1. What is GST in India?

GST is known as the Goods and Services Tax. It is an indirect tax which has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017.

In other words,Goods and Service Tax (GST) is levied on the supply of goods and services. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.

Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.

Now, let us understand the definition of Goods and Service Tax, as mentioned above, in detail.

Multi-stage

An item goes through multiple change-of-hands along its supply chain: Starting from manufacture until the final sale to the consumer.

Let us consider the following stages:

• Purchase of raw materials

• Production or manufacture

• Warehousing of finished goods

• Selling to wholesalers

• Sale of the product to the retailers

• Selling to the end consumers

A manufacturer who makes biscuits buys flour, sugar and other material. The value of the inputs increases when the sugar and flour are mixed and baked into biscuits.

The manufacturer then sells these biscuits to the warehousing agent who packs large quantities of biscuits in cartons and labels it. This is another addition of value to the biscuits. After this, the warehousing agent sells it to the retailer.

The retailer packages the biscuits in smaller quantities and invests in the marketing of the biscuits, thus increasing its value. GST is levied on these value additions, i.e. the monetary value added at each stage to achieve the final sale to the end customer.

Destination-Based

Consider goods manufactured in Maharashtra and sold to the final consumer in Karnataka. Since the Goods and Service Tax is levied at the point of consumption, the entire tax revenue will go to Karnataka and not Maharashtra.

Source : Cleartax

The GST journey began in the year 2000 when a committee was set up to draft law. It took 17 years from then for the Law to evolve. In 2017, the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July 2017, the GST Law came into force.

Source : Cleartax 

1. To achieve the ideology of ‘One Nation, One Tax’
   
   GST has replaced multiple indirect taxes, which were existing under the previous tax regime. The advantage of having one single tax means every state follows the same rate for a particular product or service. Tax administration is easier with the Central Government deciding the rates and policies. Common laws can be introduced, such as e-way bills for goods transport and e-invoicing for transaction reporting. Tax compliance is also better as taxpayers are not bogged down with multiple return forms and deadlines. Overall, it’s a unified system of indirect tax compliance.

2. To subsume a majority of the indirect taxes in India
   
   India had several erstwhile indirect taxes such as service tax, Value Added Tax (VAT), Central Excise, etc., which used to be levied at multiple supply chain stages. Some taxes were governed by the states and some by the Centre. There was no unified and centralised tax on both goods and services. Hence, GST was introduced. Under GST, all the major indirect taxes were subsumed into one. It has greatly reduced the compliance burden on taxpayers and eased tax administration for the government.

3. To eliminate the cascading effect of taxes
   
   One of the primary objectives of GST was to remove the cascading effect of taxes. Previously, due to different indirect tax laws, taxpayers could not set off the tax credits of one tax against the other. For example, the excise duties paid during manufacture could not be set off against the VAT payable during the sale. This led to a cascading effect of taxes. Under GST, the tax levy is only on the net value added at each stage of the supply chain. This has helped eliminate the cascading effect of taxes and contributed to the seamless flow of input tax credits across both goods and services.

4. To curb tax evasion
   
   GST laws in India are far more stringent compared to any of the erstwhile indirect tax laws. Under GST, taxpayers can claim an input tax credit only on invoices uploaded by their respective suppliers. This way, the chances of claiming input tax credits on fake invoices are minimal. The introduction of e-invoicing has further reinforced this objective. Also, due to GST being a nationwide tax and having a centralised surveillance system, the clampdown on defaulters is quicker and far more efficient. Hence, GST has curbed tax evasion and minimised tax fraud from taking place to a large extent.

5. To increase the taxpayer base
   
   GST has helped in widening the tax base in India. Previously, each of the tax laws had a different threshold limit for registration based on turnover. As GST is a consolidated tax levied on both goods and services both, it has increased tax-registered businesses. Besides, the stricter laws surrounding input tax credits have helped bring certain unorganised sectors under the tax net. For example, the construction industry in India.

