Introduction of GST in the field of indirect taxation is one the biggest reforms in India. The concept of GST literally changed the life of each one of us somewhere, but it brought major changes in the work of manufacturer, supplier and trader.
On 1st July 2017, GST has come into force and it changed the entire structure of indirect taxes with the concept of “One Nation, One Tax”.
Before GST, several indirect taxes were levied on goods and services with various rates of each state and due to this, the credit of earlier tax paid was not allowed to the assessee which results in instances where tax being levied on taxes (known as cascading effect).
Now after introducing GST, it results in complete elimination of cascading effect because tax is charged only on value addition. Apart from this it has become easy for government to collect tax and therefore it results in mitigation of tax evasion.
What is GST?
GST is an indirect tax. It is a destination-based tax on consumption of goods or services. In this process, tax is levied only on the value addition and henceforth GST results in complete elimination of cascading event.
It is levied at all stages right from the manufacturer to final consumption and the burden of tax is borne by the final consumer. In between, every person of all the stages gets credit of taxes paid in the form of Input Tax Credit (ITC).
Why GST has introduced in India?
Earlier multiple taxes such as Service Tax, VAT, Excise Duty, etc. were levied on supply of goods and services and every state used to levy different tax rate as per its legislation. Because of previous concept, it was difficult for government to collect taxes from all taxpayers and burden of final tax payment was huge on consumer.
To get rid of all these issues and to eliminate cascading effect Government decided to introduce new regime for indirect taxation. On 1st July 2017 Goods and Service Tax came into effect with solution for all issues which were existing in previous indirect tax laws.
Applicability of GST
Following is the list of persons who are required to get themselves register under GST portal;
· If the turnover of a person engaged exclusively in the supply of goods exceeds Rs.40 lakhs and this limit is 20 lakhs for some special category states.
· If the person is engaged exclusively in the supply of Services and his turnover exceeds Rs.20 lakhs and for some special category states, the limit is 10 lakhs.
· Any person making inter-state supply of taxable goods and services
· Casual Taxable Person and Non-Resident Taxable Person
· Every E-commerce Operator
· Person who required to pay tax under reverse charge mechanism
· Input Service Distributor
· Person who are required to deduct/collect tax under TDS/TCS
· Every person supplying Online Information and Database Access or Retrieval Services (OIDAR)
Note:- GST is not applicable on any imports and exports. Custom Duty is levied on imports and exports as may be prescribed in Customs Act, 1962.
Components of GST
India is a federal country where both Centre and States have powers to levy and collect taxes as per appropriate legislation. Henceforth, GST is divided into three parts such as CGST, SGST and IGST.
CGST and SGST is levied on all intrastate supplies (supplies which takes place within the state) and IGST is levied on all interstate supplies (supplies which takes place outside the state).
Benefits of GST
Introducing GST in India results in several advantages to various parties. Implementation of GST is not only beneficial to government but also to citizens and traders.
One of the major advantages of GST Registration is to avail the Input Tax Credit (ITC) paid on purchases/ expenses.
The other advantages offered by GST reform to various parties are as under;
A] To Citizens:
· Easier way of compliance of taxes
· Reduction in prices of goods or services due to elimination of cascading (i.e. tax on tax) effect
· Uniform prices throughout the country
· Transparency in taxation system
B] To Traders/Businessmen:
· Reduction in multiplicity of taxes
· Mitigation of cascading/ double taxation
· Development of common national market
· Simpler tax regime-fewer rates and exemptions
C] To Government:
· Ease in collecting taxes
· Uniform SGST and IGST rates to reduce tax evasion
· Reduction in compliance cost as no requirement of multiple record keeping
Drawbacks of GST
· Businesses are required to appoint tax experts which results in increase in operational cost
· The tax liabilities of Small and Medium Enterprises (SMEs) has increased
· Businesses are required to upgrade their software to GST software which ultimately results in rise in expenses
· GST is an online tax regime, henceforth it has become quite difficult for small businessmen or those who aren’t much aware about online platform
Compliance under GST
· Need to file monthly/quarterly GSTR 1 (pertaining to all sale transactions)
· Need to file monthly GSTR3B (pertaining to net payment liabilities)
· Need to reconcile your purchases with vendors GSTR1 under GSTR2A
· Annual Returns under GSTR 9
· Statement of Reconciliation under GSTR 9C.
Penalty for Non-compliance under GST
In case of any below contravention an Authorised Officer has authority to cancel the registration of registered person or can impose penalty on such person as he may deems fit.
· a person paying tax under section 10 (Composition Scheme) has not furnished returns for three consecutive tax periods; or
· any other registered person other than composition taxpayer has not furnished returns for a continuous period of six months from the date of registration; or
· taxpayer has contravened any provisions of the Act or rules made thereunder; or
· any other reason as may be prescribed
GST is one of the biggest reforms in India which not only affect taxation field but also all other sectors. Major reforms always come with few disadvantages but moreover there is a positive impact of GST in India.