As everyone knows GST is known as the Goods and Service Tax. It is an indirect tax which has just replaced many indirect taxes in India like the excise duty, Value added tax(VAT), services tax, etc. The Goods and Services Tax Act was passed in the Parliament as on 29th March 2017 and afterwards it came into effect on 1st July 2017.
In general,Goods and Service Tax (GST) is imposed on the supply of goods and services. Goods and Service Tax Law in India is a detailed, multi-stage, destination-based tax that is imposed on every value addition. Goods and Service tax is a single domestic indirect tax law for the whole country.
Under the GST structure, the tax is imposed at every single point of sale. In the field of inter-state sales, Central GST and State GST is charged. All the inter-state sales are chargeable to Integrated GST.
An item goes through a multiple change-of-hands along with its supply chain, Starting from the manufacture to the ultimate final consumer.
Let us consider the following stages:
1. Purchase of raw materials.
2. Production or manufacture.
3. Warehousing of finished goods.
4. Selling to wholesalers.
5. Sale of the product to the retailers.
6. Selling to the end consumers.
The Goods and Services Tax is imposed on each of the above stages making it a multi-stage tax.
2. The Journey of GST in India:-
The journey of GST began in the year 2000, when a committee was set up to draft law. It nearly took 17 years from then for the Law to evolve and anticipate. In 2017, the GST Bill was passed in both the houses Lok Sabha and Rajya Sabha. On 1st July 2017, the GST Law came into affect.
3. Advantages Of GST:-
GST has ultimately removed the cascading effect on sale of goods and services. Removal of the cascading effect has ultimately impacted the cost of goods. Since the GST regime eliminates the tax on tax, so the cost of goods decreases.
Moreover, GST is mainly technologically driven. All the activities including registration, return filing, application for the refund and response to notice needs is to be done online on the GST portal, which ultimately accelerates the processes.
4. What are the components of GST?
There are three taxes which are applicable under this system: CGST, SGST & IGST.
CGST: It is a tax collected by the Central Government on an intra-state sale.
SGST: It is a tax collected by the state government on an intra-state sale.
IGST: It is the tax collected by Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu).
5. Tax Laws before GST:-
In the earlier times indirect tax regime, there were many indirect taxes imposed by both the state and the centre government. States mainly collect taxes in the form of Value Added Tax (VAT). Every state had different set of rules and regulations.
Inter-state sale of goods was levied by the centre. CST(Central State Tax) was applicable in the case of inter-state sale of goods. The indirect taxes like the entertainment tax, octroi and local tax were imposed together by state and centre both. This led to a lot of overlapping of taxes imposed by both the state and the centre government.
The following is the list of indirect taxes which is in the pre-GST regime:
1. Central Excise Duty
2. Duties of Excise
3. Additional Duties of Excise
4. Additional Duties of Customs
5. Special Additional Duty of Customs
6. State VAT
7. Central Sales Tax
8. Purchase Tax
9. Luxury Tax
10. Entertainment Tax
11. Entry Tax
12. Taxes on advertisements
13. Taxes on lotteries, betting, and gambling.
CGST, SGST, and IGST have replaced all the above mentioned taxes.
However, there are certain taxes such as the GST imposed for the inter-state purchase at a concessional rate of 2%.
It applies to certain non-GST goods such as:
1. Petroleum crude
2. High-speed diesel
4. Natural gas
5. Aviation turbine fuel and Alcoholic liquor for human consumption.
It applies to the following transactions only
Use in manufacturing or processing,
Use in the certain sectors such as the network of telecommunication, mining, generation or distribution of electricity or any other power sector.
6. How has the GST helped in reduction of price?
During pre-GST regime, every purchaser, including the final consumer who has paid tax on tax. This condition of tax on tax is known as cascading effect of taxes.
7. What are the new compliances which comes under GST?
Apart from the online filing of the GST returns, the GST has introduced various new systems along with it.
GST introduced a standardized system of waybills by the introduction of “E-way bills”. This system got launched on 1st April 2018 for inter-state movement of the goods and on 15th April 2018 for the intra-state movement of goods in a staggered way.
Under the E-way bill system, Manufacturers, traders and transporters can generate E-way bills for the goods transported from one place of its origin to its ultimate destination on a common portal with great ease. Tax authorities have also benefited as this system has ultimately reduced time at check-posts and helps in reducing tax evasion.
In recent times, the E-invoicing system has been launched on a trial basis starting from January 2020 and got applicable from October 2020. This system requires large firms with an annual aggregate turnover of more than Rs.100 crore to achieve some requirements.
They must get a unique invoice reference number for every business – to – business invoice by uploading on the GSTN’s portal which is known as invoice registration portal. This portal verifies the accurate and genuineness of the invoice. After that, it authorises using the digital signature along with a specific QR code.
E-invoicing allows changing of invoices and helps reduce data entry errors. It is ultimately designed to pass the invoice information directly to the GST portal and the E-way bill portal. Therefore, it will eliminate the requirement for manual data entry while filing the ANX-1/GST returns.