1.Theoretical Aspect:

Now a days, the most contemporary topic in market is GST.

GST…..

What is a GST actually? GST is a short form from words ‘Goods and Services Tax‘. It also can be known as a multi-stage consumption tax on goods and services. This kind of tax covering all sectors of the economy including export and import activities except goods and services which are categorized under zero rated supply and exempt supply orders.

Comprehensive Definition: (GST) is a comprehensive indirect tax on manufacture, sale, and consumption of goods and services throughout India. GST would replace respective taxes levied by the central and state governments.

Nature of tax:

Broadly speaking, taxes in India are divided in 2 main Categories :

1. Direct Taxes : Tax payers directly paid the taxes to the Government.

Examples : Income Tax, Wealth Tax, Corporate Taxes

2. Indirect Taxes : The tax paid indirectly to the government known as Indirect Taxes. It’s levied on the Goods and Services Providers.

Examples : Excise Duty, Custom, Sales Tax, Service Tax

GST is an indirect tax for the whole country , being a single tax on supply of Goods and Services in its entire product cycle or life cycle i.e. from manufacturer to the consumer. It is calculated only in the “Value addition” at any stage of a goods or services. The final consumer will pay only his part of the tax and not the entire supply chain which was the case earlier. GST is a tax on goods and services under which every person is liable to pay tax on his output and is entitled to get input tax credit (ITC) on the tax paid on its inputs(therefore a tax on value addition only) and ultimately the final consumer shall bear the tax”.axes subsumed in GST which was otherwise liable to pay:

At the State Level:

  • State Value Added Tax/Sales Tax
  • Entertainment Tax (Other than the tax levied by the local bodies)
  • Octroi Tax
  • Purchase Tax and Entry Tax.
  • Luxury Tax
  • Taxes on advertisement, lottery, betting, and gambling

At the Central level:

  • Central Excise Duty
  • Additional Excise Duty
  • Service Tax
  • Additional Customs Duty (Countervailing Duty)
  • Special Additional Duty of Customs

Date of implementation of GST for all entities: 

On a brief note, on 3rd August, 2016: Rajya Sabha passed the Constitution Amendment Bill by a two-thirds majority. Consequently, on 1st July 2017: GST was made mandatory to be applicable across India.

Administration of GST in India:

There will be three components of GST:

(i) GST at Central (Union) Government Level only [CGST]

(ii) GST at State Government Level only [SGST]

(iii) Integrated Goods and Services Tax  [IGST] which would be levied and collected by CG on Inter-state sale so as to maintain the credit chain.

Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. Import of goods and services would be treated as inter-state sale under the GST system and IGST would be collected by the Centre in addition to applicable Custom duties. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.

Applicability of GST:

Every person or entity which has crossed the limit of RS 20 lacs of turnover in a financial year [Limit is Rs 10lakhs for some special category states] will be required for registration under GST w.e.f. 1st April, 2017.

[“Aggregate turnover” means the aggregate value of all taxable supplies, exempt supplies, exports of goods and/or services and inter-State supplies of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be.]

OTHER CASES [GST registration is mandatory irrespective of turnover]

  • Those making inter-state supply of goods/services.
  • Any person who supplies goods/services in a taxable territory and has no fixed place of business – referred to as casual taxable persons. Registration issued to such a person is valid for a period of 90 days.
  • Any person who supplies goods/services and has no fixed place of business in India – referred to as non-resident taxable persons. Registration issued to such a person is valid for a period of 90 days.
  • Person required to pay tax under reverse charge mechanism. Reverse charge mechanism means where the person receiving the goods/services has to pay tax instead of the supplier.
  • Agents or any other person who makes supply on behalf of other registered taxable persons.
  • Distributors or input service distributors. This person has the same PAN as the office of the supplier. This person is an officer of the supplier, he receives supplies and issues tax invoice to distribute credit of CGST/SGST/IGST.
  • E-Commerce Operator
  • Persons who supplies (except branded services) via an e-commerce operator.
  • Aggregator supplying services under his brand name.
  • Person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person.

Applicability on Businesses:

As already mentioned earlier, GST applies to every entity on the basis of turnover criteria with some exceptions. Businesses includes – trade, commerce, manufacture, profession, vocation or any other similar activity, irrespective of its volume or frequency. It also includes supply of goods/ services for starting or closure of a business. Services means anything other than goods. It is likely that services & goods carry a different GST rate.

GST applies to all persons:  Persons includes – Individuals, HUF, Company, Firm, LLP, AOP, Co-operative society, Society, Trust etc. However, GST does not apply to Agriculturists.

Agriculture includes floriculture, horticulture, sericulture, raising of crops, grass or garden produce. But does not include dairy farming, poultry farming, stock breeding, gathering of fruit or rearing of seedlings or plants.

However, PAN No. is mandatory for registration under GST.

GST Rates:

Most importantly, one needs to know the rates of GST before implementing it which are as follows:

No tax(0%) :
Goods :  No tax will be imposed on items like Jute, fresh meat, fish chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, prasad, salt, bindi. Sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, Bones and horn cores, bone grist, bone meal, etc.; hoof meal, horn meal, Cereal grains hulled, Palmyra jaggery, Salt – all types, Kajal, Children’s’ picture, drawing or colouring books, Human hair .
Services : Hotels and lodges with tariff below Rs 1,000.. Rough precious and semi-precious stones will attract GST rate of 0.25 per cent.