6. Online procedures for ease of doing business
   
   Previously, taxpayers faced a lot of hardships dealing with different tax authorities under each tax law. Besides, while return filing was online, most of the assessment and refund procedures took place offline. Now, GST procedures are carried out almost entirely online. Everything is done with a click of a button, from registration to return filing to refunds to e-way bill generation. It has contributed to the overall ease of doing business in India and simplified taxpayer compliance to a massive extent. The government also plans to introduce a centralised portal soon for all indirect tax compliance such as e-invoicing, e-way bills and GST return filing.

7. An improved logistics and distribution system
   
   A single indirect tax system reduces the need for multiple documentation for the supply of goods. GST minimises transportation cycle times, improves supply chain and turnaround time, and leads to warehouse consolidation, among other benefits. With the e-way bill system under GST, the removal of interstate checkpoints is most beneficial to the sector in improving transit and destination efficiency. Ultimately, it helps in cutting down the high logistics and warehousing costs.

8. To promote competitive pricing and increase consumption
   
   Introducing GST has also led to an increase in consumption and indirect tax revenues. Due to the cascading effect of taxes under the previous regime, the prices of goods in India were higher than in global markets. Even between states, the lower VAT rates in certain states led to an imbalance of purchases in these states. Having uniform GST rates have contributed to overall competitive pricing across India and on the global front. This has hence increased consumption and led to higher revenues, which has been another important objective achieved.

Source : Cleartax

GST has mainly removed the cascading effect on the sale of goods and services. Removal of the cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on tax, the cost of goods decreases.

Also, GST is mainly technologically driven. All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.

What are the components of GST?

There are three taxes applicable under this system: CGST, SGST & IGST.

• CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)

• SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)

• IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)

In most cases, the tax structure under the new regime will be as follows:

Transaction

New Regime

Old Regime

Revenue Distribution

Sale within the State

CGST + SGST

VAT + Central Excise/Service tax

Revenue will be shared equally between the Centre and the State

Sale to another State

IGST

Central Sales Tax + Excise/Service Tax

There will only be one type of tax (central) in case of inter-state sales. The Centre will then share the IGST revenue based on the destination of goods.

Illustration:

• Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs. 50,000. The tax rate is 18% comprising of only IGST.

In such a case, the dealer has to charge IGST of Rs.9,000. This revenue will go to Central Government.

• The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate on goods is 12%. This rate comprises CGST at 6% and SGST at 6%.

The dealer has to collect Rs.6,000 as Goods and Service Tax, Rs.3,000 will go to the Central Government and Rs.3,000 will go to the Gujarat government since the sale is within the state.

Source : Cleartax

In the earlier indirect tax regime, there were many indirect taxes levied by both the state and the centre. States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different set of rules and regulations.

Inter-state sale of goods was taxed by the centre. CST (Central State Tax) was applicable in case of inter-state sale of goods. The indirect taxes such as the entertainment tax, octroi and local tax were levied together by state and centre. These led to a lot of overlapping of taxes levied by both the state and the centre.

For example, when goods were manufactured and sold, excise duty was charged by the centre. Over and above the excise duty, VAT was also charged by the state. It led to a tax on tax effect, also known as the cascading effect of taxes.

The following is the list of indirect taxes in the pre-GST regime:

• Central Excise Duty

• Duties of Excise

• Additional Duties of Excise

• Additional Duties of Customs

• Special Additional Duty of Customs

• Cess

• State VAT

• Central Sales Tax

• Purchase Tax

• Luxury Tax

• Entertainment Tax

• Entry Tax

• Taxes on advertisements

• Taxes on lotteries, betting, and gambling

CGST, SGST, and IGST have replaced all the above taxes.

However, certain taxes such as the GST levied for the inter-state purchase at a concessional rate of 2% by the issue and utilisation of ‘Form C’ is still prevalent.

It applies to certain non-GST goods such as:

1. Petroleum crude;

2. High-speed diesel

3. Motor spirit (commonly known as petrol);

4. Natural gas;

5. Aviation turbine fuel; and

6. Alcoholic liquor for human consumption.

It applies to the following transactions only:

• Resale

• Use in manufacturing or processing

• Use in certain sectors such as the telecommunication network, mining, the generation or distribution of electricity or any other power sector

Source : Cleartax

Apart from online filing of the GST returns, the GST regime has introduced several new systems along with it.

e-Way Bills

GST introduced a centralised system of waybills by the introduction of “E-way bills”. This system was launched on 1st April 2018 for inter-state movement of goods and on 15th April 2018 for intra-state movement of goods in a staggered manner.

