The incorporation of central and state taxes in GST, detailed setting-off of input goods and services, and removal of central tax would lower the cost of locally made goods and services. This boosts the competitiveness of Indian goods and services and fuels Indian export practices.
  • Easy to Direct: When several indirect taxes are replaced by a uniform tax system, and by an enhanced IT system, makes GST is easier and simpler to administer than before.

Latest changes in GST as per Union Budget 2023-2024

The below-mentioned list is the changes in GST according to the Union Budget 2023-2024:

  • Section 10 amended – Composition scheme can be selected if taxpayers are supplying their goods through e-commerce operators.
  • Section 16 amended – If the supplier does not get paid the invoice value along with GST within 3 months from the issue of the invoice, then the recipient taxpayer must pay the value with the interest compounded under section 50.
  • Sections 37, 39, 44, and 52 – It restricts taxpayers from filing GSTR-1, GSTR-3B, GSTR-9, and GSTR-8, if the due date from the tax period exceeds 3 years.
  • E-commerce operators will be charged an amount of Rs. 10,000 or an equivalent tax amount, whichever is higher, in these cases:
    • When an unregistered person sells goods or services or both through these operators other than those cases, where they are exempted from GST.
    • When a registered person is allowed for the inter-state supply of goods even when they are ineligible for it.
    • When a person, who is exempted from GST registration does not provide the necessary details in the GSTR-8 of goods sold.
  • Legalizing the following indignation
    • As per the CGST Act, an officer cannot get discharged of duty by any person.
    • Tempering of material evidence and documents.
    • If a person fails to provide supply information or gives false information under the CGST act.
  • In the case of a compounding offense, the limits have changed from 25% to 100% of the tax involved.

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