GST - Goods and Services Tax

What is GST?

The Goods and Services Tax, or GST, is an indirect tax law applicable across India. It has replaced multiple indirect taxes such as excise duty, service tax, value-added tax, octroi, entry tax, and luxury tax. Laws pertaining to the same were put into effect on July 01, 2017, in India. This indirect taxation system has gone through multiple amendments since to arrive at the current juncture. However, it must be noted that GST does not replace customs duty, which is still mandatory on imported goods and services. Every kind of product and service attracts a different tax rate under GST. For example, luxury or sin goods are classified to attract a higher interest rate, whereas necessities have been included in lower and nil rate slab rates.

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History of GST

In 2000, the late Atal Bihari Vajpayee, the then prime minister of India, set up a committee to draft new indirect tax law. However, the implementation process took several years, as a result of which, the bill had to see and endure multiple introductions, amendments, obstacles, and rescheduling. Below is a summarised version of the chain of events pertaining to GST that transpired since 2000 in chronological order, starting from drafting to the final implementation of the GST Act.

 

Differences Between GST and the Indirect Tax Regime

 

Learn about the online GST registration process and fees.

Types of GST Charged in India

GST is primarily categorised into three different types, i.e. CGST, SGST, and IGST.

• Central Goods and Services Tax (CGST)

The Central government collects the CGST tax, which is levied on the intra-state supply of products and services. The introduction of the same led to the abolition of central taxes such as central excise duty, customs duty, service tax, among others.

• State Goods and Services Tax (SGST)

As the name implies, SGST is that component of the tax which goes to the state government. SGST is applicable on goods and services sold within the state. This has, in turn, replaced several other taxes, such as the value-added tax (VAT), entertainment tax, entry tax, and state sales tax, among others.

• Integrated Goods and Services Tax (IGST)

Integrated GST is charged on products and services that are produced and consumed in two different states. The revenue collected from IGST is distributed among the relevant states. IGST was implemented with the intention of streamlining the tax process.

• Union Territory Goods and Services Tax (UTGST)

UTGST, as the name suggests, is applicable on goods and services supplied within the union territories of India, namely Chandigarh, Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, and Lakshadweep. UTGST is collected in addition to CGST instead of SGST.

Advantages of GST

1. Benefits for Traders and Manufacturers

• Compliance becomes easy

• Brings uniformity in tax rates and structure

• Removal of the cascading or compounding effect caused by the imposition of multiple taxes

• Paves the path for the development of a common national market

2. Benefits for Central and State Government

• It is relatively easier to implement and administer

• An improvement in compliance and revenue collections

• Better revenue effectiveness

3. Consumer Benefits

• Payment of a single and transparent tax

• Reduction of the burden on taxpayers

Tax Laws Before GST

In the earlier tax regime, many indirect taxes were levied by both state and central governments. The states mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different set of rules and regulations. The centre taxed inter-state sale of goods. CST (Central State Tax) was applicable for the inter-state sale of goods. These indirect taxes, such as the entertainment tax, octroi, and local tax, were levied together. The following are the list of indirect taxes that were applicable in the pre-GST regime:

• Central Excise Duty

• Duties of Excise

• Additional Duties of Excise

• Additional Duties of Customs

• Special Additional Duty of Customs

• Cess

• State VAT

• Central Sales Tax

• Purchase Tax

• Luxury Tax

• Entertainment Tax

• Entry Tax

• Taxes on advertisements

• Taxes on lotteries, betting, and gambling

Taxes like CGST, SGST, and IGST have replaced all the above taxes.

What are the new Compliances Under GST? 

Apart from filing the GST return, the new GST tax regime has introduced several new systems. They are:

E-Way Bill

Eway bills are typically issued by a supplier when they wish to send their goods to another state or union territory. These eway bills are necessary for the commercial movement of goods valued over ₹50,000 across state borders. The online eway bill login portal through which you can generate the document in question is ewaybillgst.gov.in. Alternatively, you can generate one through a text message or via the official application that is available on Google Play Store as well as the Apple App Store. Once the way bill is generated, the supplier, the recipient, and the transporter receive a unique e-way bill number, which essentially greenlights the movement of goods from point A to B.

E-Invoicing

The e-invoicing system requires large businesses with annual aggregate turnover of more than ₹100 crore to obtain a unique invoice reference number. The same will be applicable for every business-to-business invoice that should be uploaded on the GSTN's portal. The portal verifies the genuineness of the invoice and authorises the same with a digital signature and a QR code. 

E-invoicing additionally allows the interoperability of invoices and reduces data entry errors. It is designed to pass the invoice information directly from the Invoice Registration Portal (IRP) to the GST portal and the e-way bill portal. It will, therefore, eliminate the requirement for manual data entry while filing the ANX-1/GST returns and for the generation of part-A of e-way bills.

What Changes Does GST bring in? 

The Goods & Services Tax brought a major change in the taxation visuals in India. Earlier, different taxes were paid separately to the state and the centre. However, GSTIN subsumed all taxes into one, and now there is the practical application of 'One Nation, One Tax.' Some of the changes that GST brought in are as follows:

• No multiple taxes to be paid

• Replacement of indirect taxes like excise duty and sales tax into one

• Clear distinction of taxes on luxuries and necessities

• Introduction of simplified ways to fill Income Tax Returns and taxes, for instance, through the official GST online portal.

• Boost for Real estate and MSME sector

• Ease for transportation of goods, as no separate taxes

• Tax administration under both State and Central governments

• Transparency in the taxation process

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