Everything you need to know about the Goods and Services Tax (GST)

GST is a multi-stage, all-encompassing tax system that applies to the sale of goods and services. The fundamental goal of this taxing scheme, which is applicable throughout India, is to reduce the cascading effect of other indirect taxes. Tax evaders must face harsh penalties in order for the indirect taxation regime, known as GST, to function properly. The government of India has implemented three important methods to persuade people to comply with the GST regime: interest, monetary penalties, recovery, and suspension of GSTIN.

Everything you need to know about the Goods and Services Tax (GST)

What Is GST?

The Goods and Service Tax Act was passed by the Indian government on March 29, 2017, and it went into effect on July 1, 2017. The Goods and Services Tax (GST) is a national indirect tax law that applies to all goods and services.

The GST (Products and Services Tax) is a tax on both goods and services. It is an indirect tax in India that has mostly superseded other indirect taxes such as VAT, Service tax, Excise duty, and so on. This will simplify tax collection, reduce double taxation, and improve the efficiency of the process.

 

What is the necessity for GST in India?

GST is a tax with a comprehensive and continuous chain of set-off benefits to the level of retailers, which is why India needs it. It is primarily a value-added tax at each level, with a credit tax mechanism allowing a supplier to set off at each stage. The burden of GST falls on the final consumer, who is the end-user of the commodity or service for which GST is required.

 

What is the Process of GST?

The GST is a destination-based tax because it is imposed in the state where goods and services are consumed (rather than where they are produced). It is charged at every point of sale and is included in the cost of a product.

  1. GST, in simple terms, replaces a number of indirect taxes imposed by the national and state governments, resulting in a single market in India.
  2. Certain goods and services are excluded from GST and are instead subject to existing state levies such as the value-added tax (VAT), which is a tax paid at each stage of value addition in the supply chain. The consumer pays these fees at each stage of the manufacturing process.
  3. The imposition of GST on petroleum crude, high-speed diesel, motor spirit, natural gas, and aviation turbine fuel has been postponed, and they are now subject to excise charges and VAT imposed by the Centre.
  4. GST helps both domestically and internationally:
  • It simplifies the job of manufacturers across the country by combining many levies into one and promoting economic integration.
  • It brings India up to pace with the global market by implementing a generally acknowledged tax system.
  1. GST includes a number of exemptions and relaxations that can be obtained by meeting specified criteria. A tax credit is an example of this incentive, as it is the amount that some taxpayers can deduct from the tax they owe.

What Is The GST Structure?

At present moment, all goods and services are primarily separated into a four-tier rate system of 5%, 12 per cent, 18 per cent, and 28 per cent.

To make the taxation procedure easier, the government is considering altering the four-tier structure to three or two tiers. GST, which was implemented in 2017, is still in its early stages and is prone to errors, infractions, and conflicts of interest. To avoid this, the authorities established an Advanced Ruling Mechanism on questions of goods and services delivery. This procedure can be used by taxpayers to resolve difficulties such as registration, classification, tax rate, taxability, and so on.

 

Who Has the Authority to Impose the GST?

The Centre and States can impose GST on a shared tax base because it is a destination-based tax. As a result, it consists of several elements:

  • The tax levied by the Centre is known as the Central GST (CGST).
  • State GST (SGST) vs. Union Territory GST (UTGST): The SGST is a state tax, while the UTGST is a tax imposed by the Union Territory.
  • Integrated GST (IGST): This tax is charged on commodities that are transported between states. Goods imports are classified as interstate supplies. Imports will be subject to IGST as well as any applicable customs charges

 

 

Exceptions:

  • The GST has a dual structure, with the Centre and the states each having the authority to charge the tax on the supply of goods and services at the same time.
  • CGST and IGST are levied and administered by the Centre, whilst SGST and UGST are levied and administered by the states or union territories.
  • Export and supply of commodities to Special Economic Zones are exempt from the GST (known as zero-rated supply). Exporters can either obtain an IGST refund or export products under a bond without paying the IGST in specific circumstances like these.
  • To assess the nature of supply, the GST law has separate provisions for goods and services. Whether the transaction is intra-state or inter-state depends on the supplier's location and the location of the products or services being supplied.
  • The GST rates have been altered a few times since its inception in 2017. The appropriate GST rates have been divided into a four-tier rate structure, as previously noted. Because of the continuing COVID-19 epidemic, the GST rates on two medicines were temporarily abolished, while the GST rates on 15 other necessary commodities were decreased.

 

What is the GST's Purpose for Taxpayers or Consumers?

  • Previously, India's tax structure comprised several levies at the federal and state levels, which sometimes perplexed taxpayers. Taxes have been grouped together under the "one nation, one tax" system, with the goal of making the tax filing procedure easier for taxpayers.
  • GST facilitates the cross-border mobility of goods and services. Manufacturers can now avoid paying CST (Central Sales Tax) and other taxes thanks to the implementation of IGST.
  • GST creates a single tax department, resulting in tax legislation and the unification of numerous tax departments.
  • Anti-profiteering provisions have been added to the GST law in order to protect consumers. Any reduction in the tax rate on any supply of goods or services, as well as any advantage from the input tax credit, will be passed on to the customer in the form of lower commissions.

What Are the Consequences of Not Filing Your GST Returns On Time?

Fortunately, the GST law does not impose any penalties for late or non-filing of GST returns. Instead of a penalty, late fees are imposed on GST registered dealers who fail to file returns on time.

 

What Are the Consequences of Failing to File GSTR-1/3B?

  • Give your consumers a tax credit denial: Your customer will not be eligible for an input tax credit for the GST you levied on your sales invoices.
  • E-waybill Blocking: If you don't file two GSTR 3Bs in a row, you won't be able to generate an E-waybill.
  • GSTR-1 inhibition: If you don't file two GSTR 3Bs in a row, you won't be able to file GSTR-1.
  • Non-payment of GST has a penalty: In the GST, there are provisions for penalties for certain specified offences. One of these infractions is failing to pay the collected tax amount within three months of the due date. The penalty will be calculated based on the amount of tax collected, with a minimum of Rs. 20,000.
  • Suspension, followed by GSTIN is cancelled: If you (a regular taxpayer) fail to file a return for six months in a row, the GST Officer has the authority to cancel your registration. Before cancelling your reservation, the officer will send you a Notice asking for additional information. You must respond within seven working days, explaining why your GST registration should not be cancelled. Officers, on the other hand, do not have to start the cancellation process right once if they haven't filed a return for six months in a row. Your GSTIN will be suspended if officers decide to begin the process of cancelling your GST registration. You cannot provide any Taxable Goods until the suspension is lifted.