Introduction of Goods and Services Tax (GST)

The introduction of Goods and Services Tax (GST) in India was a historic move that marks a major reform of indirect taxation in the country. This initiative is now paving the way for the national market. Indian goods are also became more competitive in international and domestic markets after the introduction of GST.

From the consumer’s perspective, the overall tax burden, which is currently between 25% and 30%, will be significantly less. GST is generally easier to administer due to self-regulation and transparency.

What do you mean by GST?

GST is a comprehensive, multi-level tax regime that applies to the sale of goods and services. The main purpose of this tax measure is to reduce the cascading effect of other indirect taxes.

The bill aims to bring together all indirect taxes including value-added tax, central excise tax, luxury tax, service tax law, entertainment tax, and entry tax.

All domestically manufactured goods and services in connection with imported goods are subject to standard indirect tax through GST. The imposition of GST was to improve the country’s economic growth and to handle taxes more effectively.

What are the 4 types of GST?

GST comprises the following levies:-

Central Goods and Services Tax (CGST) [also known as Central Tax] which is levied on intra-state or intra-union territory on the supply of goods or services or both.

State Goods and Services Tax (SGST) [also known as State Tax] which is levied on the supply of goods or services or both within the same state.

Union Territory Goods and Services Tax(UTGST) [also known as Union Territory Tax] which is levied on the supply of goods or services within the same union territory.

Integrated Goods and Services Tax (IGST) [also known as Integrated Tax] on inter-state supply of both goods and services

How is GST calculated formula?

GST can be calculated by multiplying the taxable amount by the GST rate. If CGST and SGST/UTGST is applicable then CGST and SGST both amounts are half of the total GST amount.

GST = Taxable Amount x GST Rate

If you have the amount which is already including the GST then you can calculate the GST-excluding amount by the below formula

 GST excluding amount = GST including amount/ (1+GST rate/100)

For example GST including the amount of a product in Delhi is Rs. 1180 and GST rate is 18%

  GST excluding amount = 1180/(1+18/100) = 1180/1.18 = 1000

  GST is calculated on the transaction amount and not on the MRP.  So, GST is Rs. 180; SGST is Rs. 90 90 and CGST is Rs. 90.

Who is the father of GST?

Atal Bihari Vajpayee is the father of GST.

A unified national GST (Goods and Services Tax) was proposed and approved in a 1999 meeting between then-Prime Minister Atal Bihari Vajpayee and his economic advisory team. Vajpayee then assembled a team led by Asim Dasgupta, then Minister of Finance of West Bengal, to build the GST model. 

The Constitution of 2017 (Article 100, First Amendment) Act was introduced at midnight on 30 June 2017, following the passage of the 122nd Amendment Act. GST is India’s largest tax reform since 70 years of independence and is overseen by the GST Council chaired by the country’s Finance Minister.

What type of tax is GST?

The Goods and Services Tax (GST) is an indirect tax levied on the sale of goods and services. Also called consumption tax. This is a comprehensive, multi-level location-based tax. This is pure because it absorbed almost all indirect taxes, except some government levies. Due to the multi-level feature, GST is collected at each level of production. However, since it is a destination tax and not a tax of origin like the former, it is levied at the place of consumption rather than the place of origin.

What is GST credit?

An input tax credit means claiming credit for the GST paid on the purchase of goods and services used to facilitate your business. 

This tax is payable at the time of purchase when the liability payable on outward supplies is lower.

Every person with a GST registration in the supply chain takes part in control, collects the GST tax, and remits the collection amount. 

To avoid double taxation and cascading effects, input tax credits offset taxes paid on the procurement of raw materials, consumables, goods, or services used in the manufacture, supply, or sale of goods or services.

What is a GST invoice?

The issuance of a GST invoice is by a supplier or seller to the recipient or purchaser of goods or services. Such documents include the names of the parties involved and details of the goods or services offered as part of the particular transaction.

• Product Name
• Description
• Quantity of Goods or Services Sold
• Supplier and Buyer Details
• Terms of Supply
• Date of supply
• Price Per Goods or Services Sold
• Rebates/discounts

To charge the tax and pass on the input tax credit, a tax invoice is issued.  Sellers must issue GST tax invoices for sales over INR 200/-.

For taxable services, the invoice must be issued before or after the service is rendered.

However, issuance of such an invoice must be within a maximum of thirty (30) days from the provision of the services.

For Banks and Financial Services Institutions (BFSI), this period is 45 days.

What is GSTR 3B form?

GSTR 3B is a monthly return form that taxpayers must file regardless of their returns. All taxpayers, including those who filed Nil returns, must have GSTN to file GSTR 3B returns.

Details taxpayers have to furnish in the form are:

• Sales and Purchase made by the taxpayer
• Liable Input Tax Credit
• Liable Tax
• Tax Paid

Filing Form GSTR-3B is a must for all regular and casual taxpayers, even if there is no business during the tax period. GSTR 3B is a monthly return with a due date of the 20th of the following month.

What is TDS credit in GST?

The introduction of the concept of TDS was to collect taxes directly from income sources.

According to this concept, a person (deductor) who has a make specific payment obligation to a person (deductee) must deduct the withholding tax and pay it to the central government account. 

TDS of 2% must be deducted from payments made to suppliers of taxable goods or services if the value of such supply under the contract exceeds Rs. 2.5 lakh rupees.

A tax deductee whose income tax is deducted is entitled to a credit for the amount deducted based on Form 26AS or TDS statement issued by the tax deduction.

Frequently Asked Questions(FAQs)

Who is the CEO of GST?

Union Finance Minister Nirmala Sitharaman currently chairs the GST Council.

Who is the first GST Chairman?

The late Arun Jaitley served as the first chairman of the Goods and Services Tax Commission (GST).

Can we claim ITC on 5% GST?

An input tax credit is not allowed on any goods or services the applicant receives if tax is paid at the rate of 5% GST.

Is GST a monthly credit?

Every registered taxpayer under GST must file his tax liability on a monthly basis.

Is it mandatory for all traders to register for GST?

All traders with annual turnovers of more than Rs.20 lakh will be mandated to register under the Goods and Services Tax.

Wrapping Up

India has adopted a dual GST model. GST has kept it not only simple but also robust, by stating that the entire value of goods/services is taxed in an integrated manner. File your GST returns with GST experts at InstaFiling.

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