Under the e-way bill system, manufacturers, traders and transporters can generate e-way bills for the goods transported from the place of its origin to its destination on a common portal with ease. Tax authorities are also benefited as this system has reduced time at check -posts and helps reduce tax evasion.

E-invoicing

The e-invoicing system was made applicable from 1st October 2020 for businesses with an annual aggregate turnover of more than Rs.500 crore in any preceding financial years (from 2017-18). Further, from 1st January 2021, this system was extended to those with an annual aggregate turnover of more than Rs.100 crore.

These businesses must obtain a unique invoice reference number for every business-to-business invoice by uploading on the GSTN’s invoice registration portal. The portal verifies the correctness and genuineness of the invoice. Thereafter, it authorises using the digital signature along with a QR code.

e-Invoicing allows interoperability of invoices and helps reduce data entry errors. It is designed to pass the invoice information directly from the IRP to the GST portal and the e-way bill portal. It will, therefore, eliminate the requirement for manual data entry while filing GSTR-1 and helps in the generation of e-way bills too.

Source : Cleartax

The government has released a notification vide Notification No. 37/2022 dated April 21, 2022 that specifies additional conditions for filing income tax returns if an individual’s income is below the basic exemption limit. 

The conditions are specified below:

●    Total business sales/turnover/gross receipts during the financial year exceeds Rs 60 lakh.

●    Total professional gross receipts exceed Rs 10 lakh during the financial year.

●    Aggregate TDS and TCS during the financial year is Rs 25,000 or more (In the case of senior citizens an increased limit of Rs 50,000 shall be applicable).

●    Total deposits in one or more savings bank accounts is Rs 50 lakh or more during the financial year.

“The Act already contains certain conditions where you are required to file an income tax return even if the income is below the threshold limit,” says Archit Gupta, founder and CEO, Cleartax, a tax portal. The conditions are as under: 

 If you have deposited an amount, or the aggregate of the amount is in excess of Rs 1 crore in one or more current account maintained with a bank or a co-operative bank. 

●    If you have incurred aggregate expenditure in excess of Rs 2 lakh for yourself or for any other person travelling to a foreign country.

●    If you have incurred aggregate expenditure in excess of Rs 1 lakh towards payment of electricity bill.

Other Scenarios Where It Is Mandatory To File ITR 

It is mandatory under the Income-tax Act to file an ITR in India in the following circumstances 

●    Your gross total income (before allowing any deductions under Section 80C to 80U) exceeds Rs 2.5 lakh in FY 2020-21. This limit is Rs 3 lakh for senior citizens (aged above 60 but less than 80) or Rs 5 lakh for super senior citizens (aged above 80).

●    You are a company or a firm irrespective of whether you have income or loss during the financial year.

●    You want to claim an income tax refund.

●    You want to carry forward a loss under a head of income.

●    Filing an income tax return is mandatory if you are a resident individual and have an asset or financial interest in an entity located outside of India. (Not applicable to NRIs or RNORs).

●    If you are a resident and a signing authority in a foreign account. (Not applicable to NRIs or RNORs).

●    You are required to file an ITR when you are in receipt of income derived from property held under a trust for charitable or religious purposes, or a political party or a research association, news agency, educational or medical institution, trade union, a not- for- profit university or educational institution, a hospital, infrastructure debt fund, any authority, body or trust.

●    If you are a foreign company taking treaty benefits on a transaction in India.

●    A proof of return filing may also be required at the time of applying for a loan or a visa.

ITR Filing For NRIs

Says Gupta: “Any individual, NRI or not, whose income exceeds Rs 2.5 lakh (for FY 2020-21) is required to file an ITR in India. The limit is same for all individuals; there is no higher threshold limit for senior or super-senior citizens. Please note that for an NRI, income earned or accrued in India is taxable in India.” 

There is one more exception for NRI taxpayers, though. Unlike in case of resident Indians, if there is a long-term or short-term capital gain, the non-residents are not eligible to benefit from the basic exemption limit. Hence, if the capital gains exceed Rs 2.5 lakh, the NRI is required to file the ITR. 

