Goods and Services Tax (GST) is the new indirect tax law which has subsumed most of the previous indirect taxes. It is applicable for manufacturers, traders and service providers alike. The preceding indirect taxation system was complicated for any layman to follow. There were confusing rates, tax on tax effect, and complex compliance procedures. After a 17 year journey, GST came into effect from 1st July 2017.
How is GST different from the previous laws?
- Interstate movement of goods – Earlier, CST @2% was applicable on moving goods from one state to another. This led to an increase in the price of products. Tax checkpoints also led to delayed arrivals. Toll nakas were dismantled on the eve of GST launch. Toll, mandi charges, and vehicle entry fee continue. However, there’s no entry tax on goods movement. Transport efficiency has already increased by 30%.
- No more cascading taxes – Under the new regime, there is tax on value addition rather than the total value at each stage. Also, claiming input tax credit reduces the cost.
Countries with GST
Indirect taxes replaced
(i) Taxes levied and collected by the Centre:
- Central Excise duty
- Additional Duties of Customs (known as CVD)
- Special Additional Duty of Customs (SAD)
- Service Tax
(ii) Taxes levied and collected by the State:
- State VAT
- Central Sales Tax
- Entertainment and Amusement Tax (except when charged by the local bodies)
- Taxes on lotteries, betting and gambling
a) Multiple rates – India is the second most populous country. There is a wide gap between the rich and the poor. Hence, it would be unfair to tax a Mercedes and a toothpaste at the same rate. Increasing the tax from 12% to 18% would led to inflation and market disruption. For this reason, there are different tax slabs.
b) The GST (Compensation to States)
Act – GST is a destination based tax. Stats which consume goods or avail services, will be eligible for the revenue on the supply. Manufacturing states may lose revenue earned from indirect taxes. Hence, manufacturing states will receive compensation under the GST (Compensation to States) Act for 5 years. There is cess on demerit goods to collect funds for this purpose.
What is Goods and Services Tax Network (GSTN)?
The entire process from registration to return filing and paying taxes is digital. Thus, there are almost no human elements. The GSTN is the IT portal shared by the Central and State governments. It acts an interface between the taxpayers and the government.
GST Identification Number refers to the unique identification number allotted to every business.
GSTIN is a state-wise, PAN-based 15-digit identification number.
PAN is mandatory for registration.
Who needs to register?
Threshold limit for registration:
- Normal states – Turnover more than Rs. 20 lakh
- North Eastern States – Turnover more than Rs. 10
- Sale of exempt goods/services: No registration required
It is mandatory to obtain registration if:
- Your business was registered under an earlier law;
- You undertake inter-state supply of goods and services or inter-state supply of services more than Rs. 20 lakh
- For Casual Taxable Persons
- If you are a Non-Resident Taxable Person
- You provide services of an input service distributor
- If you are an E-commerce operator or aggregator.
Complete your GST registration process within 10 minutes with GST Edge’s Registration utility.
Exemption from registration
Certain entities are exempt from registration. These bodies don’t need to register. The following get get a UIN instead of GSTIN:
- Any specialized agency of United Nations Organization, or any financial institution and organization notified under the United Nations Act, 1947;
- Embassies or Consulates of foreign nations;
- Other person/s notified by the Board/Commissioner;
- Any specific person/s notified by the Central or State governments, based on recommendation of the GST Council.