GST is a single indirect tax on the supply of goods and services in the entire chain right from the manufacturer to the supplier. Good and Services Tax [GST], since its effect has left multiple emotions in the mind of the common man, there are a number of questions which need  answers in order to understand GST.

Let us understand the difference between GST and other taxes which were in effect before its applicability.

VAT [Value Added Tax] was  considered to be the first generation reforms introduced in April 2005. The existing sales tax was replaced with VAT. Central Sales Tax, Excise Duty, Customs Duty, Service Tax became part of VAT.

Goods and Services Tax is considered to be the second generation of tax reforms. The VAT system was merged with Luxury tax, entertainment tax and renamed as State Goods and Services Tax [SGST]. Furthermore, Central Sales Tax, Excise Duty, Customer Duty, Service Tax have been incorporated under a single umbrella as Central Goods and Services Tax [CGST]. There is no major segregation between the VAT and GST, the taxes have been clubbed together and brought under a single umbrella.

What are GST rates and when is it levied ?

As per the Act, all goods and services have been placed in five brackets – 0%, 5%,12%,18%, and 28%. The tax is levied on the sale of goods and services. Each bracket has multiple items  falling under it, which are a taxed accordingly.

The tax applied is ‘Value Driven’ i.e. it is applied on goods or services at every stage where the value of the goods or services increases or is added. The tax will be levied where the goods or services are consumed. For example, if the goods are created or manufactured in Maharashtra and sold in Andhra Pradesh, then the tax would be levied in Andhra Pradesh.

What are the types of GST ?

GST is destination based. Basis the same, these are the following  types of GST:

• SGST – State Goods and Services Tax
• CGST- Central Goods and Services Tax
• IGST- Interstate Goods and Services Tax

The sale of goods and services intra-state would levy central and state GST. The inter-state sale of goods and services would levy inter-state GST.

Is GST same for all ?

GST is different for different businesses. The application of GST for different businesses is also different.

Mostly, all businesses, whether manufacturing or e-commerce have been brought under the purview of tax regime. Registration forms an important part of GST. It is important for businesses to register and procure tax number in order to file tax as per the stipulated norms.

Is GST registration mandatory ?

There is a stipulated threshold for businesses to register which is an aggregate turnover of INR 20 lakh in a financial year. If the businesses are under that threshold, it is not mandatory for these businesses to register. In such cases, the registration is voluntary.

As per the Act, if the registered seller sells the goods and services to the unregistered buyer, he is supposed to pay GST for the unregistered buyer. If your business is registered under VAT or service tax or excise duty, you should migrate to GST.

The GST explained above is the basic know how about the new tax. It is also important to understand the tax regime appropriately and file the tax when due. The assessee can login into the Government of India website, which provides necessary information in regards to the changed tax regime.

After a lot of back and forth, the GST bill was passed in April this year, and in what can only be called a true show of grit and determination, the Prime Minister and the Finance Minister have worked hard to ensure a roll out as smooth as can be expected in country of a billion plus individuals with as many aspirations.

The two facts that really elucidate the benefits of GST the most are the increased employment because of the boost in production, stimulated by the increased demand for products nationwide, and reduced prices actuated by lower cost of interstate commerce [due to the abolition of interstate taxes] and increased competition among the small and medium businesses. Naturally, with the growth in demand and production, will come the growth in GDP – a growth that could be as much as 4.2%.

While the benefits of the GST are expected across the board, entities that stand to gain the most are the start-ups and the SMBs, which, for quite a long time, have been considered to be the chief development agent of the Indian economy. They are not only the leading source of employment, but also contribute more than half of the nation’s production and over 40% of its exports. Thus it’s a given that the advantages of actualising GST on SMBs will have a serious impact on India’s economy in the coming years.

To begin with, GST has made starting a business a whole bunch easier, simpler, more standardized by eliminating the need to register for VAT. VAT was particularly problematic for business with operations in multiple states, as it required registration in all the states where the business had operations. Moreover, online registration further eases and improves the efficiency of the process, while also making it a whole lot cheaper.

Secondly, while VAT required registration fee to be paid by all business with annual turnover of more than INR 5 Lacs, GST has increased this limit to INR 20 Lacs – meaning, any business making less than INR 20 Lacs per annum can enjoy exemption from the tax. While the monitory benefits of this are apparent, the benefit that is less apparent is that SMEs can now enjoy expedited delivery of goods at interstate check points, thus making interstate trading a lot less financially taxing. Considering the fees, octroi charges, logistics expenses, and customer charge-backs [for delayed deliveries] and DSO costs, an SME can now expect cost savings of as much as 20%.

Added transparency in the taxation process is another benefit that small businesses can expect after the GST roll-out. This will be enabled by the digitization of the compliance and refund process. By removing the more manual and complicated processes of the yesteryear’s, GST mandates all tax returns to be filed electronically, and all input tax credits and tax liability adjustments to happen automatically. This mandate will not only expedite the process, but will also improve liquidity for small businesses.

