The introduction of Goods and Service Tax (GST) India was introduced in India by Honourable Late Former Prime Minister Atal Bihari Vajpayee long before the year 2000. Finally, in the year GST Bill was re-introduced in the Indian Parliament by the then Finance Minister. With some further work & efforts both the houses of the Indian Parliament finally passed GST Law and on the midnight of 1st July 2017, the law was launched by the President of India.
It is an indirect taxation system that was introduced to revamp the structure of the indirect (yet complicated) taxation system which was earlier prevailing in India. The other main aspect of this tax has reduced the cascading effect of double taxation.
How does Goods and Service Tax (GST) in India work?
Goods and Services Tax, commonly known as GST is an indirect tax that is levied on the supply of certain goods and services in India. The GST is further divided into two parts, that is for Intra-State Supplies and Inter-State Supplies. Intra-State constitute two tax, which is CGST & SGST/UTGST and Inter-State Supplies constitute IGST.
Central Goods & Services Tax (CGST): It is charged on the interstate supply of products and services.
State Goods & Services Tax (SGST): It is charged on the sale of products or services within a state.
Integrated Goods & Services Tax (IGST): It is charged on the inter-state transactions of products and services.
Union Territory Goods & Services Tax (UTGST): It is charged the supply of products and services on the supply of products and services in any of the Union Territories. It was levied along with CGST.
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Eligibility for Goods and Service Tax (GST) in India
Entities & individuals who must register for GST-
- E-commerce aggregators
- Individuals who supply through e-commerce aggregators
- Individuals who pay tax as per the reverse charge mechanism
- Agents of input service distributors and suppliers
- Non-Resident individuals who pay tax
- Businesses that have a turnover that is more than the threshold limit
- Individuals who have registered before the GST law was introduced
Registration of Goods and Service Tax (GST) in India
Firms or companies that cross the desirable threshold aggregate turnover limit must register under GST. As per Section 22 of the GST Act, suppliers shall get registered under GST law.
After registration, a unique identification number is allotted called a Goods and Service Tax Identification Number (GSTIN). This number is Government approved & is recognized in India. This number indicates that the supplier is legally authorized as a supplier. The unique number facilitates supplier to collect tax from the recipient of goods or services on the behalf of Government and also to avail Input Tax which is paid by him on his inward supply.
The whole GST registration process is only and it just takes 2-6 working days to process.
Goods and Service Tax Identification Number (GSTIN)
It is a 15 digit unique number that is provided by the government. This number is provided on the basis of state and the PAN number of the business owners. Some of the other usages of GSTIN numbers are-
- The loan can be availed
- A refund can be claimed
- Ease in the verification process
- Corrections can be made
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Goods and Service Tax (GST) Certificate
When a seller or businessman gets enrolled one’s business under GST, a certificate is issued by the concerned GST authority known as GST Certificate. Any business which is crossing the turnover of the fixed threshold amount is mandatorily get registered under GST.
The certificate issued is technically known as Form GST REG-06. One can also get their soft copy from the official GST portal and also due to digital ease the certificate is issued digitally only. The certificate contains, GSTIN, Legal Name (that is of organization), Trade Name (if the firm has), Constitution of Business (which describes the type of business), Address of Principal Place of Business, Date of Liability, Date of Validity, Type of Registration, Particulars of Approving Authority and finally the details of signature that is, Name, Designation, Office, Date of issue of Certificate,
Major terms in Goods and Service Tax (GST)
- Taxable Person
It means an entity that carries business or economic activity in India and is registered under GST. (Where entity means individuals, HUF, company, firm, LLP, or any Government body.)
- Casual Taxable Person
They are individual who occasionally supplies goods or services in a territory where GST is applicable but do not have any fixed place of business. For example, when a non-resident supplies goods or services but doesn’t have any fixed place of business in India is known as a Casual Taxable Person.
- Place of Business
This terminology has three parts, that are-
a)It is a place where the business is carried out (either store’s goods or from where the service is provided)
b) Where the business Books of Accounts is maintained
c) Where the taxable person is engaged in business through an agent.
- Input Tax Credit
In concise form, it basically means that at the time of paying tax on output, one can reduce the tax that one has already paid on inputs and subsequently pay the balance amount.
- Reverse Charge
In the normal GST taxation, the supplier of the goods or service pays tax, but in the case of reverse charge, the receiver of the goods or service becomes liable to pay the tax. But this charge is applicable to certain suppliers such as,
- Unregistered dealer to a registered dealer
- Services through an e-commerce operator
- Supply of certain goods and services specified by CBIC
- Mixed Supply and Composite Supply
Mixed Supply means that when goods or services are supplied in any combination is supplied together then the taxable amount is over a single price. For example, if a pen and notebook are supplied in combination then the tax will be charged on the single bundle price but when the pen & notebook is supplied separately then the tax will be on both items.
Composite Supply means the supply of goods or services which come naturally in a bundle and is supplied along with each other where one of them is the principal material. Given the condition that items cannot be supplied separately. For example, when someone buys a laptop, a laptop charger naturally comes with it. The principal material is a laptop here.
Its means bringing goods from outside of India, whereas in the case of service, the service provider supplies service in India (but him/herself is located outside of India) / the service recipient is in India/ place of supply is in India.
Under GST, the import of goods or services is considered to be as Inter-State Sales, therefore, IGST is levied on the import of goods and services along with customs duty is charged.
Note- In the GST regime, the service provider doesn’t need to bear the GST price but the service recipient is liable to pay.
Exports mean when a product or service is provided outside India by an Indian business owner. Talking about detailed aspects, the supplier is located in India/ the goods or service receiver is outside India / the price of the product or service has an element of foreign exchange added to it. Under GST export is Zero-rated.
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