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What is GST

Goods and Services Tax (GST) was implemented on the 1st of July 2017 as Goods & Services Tax Act. This indirect taxation system thus went through a chain of amendments since its inception. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country. With the introduction of GST law, the government aimed to consolidate all indirect taxes under one umbrella. Thus, except customs duty that is imposed on import of goods, Goods & Services Tax replaced multiple indirect taxes such as excise duty, \service tax, value-added tax, octroi, entry tax and luxury tax.

Implemented by the nations worldwide with individual customisations, the tax has been successful in simplifying the indirect taxation structure of India. Customers are required to pay tax on the purchase of goods or services as an inclusion in the final pricing. The tax collected by the seller is to be paid to the government, thus implying indirect taxation. GST rates are uniformly applied on different goods and services; they have been categorised under different slab rates. Luxury goods are classified under higher slabs, necessities have been included in lower and nil slab rates.

Journey of GST in India

The journey GST began in the year 2000, the Prime Minister of India introduced the concept of Goods and Services Tax (GST). He also formed a committee to draft new indirect tax law. However, its implementation process took years, and the bill went through multiple introductions, amendments and rescheduling. Here’s a summation of GST’s chronology, from drafting to final implementation.

Year

History Of GST

2000

The PM set up a committee for drafting Goods & Service Tax law for India.

2004

A task force reported the requirement to implement GST tax laws to improve the indirect tax systems.

2006

Goods & Services Tax introduction was scheduled on 1st April 2010 by the Finance Minister of India.

2007

A decision was made to phase out Central Sales Tax (CST). Consequently, CST rates were reduced to 3% from 4%.

2008

The EC finalized GST’s dual structure for separate legislation and levy.

2010

The GST introduction was postponed due to structural and implementation hurdles.

2011

The Constitution Amendment Bill was introduced for enabling the Goods & Services Tax Law.

2012

The tax initiated by the Standing Committee was stalled due to lack of clarity regarding Clause 279B.

2013

GST’s report presented by the Standing Committee.

2014

The Finance Minister of India reintroduced the GST Bill to the Parliament.

2015

The Lok Sabha approves the bill, but it gets stalled in Rajya Sabha..

2016

Goods and Services Tax Network (GSTN) went live, and the GST law amended got approved by the President of India.

2017

The Cabinet approves four supplementary bills on GST. The Goods & Services Tax Law was implemented on 1st July 2017.

Difference between GST Tax and Old Tax Structure

 

GST Tax

Old Tax Structure

Number of laws

There is only one law applicable

There were separate laws for separate taxes and respective VAT on states

Tax rates

There will be only one CGST rate and uniform SGST rate applicable across all the states.

Existence of separate tax rates

 

Cascading effect (Taxes on Tax)

The cascading effect is reduced which makes it very simple

Presence of the cascading effect of taxes due to diversity in taxes

Tax Burden

The tax burden is much reduced.

The high tax burden on taxpayers

Tax Structure

Subsuming or absorbing the taxes into one makes compliance simple and easy.

Presence of multiple taxes makes compliance difficult.

Prices for Consumers

Prices are expected to be reduced.

Usually very high due to the cascading effect of taxes.

Know about online GST registration process and fees.

What are the New Compliances Under GST?

The new GST tax regime has introduced several new systems. They are as follows:

  • E-Way Bills

GST introduced a centralized system of bills by the introduction of “E-way bills”. This system was launched for inter-state and intra-state movement of goods in a staggered manner.

Manufacturers, traders and transporters can quickly generate e-way bills for transportation of goods from the place of its origin to its destination with ease. Tax authorities are also benefited as the E-way bill system helps reduce the time consumed at check -posts and reduces tax evasion.

  • E-invoicing

Recently, the e-invoicing system has been launched on a trial basis starting from January 2020 and applicable from October 2020. This system requires large businesses with an annual aggregate turnover of more than Rs.100 crore to comply with some requirements. They must obtain a unique invoice reference number for every business-to-business invoice by uploading on the GSTN’s portal known as the invoice registration portal. The portal verifies the correctness and genuineness of the invoice. After that, it authorizes using the digital signature along with a QR code. E-invoicing allows interoperability of invoices and helps reduce data entry errors. It is designed to pass the invoice information directly from the IRP to the GST portal and the e-way bill portal. It will, therefore, eliminate the requirement for manual data entry while filing ANX-1/GST returns and for the generation of part-A of the e-way bills.

Also read about the various components of GST.

Advantages Of GST

Benefits for Traders and Manufacturers:

  • Easy compliance

  • Uniformity in tax rates and structure

  • Removal of cascading or compounding effect of taxes

  • Enhance the competitiveness

  • Growth towards the development of a common national market

Benefits for Central and State Government:

  • Simple and easy administration

  • Improved compliance and revenue collections

  • Better revenue effectiveness

Consumers Benefits:

  • Payment of the single and transparent tax

  • Reduction of the burden of the taxpayers

Tax Laws before GST

In the earlier tax regime, there were many indirect taxes levied by both the state and the central government. The states mainly collected taxes in the form of Value Added Tax (VAT). Every country had a different set of rules and regulations. The centre taxed Inter-state sale of goods. CST (Central State Tax) was applicable for 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 changes does GST bring in

The Goods & Services Tax or GST 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 GST online portal or website

  • 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

Also know about the impact of GST on personal loans.

FAQs

  • ✔️What do you mean by GST?

    Goods & Services Tax is a tax, charged on the consumption and supply of goods and services in India. The Government collects GST from the ultimate point of consumption.

  • ✔️What is GST and types of GST?

    The Government collects GST services on various goods and services. It is distinguished into four types, which are IGST, CGST, SGST, and UGST.

  • ✔️What are the three types of GST?

    The three types of GST are CGST (Central Goods and Services Tax), SGST (State Goods and Services Tax), IGST (Integrated Goods Services Tax), and UGST (Union Goods and Services Tax).

  • ✔️Who collects IGST?

    Both Central and the State Government collect IGST (Integrated Goods and Services Tax) based on the prefixed revenues. This GST bill is collected in case of inter-state transactions.

  • ✔️Can I pay the GST bill online?

    Yes, the GST bill can be paid online through the GST official website.

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