GST has also raised the bar on total amount of input tax credit that can be claimed in the year of the purchase itself from the earlier 50% to 100% now; a move that will help free-up much needed capital for small business. But the biggest advantage of them all, perhaps, is the clarity of what constitutes products and services. By removing the distinction between sales and services, the GST greatly simplifies simplifying the tax assessment process, which in turn boosts tax compliance.

About the only complication for the small and medium businesses that has increased because of GST is the number of filings that will now have to do in a year. It might seem like a lot of work at the first glance, and the draft GST return format provided by the government is not easily comprehensible by those who have little or no accounting knowledge. That said, at the end of the day, it is a compliance issue, and, besides, a lot of automation has gone into the system to make things easy for the small business. But a lot of people might still find the process cumbersome and confusing, and understandably so.

Experts at RevMyStartup have extensively studied the GST law, and will be more than happy to answer any questions you may have on GST Registration or GST Return Filing to ensure you are fully GST compliant. To know more, call RevMyStartup today to get your GST registration and filing done in the right and best manner, at reasonable prices.

About the Author – This article is contributed by Vaibhav Tripathi, content writer at RevMyStartup.

[If you would like to contribute to this blog as a Guest Writer, please email us at himanshu.sheth@gmail.com with the relevant content].

The Institute of Chartered Accountants of India will be conducting Technology enablement conclaves throughout the country for both member as well as non-member Chartered Accountants. Tally Solutions, the premier Indian software company will support the initiative as technology partner.

The theme of the conclave will be based on Information technology in GST – Enabler or necessity. The sessions aim to highlight how the use of right technology will help CAs manage GST compliance for themselves and their clients in a smooth and efficient manner. The first of these events was held on 29th July in New Delhi at the India habitat Centre.

GST is widely acknowledged as a taxation regime with technology as its backbone. Right from registration, to billing, filing and even payment of taxes are happening online facilitated by a business system. Under such circumstances, businesses need to adopt this new way of managing their transactions and compliance and Chartered accountants are being banked on by them to help them with the same. In addition, the change in the tax structure has brought with it its fair share of challenges for the CA community. These conclaves have been designed to equip Chartered accountants with knowledge on how technology can solve their existing problems and enable them to serve their clients effectively.

Speaking on the occasion, CA Nilesh Shivji Vikamsey, President – ICAI said

I am happy to know that IT committee of the Institute of Chartered Accountants of India has initiated the series – ‘Information Technology in GST- Enabler or Necessity‘. I am very clear in my mind that Technology in GST is a necessity. We need to equip our members [Chartered Accountants] to partner with the technology providers, so that the ultimate aim of the government of a smooth GST implementation, is achieved. For the first time in Indian history a Joint federal tax system has come between the Centre and the States. It’s a path breaking law, where tax is jointly going to be levied. With GST, I am sure India as a nation will grow to greater heights.

Bharat Goenka, Managing Director, Tally Solutions, added

GST is the first tax regime which is fully technology based.  This will leap-frog India as one of the best indirect tax regimes in the world, and Chartered Accountants areplaying a very important and appreciable role to make this transition successful for the country.  We are proud and delighted to be workings with the ICAI on this journey, and look forward contributing in the pan-India conclaves with them. The aim is to hear the challenges on the ground, and provide perspectives on how technology will help simplify their lives, and those of their clients.

While CA Atul Gupta, Chairman IT Committee of ICAI and Former Chairman Indirect Taxes Committee of ICAI, shared the important role Chartered Accountants are playing in taking this reform into all corners of country.

With just 5 days to go for the roll out of GST, the GST common portal opened inviting fresh registrations of first time taxpayers including those to be registered as TDS/TCS and enrollment of GST Practitioners. It is also open for existing taxpayers to complete their enrollment process.

The Goods & Services Tax has been referred to as the most significant tax reform in India post independence. The new regime will usher in a common national market by doing away with a complex web of local and central taxes and incorporating them into a single levy.

The GST portal has already opened two windows for enrolments – first between November 8 to April 30 and then from June 1 to June 15. This is the third window to allow all taxpayers enough time to migrate to the new regime.

As the technology provider of the regime, GSTN has been working tirelessly to ensure there are no delays in the commencing of the ambitious indirect tax regime. The GSTN has set up a robust portal already equipped to handle as many as 2.6 billion transactions every month.

The GST Common Portal will enable taxpayers to meet the GST compliance requirement like filing returns and making tax payments.

About Goods and Services Tax Network [GSTN]

Goods and Services Tax Network [GSTN] is a Section 8 [under new companies Act, not for profit companies are governed under section 8], non-government, private limited company. Instituted in March 2013, the Company has been set up primarily to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of the Goods and Services Tax (GST). The Government of India holds 24.5% equity in GSTN and all States of the Indian Union, including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%. Balance 51% equity is with non-government financial institutions. For more information, please visit GSTN