Goods & Service Tax(GST)

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The Goods and Service Tax Act, which was approved in the Parliament on March 29, 2017, came into effect on July 1, 2017. India has adopted a double GST model, where both central and state government imposes tax on goods and services. There are three types of GST implemented in the country:

CGST: It is imposed by the central government of India.

SGST: It is imposed by the state government.

IGST: It is imposed by the central and state government together, but composed by the central government.

Tax will be charged at each and every point of sale, State tax and Central tax will apply in case of intra-state sales, while incorporated GST will be levied for inter-state sales. Goods imported will come under IGST as they will be regarded as inter-state supply.

What is GST?

It is one of the major tax reforms in India and it is improving ease of doing business and increasing the taxpayer base in India by bringing in millions of small businesses in India. Under the new regime, all entities involved in selling or buying goods or providing services or both are necessary to register for goods and service tax. Entities without tax registration would not be permitted to collect tax from a customer or claim input tax credit of GST paid. Further, it is compulsory once an entity crosses the minimum verge turnover of starts a new business that is expected to cross the approved turnover.

As per the committee, entities in special category states with a yearly turnover of Rs.10 lakhs and above would be necessary to register under goods and service tax. All other entities in rest of India would be necessary to register for goods and service tax if annual turnover exceeds Rs.20 lakhs. There are also different other criteria, that could make an entity liable for obtaining GST registration – irrespective of annual sales turnover. Entities required to register for goods and service tax as per regulations should file for application within 30 days from the date on which the entity became liable for registration under goods and service tax.

Most of the services and products that are subject to the new tax rule have been categorized under four tax slabs – 5%, 12%, 18% and 28%. Goods and service tax rates will not apply on some goods and services, like milk, curd, fresh fruits etc. The rates for important food items have been kept very low and the reason to do this is because food items make up for about 50% of the consumer basket and contribute relatively much to ensuring that widespread price rises is kept in check. Luxury goods and negative items are taxed at a higher rate so as to maintain income impartiality for central and state governments.

Penalty for not registering

Any offender is not paying tax or making short payments (legitimate errors) has to pay a fine of 10% of the tax amount due subject to a least amount of Rs.10,000. The penalty will at 100% of the tax amount due when the offender has intentionally evaded paying dues.


GST Return Filing

The goods and services tax law now governs most of the indirect tax system in India. Suppliers registered under this regime must meet the compliance requirement regularly. Depending on the turnover and activities, the requirements and the period of presentation of the declarations are prescribed by law.

By filing the GST online, taxpayers learn about the Goods and Services Tax Network (GSTN) on the entry and exit of supplies, including the amount of taxes paid and collected. When registering taxable transactions with the Government, the taxpayer must also pay the amount of the tax collected from an external supplier of goods or services after the deduction of the Input Tax Credit (ITC).

What is the GST return?

A return is a document that contains details of the income that the taxpayer must submit to the tax administrative authorities. This is used by tax authorities to calculate tax liability.

Under GST, a registered dealer has to file GST statements that include:
  • Purchases
  • Sales
  • GST output (in sales)
  • Entry tax credit (GST paid on purchases)
  • To submit GST returns, purchase and sale invoices that are GST compliant are required.
Who Must Submit GST Returns?

Under the GST scheme, any regular business has to file two monthly and one annual returns. This equates to 26 returns in one year.

The beauty of the system is that one has to manually enter the details of a monthly return: GSTR-1. The other GSTR 3B return will be automatically completed by deriving GSTR-1 information submitted by you and your providers.