5% :
Goods : Items such as fish fillet, Apparel below Rs 1000, packaged food items, footwear below Rs 500, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, kerosene, coal, medicines, stent, lifeboats, Cashew nut, Cashew nut in shell, Raisin, Ice and snow, Bio gas, Insulin, Agarbatti, Kites, Postage or revenue stamps, stamp-post marks, first-day covers.
Services: Transport services (Railways, air transport), small restaurants will be under the 5% category because their main input is petroleum, which is outside GST ambit.

12% :
Goods:
Apparel above Rs 1000, frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, Bhujia, namkeen, Ayurvedic medicines, tooth powder, agarbatti, colouring books, picture books, umbrella, sewing machine, cellphones, Ketchup & Sauces, All diagnostic kits and reagents, Exercise books and note books, Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs, Spectacles, corrective, Playing cards, chess board, carom board and other board games, like ludo.
Services:
Non-AC hotels, business class air ticket, fertilizers, Work Contracts will fall under 12 per cent GST tax slab
18%:
Goods:
Most items are under this tax slab which include footwear costing more than Rs 500, Bidi Patta, Biscuits (All catogories), flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, tampons, note books, steel products, printed circuits, camera, speakers and monitors, Kajal pencil sticks, Headgear a and parts thereof, Aluminium foil, Weighing Machinery [other than electric or electronic weighing machinery], Printers [other than multifunction printers], Electrical Transformer, CCTV, Optical Fiber, Bamboo furniture, Swimming pools and padding pools, Curry paste; mayonnaise and salad dressings; mixed condiments and mixed seasonings
Services:
AC hotels that serve liquor, telecom services, IT services, branded garments and financial services will attract 18 per cent tax under GST.
28% :
Goods:
Bidis, chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with choclate, pan masala, aerated water, paint, deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles, water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles, aircraft for personal use, will attract 28 % tax – the highest under GST system.
Services :
5-star hotels, race club betting, cinema will attract tax 28 per cent tax slab under GST

Crude Oil & Petrol:  GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural gas) would be applicable from a date to be recommended by the GST Council.

The state governments wanted to exclude taxes on petroleum and alcohol products from the purview of GST. This is because, these items account for significant portion of the state’s revenues. This was a key issue of discussions between the centre and the states. It has now been decided that alcohol will be exempt from GST. Petroleum products too will be excluded from GST initially. It would be slowly included in the purview of GST later.

Brief about GSTN i.e. GST Network:

It is a section 25 company with Strategic Control with the Government, to function as a Common Pass-through portal for taxpayers-

  • submit registration application
  • file returns
  • make tax payments.

Practical Aspect:

The major features of the proposed registration procedures under GST are as follows:

Existing dealers: Existing VAT/Central Excise/Service Tax payers will not have to apply afresh for registration under GST.

New dealers: Single application to be filed online for registration under GST.

The registration number will be PAN based and will serve the purpose for Centre and State.

  • Unified application to both tax authorities.
  • Each dealer to be given unique ID GSTIN.
  • Deemed approval within three days.

Author Bio

Qualification: CS
Company: Ministry of Corporate Affairs
Location: New Delhi, New Delhi, IN
Member Since: 12 Jun 2017 | Total Posts: 2
I am a professionally qualified Associate Member of Institute of Companies Secretaries of India has started my career with private sector. i have a creative mind and am always up for new challenges. I am well organized and always plan ahead to make sure I manage my time well. I enjoy reading the art View Full Profile

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12 responses to “A simple and comprehensive study on GST”

  1. NATARAJAN GANESAN says:

    VERY NICE ARTICLE-KEEP IT UP. WISH YOU ALL THE BEST. BEING A CS I EXPECT LOT OF ARTICLES IN CA 2013/CA 1956

  2. APPA RAO KELLA says:

    Can anybody clarify under what statutory provison, the taxable person is required to bifurricate (divide) the GST rate of tax into two tax rates, say central tax rate and state tax rate.

    I observed that many people are dividing the tax rates as above in the invoices and charging accordingly.

  3. Brij says:

    Please advise applicability of GSTon professionals and thurhold limit for registeration.

    • Deepali Agarwal says:

      The GST Act does not distinguish between a trader and a service provider, all it talks about is a supplier defined under section 2 sub-section 91 of the Act. So, Every supplier shall be liable to pay GST if his aggregate turnover in a financial year exceeds the annual exemption threshold of Rs.10 lakh for the north-eastern and hill states and Rs 20 lakh for rest of the India.

  4. SAGAR DAVDA says:

    One Correction,

    Rate of tax on works contract is 18% not 12%..

  5. MANOJ SAHNI says:

    Nicely written, broadly comfort comes after reading, keep it up….

  6. Ishant says:

    Nice article.

  7. Binesh babu says:

    Very informative and any one can learn about gst very simply..

  8. CA Shreedhar Padhye says:

    Article is good for laymen and gives in brief the birds eye view. Authors language is lucid & simple. Overall excellent beginning.

  9. Paul says:

    Article is nice and crispy.

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