Why e-File ITR

“A significantly large number of returns are e-filed, and gradually, the I-T department is hoping to bring all returns online. It is mandatory to file the ITR online for all the registered taxpayers with taxable income. However, paper returns can be filed by those who are above 80 years of age, and do not have any income from regular business or profession,” adds Gupta. 

If you get away with putting this off by the due date, there are some legal consequences for late filing.

Penalties For Non-Filing Of ITR

Under section 271F, the assessing officer could levy a penalty of Rs 5,000 when you have not filed your return.  (Applicable until FY 2016-17).

Late Filing Penalty From FY 2017-18 Onwards 

From FY 2017-18 onwards, penalties for non-filing an income tax return are as follows:

•    A penalty of Rs 5,000 is applicable if the return for FY 2018-19 is filed after the due date, but by December 31, 2019.

•    A penalty of Rs 10,000 is applicable if the return for FY 2018-19 is filed after December 31, 2019, but by March 31, 2020.

Note: Penalty is limited to Rs 1,000 for those with income up to Rs 5 lakh. These provisions are covered under a new section 234F.

Penalty Provisions From FY 2020-21 Onwards

From FY 2020-21 onwards, the maximum amount payable on late filing of return is reduced to Rs 5,000.

Hence, from FY 2020-21 onwards, if the taxpayer files the return after the due date, a penalty of up to Rs 5,000 shall be paid. However, there is no change in the penalty amount for taxpayers with income below Rs 5 lakh, i.e., the penalty is still Rs 1,000.

Source : Outlook Money (outlookindia.com)

A person or firm who has a small business, traders, small shops and common people who are directly or indirectly part of GST because the registration of GST is based on State and PAN. Supplier has to register in each such State or Union territory from where he does supply if he fulfills any of the following conditions:

Under GST who is ‘taxable person’?

Any person who owns his business/firm at any of the state in India, who is already registered under the GST Act or yet required to be registered under the GST. Any person in india, who is involved in economic activity which consist of trade and commerce is considered as taxable person.

‘Person’ here includes individuals, HUF, LLP, company, firm, any corporation or Government company, an AOP/BOI, body corporate incorporated under laws of foreign country, local authority, co-operative society, government, artificial juridical person, Trust foundation.

So, it does not matter whether you are a registered company or not, if you are doing a business where annual turnover is more than 20 lakhs a year, you need to apply for GST.

Also, Even if A ‘taxable person’ sales are less than Rs. 20 Lakh, they have to voluntarily opt for GST registration because:

• They will not get any tax refunds on purchases (e.g. if you purchase goods which cost you Rs 50,000 in a financial year, and that has tax rate of 28% – you can not get tax refund of Rs. 14,000).

• They cannot sell outside their state, if not registered under GST.

Problem:

In short, GST registration is a mandate requirement for anyone who is doing a business.

• GST is a major indirect Tax reform for the next 20-30 year.

• At least 8 to 11 fold increase is expected in the absolute taxpayers with the implementation of GST.

• 5 to 7 crore taxpayer are expected to be part of GST.

• The GST is primarily based on monthly tax filing mechanism with invoice level filing.

• Currently there are not enough Tax professionals and consultants available to serve this huge demand.

• Over 70-80% of the new taxpayer are going to be small business owners.

• Professional Tax consultants charge a minimum Rs. 25,000 to 35,000 per year for even a small business owner.

So you can imagine from above points, there is a HUGE GAP in demand and supply. There are limited amount of Professionals available in the market who can cater to these many ‘taxable person’ like: individuals, HUF, firm, company, LLP, any corporation or Government company, an AOP/BOI, body corporate incorporated under laws of foreign country, co-operative society, local authority, government, trust, artificial juridical person.

Resolution:

• GST Suvidha Kendra® is aimed to fill this gap with – Simple, Reliable and Affordable GST services by providing a Licence to GST Suvidha Kendra® Owner and back office support to GST Suvidha Kendra®. A GSK does not need to hire any accountant or professional. Moreover, It is not required to have GST knowledge to GSK owner. Everything will be done at our end (back office)

• GSK shall provide GST and income Tax related all compliance solutions in an affordable range of Rs 12000 to 15000.