Goods and Services Tax (GST), GST News, Details and Changes

The Goods and Services Tax (GST) is a comprehensive indirect tax system implemented in India on July 1, 2017, to replace various state and central taxes like VAT, service tax, excise duty, and others. GST is aimed at creating a unified tax structure, simplifying compliance, and reducing the cascading effect of taxes. It operates on the principle of “One Nation, One Tax” and is levied at every stage of the supply chain, ensuring seamless input tax credit across goods and services. Goods and Services Taxes (GST) is a very important topic of UGC NET Commerce exam. So, lets understand Goods and Services Taxes (GST) properly.

UGC NET Commerce Syllabus 2024

Concept and Evolution of GST in India

The Concept of GST in India

• Unified Tax Structure: GST integrates multiple indirect taxes like VAT, excise duty, and service tax into a single system.
• Destination-Based Tax: GST is levied at the point of consumption, reducing tax-on-tax effects and promoting ease of compliance.
• Tax Slabs: Four main GST slabs—5%, 12%, 18%, and 28%—cover various goods and services, with additional cesses for luxury and sin goods.
• Transparency and Efficiency: Automation through e-invoicing, GST returns, and digital compliance mechanisms has streamlined tax processes.

Evolution of GST in India

• Pre-GST Scenario: Multiple central and state-level taxes created complexities and inefficiencies in India’s tax system.
• Constitutional Amendment: The 101st Constitutional Amendment in 2016 enabled the framework for GST implementation.
• Launch on July 1, 2017: The “One Nation, One Tax” vision marked the GST rollout, aimed at transforming India into a unified market.
• Technology-Driven Compliance: Over time, initiatives like e-way bills and faceless assessments have enhanced efficiency.

Tax Structure Before Goods and Services Tax (GST)

Goods and Services Tax (GST) replaced 17 central and state taxes, simplifying the tax regime. Lets see the tac structure before GST in India:

1. Multiple Taxes:
   • Central taxes: Excise duty, service tax, central sales tax.
   • State taxes: VAT, state excise duty, luxury tax, octroi, and entry tax.
2. Cascading Effect:
   • Taxes were levied on values inclusive of previous taxes, leading to a “tax on tax” situation.
   • Example: VAT was charged on the price, including excise duty.
3. Lack of Uniformity: States had different VAT rates, causing inconsistencies and hindering interstate trade.
4. High Compliance Burden: Separate registrations and filings were required for central and state taxes, increasing operational complexities.
5. Economic Impact:
   • Higher logistics costs due to state checkpoints and entry taxes.
   • Reduced transparency and limited input tax credit availability.

Components of GST in India

The Goods and Services Tax (GST) in India is designed as a dual system comprising four key components. These components ensure seamless tax collection across different types of transactions, promoting uniformity and efficiency in the indirect tax system:

1. Central Goods and Services Tax (CGST)
   • Levied by the Central Government on intra-state transactions (goods/services supplied within a state).
   • Shared with the State Government via SGST for the same transaction.
   • Revenue collected under CGST contributes to the Central Government’s fund.
   • Example: If GST on a product is 18%, 9% is CGST.
2. State Goods and Services Tax (SGST)
   • Levied by State Governments on intra-state transactions.
   • Works parallelly with CGST, where revenue is retained by the state of consumption.
   • Rates vary minimally by product type but are generally uniform across states.
3. Integrated Goods and Services Tax (IGST)
   • Imposed on inter-state transactions (goods/services supplied between states) and imports/exports.
   • Collected by the Central Government and later distributed between the states involved.
4. Union Territory Goods and Services Tax (UTGST): Applied in Union Territories without legislature (e.g., Andaman and Nicobar Islands).

Goods and Services Tax (GST) Council

The Goods and Services Tax (GST) Council is the highest decision-making body for the Goods and Services Tax (GST) in India. It is a constitutional body, established under Article 279A of the Indian Constitution, responsible for making recommendations regarding the GST structure, rates, and related issues. The primary role of the GST Council is to ensure uniformity and consistency in the application of GST across India’s federal structure, balancing the interests of the Central Government and State Governments.

Structure of GST Council:

• Chairperson: The Union Finance Minister chairs the GST Council.
• Members: It includes the Finance Ministers of each state and union territory, ensuring that both the Centre and States have an equal say in decisions.

