It has been about a month since the rollout of GST. Yet, there are many unanswered questions with regards to GST ecosystem, procedures, migration, return filing and the role of technology. This series is our attempt to answer some of the questions.
This blog shall address the basic questions of GST.
A. What is GST?
GST or the Goods and Services Tax in India is nothing short of tax reformation. The GST is aimed to reduce the possibility of tax evasion at the same time creating a more competitive market scenario that will boost business growth. It replaces all the indirect taxes that an organisation was paying, with a single uniform tax. The expected result of the removal of multiple taxes is the elimination of the cascading effect that they have on prices of goods and services that the end user pays. The GST act, on the process front, replaces the yearly report filing system with a monthly invoice data filing system. The payment of taxes also shifts to a regularised monthly payment system.
B. What taxes have been replaced by GST?
The GST replaces indirect taxes on a centre and state level. Below is the list of taxes that it replaces.
The central taxes that it replaces are-
- Central Excise Duty
- Duties of Excise (medicinal and toilet preparations)
- Additional Duties of Excise (goods of special importance)
- Additional Duties of Excise (textiles and textile products)
- Additional Duties of Customs (commonly known as CVD)
- Special Additional Duty of Customs (SAD)
- Service Tax
- Cesses and surcharges in so far as they relate to supply of goods or services
The state taxes that it replaces are-
- State VAT
- Central Sales Tax
- Purchase Tax
- Luxury Tax
- Entry Tax (all forms)
- Entertainment Tax (not levied by local bodies)
- Taxes on advertisements
- Taxes on lotteries, betting, and gambling
- State cesses and surcharges
C. Why is GST in India Dual in Nature?
A dual nature of GST in India indicates a model where the centre and state act as partners in tax administration. This leads to the current structure with the three types of GST; CGST, SGST and IGST.
CGST is levied by the centre on the provision of goods and services within a particular state.
SGST is levied by the state on the provision of goods and services within a particular state.
IGST is levied upon the supply of good and services between two states.
D. Who needs to register for GST?
The GST act indicates that any organisation participating in the following activities will have to register under GST.
- Any organisation whose financial turnover is above Rs. 20 lakhs in a year. In the case of business in the North Eastern and hill states, if the turnover is above Rs. 10 lakhs, the organisation needs to register
- Every organisation or person registered under the earlier tax laws needs to register to GST
- Any organisation or individual who is engaged in interstate supply of goods and services
- Any organisation or individual who even intermittently supplies goods or services in an area where GST is applicable
- Any organisation or individual who might not have a place of business in India but supplies goods or services intermittently in an area where GST is applicable
- Input service distributor i.e. the office of the supplier of goods/services who receives tax invoices on receipt of input services and issues tax invoices with the intent of distributing the credit of CGST/SGST/IGST
- Organisations that pay tax under the reverse charge mechanism
- An agent to the supplier
- Any organisation engaged in E-commerce or supplies to an e-commerce aggregator
E. How can one migrate to the GST Network?
The migration to the GST Network requires an organisation to first obtain a provisional identification number which is then transferred to the permanent GSTIN.
The coming blogs in this series will address some of the above questions in detail and also address other questions that have been asked or will be asked in time. Stay tuned! If you are looking for any specific answers, then drop in your questions in the comments.