All You Need to Know About GST

GST is the latest set of reform brought in by the Centre. Let's see what it means for all of us...

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GST (Goods & Services Tax) has become the major concern of the people nowadays. We all are yet to understand the term “GST”. What changes will it bring to the economy? How does it impact the life of people? Whether it will become a boon or bane for the taxpayers and the economy? Whether it will contribute to the price rise of commodities? Or whether it will be the relief Indian taxpayers have been waiting for last five decades? Whether it will affect the business or will it become a boon for the business and businessman?

We all have these and many other questions, here in this post we try to address many such queries.

What is GST or Goods and Services Tax?

Goods and Service tax (GST) is an indirect tax applicable throughout the India except for the Jammu and Kashmir (Applicable now, after J&K Assembly passed the bill on July 5). Some characteristics of GST in the latest form:

  • It is an initiative taken by the Government to abolish the multiple cascading taxes levied by the Centre and State Governments.
  • It is the tax which is levied on the supply of Goods and Services.
  • It is a consumption and destination based tax.

GST will bring a uniformity in all the states relating to taxes as the tax rate in all the states is supposed to be the same.

What does Consumption Based Tax Means?

It is a consumption based tax. Meaning it will be payable in the states where the goods and services are consumed by the final user and not to the state where these goods were manufactured or produced.

This will induce the much-needed induction to the interstate economy, and help the under developed states to grow.

The Indian GST Model

In India, we have adopted a dual GST model, means the taxation is administered by the both Union and State Governments. There are two components of GST namely Central GST and State GST. This dual GST will be levied on the supply of Goods and Services across the Country.

The taxes which were levied on the transaction made by the suppliers by the ways of Inter-State Transaction, Intra-State Transaction and Export of Goods and Services:

  • Inter-State Transactions means where the supplier/producer supplies the goods and services to the person in another state. In an Inter-State Transaction, the supplier will deduct an Integrated Goods and Service Tax (IGST).
  • Intra-State Transactions are transactions which were made within the same state. Meaning the supplier/producer and the final consumer both are in the same state. the supplier will deduct Centre Goods and Service Tax (CGST) and State Goods and Service Tax (SGST) on Intra-State Transactions.

How Will the Exports be Taxed under New GST?

Under GST regime, export of goods or services or both (hereinafter, referred to as supply) has been termed as Zero-Rated Supply.

To export zero-rated supply the registered person or supplier can opt for either of the following two options:

  • Supply of goods or services or both under bond or Letter of Undertaking (LUT), without payment of integrated tax and claim refund of unutilized input tax credit. Input Tax is the GST paid on the raw material bought for the activity.
  • Supply of goods or services or both, on payment of integrated tax and claim refund of such tax paid. (explained in detail below…)

Note: If the supplier wants to claim refund the Supplier should be a “Registered Supplier”.

Procedure When Supply (Export) is After Payment of IGST

When Zero Rated Supply is made after making payment of IGST, following procedure is required to be followed:

  • Exporter will pay the amount of IGST levied as per normal provisions of the IGST Act, 2017 and will claim refund of such IGST paid as per provisions contained in Chapter XI of CGST Act, 2017
  • Application of refund, inter-alia, shall be filled in Form GST RFD-01 in case of claim for refund of tax paid on export of services
  • In case of export of goods, shipping bills filed by an exporter shall be deemed to be an application for refund.

The application shall be deemed to have been filed only when the person in charge of the conveyance, carrying the export goods, duly files an export manifest or an export report covering the number and date of the ‘shipping bills’ or ‘bill of export’ and the applicant has furnished a valid return in GSTR-3.

Forms for Filing Return Under GST:

Sr. #Form No.Description
1.GSTR-1 Download formDetails of outwards supplies of goods or services
2.GSTR-1A Download formDetails of auto drafted supplies of goods or services
3.GSTR-2 Download formDetails of inward supplies of goods or services
4.GSTR-2A Download formDetails of supplies auto drafted from GSTR-1 or GSTR-5 to recipient
5.GSTR-3 Download formMonthly return
6.GSTR-3A Download formNotice to return defaulter u/s 46
7.GSTR-4 Download formQuarterly return for registered persons opting composition levy
8.GSTR-4A Download formAuto drafted details for registered persons opting composition levy
9.GSTR-5 Download formReturn for Non Resident Taxable Persons
10.GSTR-5A Download formDetails of supplies of online information and database access or retrieval services by a person located outside India made to non-taxable persons in India
11.GSTR-6 Download formReturn for input service distributors
12.GSTR-6A Download formDetails of supplies auto drafted from GSTR-1 or GSTR-5 to ISD.
13.GSTR-7 Download formReturn for Tax Deduction at Source
14.GSTR-7A Download formTax Deduction at Source Certificate
15.GSTR-8 Download formStatement for Tax Collection at Source
16.GSTR-11 Download formInward supplies statement for persons having Unique Identification Number (UIN)

Procedure When Supply is Without Payment of IGST

When Zero Rated Supply is made without payment of IGST, following procedure is required to be followed:

  • Exporter will furnish a bond or LUT in form GST RFD-11 with the Central/State jurisdictional Commissioner (It may also be furnished with Deputy/Assistant Commissioner as per Circular No. 2/2/2017 dated July 04, 2017)
  • The application is required to be furnished manually till the time module for furnishing it electronically is unavailable on the common portal
  • In respect of export of goods:
  1. Detail of export invoices are to be declared in Form GSTR-1 by supplier
  2. Detail of export invoices declared will be electronically transmitted to the system designated by Custom Authority
  3. The designated system will send an electronic confirmation to the common portal of GST confirming that the goods mentioned in the invoices declared in GSTR-1 have been exported out of India.

Conditions for Zero Rated Supply

  • For Export of Goods: Goods shall be exported out of India within three months from the date of issue of Invoices;
  • For Export of Services: Proceeds of export for such services in convertible foreign exchange should be realised within one year (hereinafter, referred to as such period) from the date of issue of invoice (period of one year can be extended by the Commissioner/Jurisdictional Officer upon request).

Consequences if Above Conditions are Not Fulfilled

The supplier will pay the tax due along with interest thereon at a rate of 18% per annum, from the date of issue of invoice, within 15 days of the expiry of such period.

In GST, there are different rates for different Goods and Services, most prominent of them are as follows:

GST Rates on Goods

GST Rates for Goods India

GST Rates on Services

GST Rates for Services

  • GST Rates on Pearl, precious or semi- precious stones, diamonds (other than rough diamonds), precious metals (like gold and silver), imitation jewellery, coins are 3%
  • GST rate on rough diamonds is 0.25%.

Advantages and Disadvantages of Current GST

Advantages

  • GST is a transparent system it will curtail the no. of Indirect Taxes.
  • GST is not a cost to registered retailers which in turn lower the cost of doing business.
  • GST applies only at the time of consumption (sale) of goods and services. It will help in removing economic distortions and bring about the development of a common national market.
  • It will promote the export of Goods as there is no tax on Export.

Disadvantages

  • The economy will face Inflation and price hike during the transition period.
  • Business will have to register themselves for GST for each state they have their business.
  • Small business and new start-ups who lack knowledge of GST may require hiring professionals for managing their taxes.
  • Luxury items get Costlier.

Hope GST will benefit in the growth of the economy and reduce the tax burden for people and businesses.

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