Click here for GST Council website

GST Tax Structure and Rates: Key Points

1. Introduction to GST Tax Structure:
   • GST in India is a comprehensive indirect tax system introduced on July 1, 2017, aimed at subsuming various indirect taxes like VAT, excise duty, and service tax into a unified structure​
   • It is designed to create a seamless tax experience across states and the center, ensuring ease of doing business and improving compliance​
2. GST Tax Slabs: The GST in India is categorized into four major tax slabs:
   • 5%: Items of mass consumption and essential goods.
   • 12%: Standard goods and services, including processed foods, and services like transportation.
   • 18%: Services and goods with broader applications like financial services and many non-essential items.
   • 28%: Luxury goods, higher-end products, and services such as air-conditioned restaurants, automobiles, and consumer durables​
3. Exemptions Under GST:
   • Several essential goods and services, such as healthcare, education, and certain food items, are exempted from GST​
   • Additionally, small businesses with an annual turnover of up to ₹40 lakhs (₹20 lakhs for service providers) are exempt from registration under GST​
4. Input Tax Credit (ITC): GST allows businesses to claim an Input Tax Credit (ITC) on taxes paid on inputs, reducing the cascading effect of taxes. This is a key feature of the GST system, encouraging businesses to maintain a transparent supply chain​.
5. Recent Changes and Adjustments (2024):
   • GST Rate Reductions: The government has periodically reduced GST rates on essential goods and services, such as cancer drugs and certain food items​
   • E-invoicing Implementation: The introduction of e-invoicing, now extended to more businesses, aims to enhance tax compliance and prevent fraud​
6. GST on Exports: Exports are zero-rated under GST, meaning that no tax is applied on exported goods or services, but the exporter can claim a refund for any taxes paid on inputs​
7. GST Revenue: The GST Council ensures that the GST rates are regularly reviewed, and in FY 2023-24, GST collections exceeded ₹20 trillion, reflecting a growth in both compliance and revenue​.

GST Registration: Eligibility, Threshold Limits, and Process

Eligibility for GST Registration

1. Business Turnover: Any business with an annual turnover exceeding ₹40 lakhs (₹20 lakhs for service providers) must register under GST​. For special categories like North-Eastern states and hill states, the threshold is ₹10 lakhs​.
2. Interstate Supply: Businesses making interstate supply (selling goods or services across state borders) are required to register for GST, irrespective of turnover​
3. E-commerce Operators: E-commerce platforms, whether they are the provider or facilitator of goods and services, must also obtain GST registration​
4. Casual Taxable Persons: Individuals or businesses engaged in occasional taxable supplies (like trade fairs) must register as casual taxable persons​
5. Non-Residents: Non-resident persons or foreign entities providing goods or services in India also need to register under GST​.

Threshold Limits for GST Registration

1. For Goods: The threshold for GST registration for businesses dealing with goods is ₹40 lakhs (₹20 lakhs for special category states)​
2. For Services: Service providers with an aggregate turnover of ₹20 lakhs (₹10 lakhs for special states) must register under GST​
3. Voluntary Registration: Businesses below the prescribed threshold can opt for voluntary GST registration to avail of benefits like input tax credit (ITC), provided they maintain records and comply with GST laws

Process of GST Registration in India

Step 1: Create GST Account:

• Visit the official GST portal (www.gst.gov.in) and click on “Services” → “Registration” → “New Registration”.
• Fill in details such as PAN, email, and mobile number, and verify through OTP​

Step 2: Fill Application Form:

• After OTP verification, complete the GST REG-01 form with details like business name, type, and business address.
• Attach supporting documents such as PAN card, proof of business address, bank account statement, and identity proof​

Step 3: ARN Generation:

• After submission, an Application Reference Number (ARN) will be generated. This can be used to track the registration status​

Step 4: Verification by GST Officer:

• The application is reviewed by a GST officer. If everything is in order, the officer may approve the registration​

Step 5: GSTIN Issuance:

• Once the application is approved, a GSTIN (Goods and Services Tax Identification Number) will be issued to the business​

Documents Required for GST Registration

• PAN card of the business owner
• Proof of business address (electricity bill, rental agreement)
• Bank account statement
• Identity and address proof of the business owner​

Click here to check the official website of GST

In conclusion, GST in India has transformed the nation’s tax landscape by unifying multiple indirect taxes into a single, efficient system. It has streamlined compliance, enhanced business transparency, and fostered a smoother flow of goods and services across the country, contributing to India’s economic growth​.

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