GST: India’s New Tax System Explained (2023)

Introduction

Hey there, dear readers! If you’re as intrigued by the finance world as we are, you’ve probably heard the term ‘GST’ being thrown around a lot. But what is it exactly? And why does it matter to you? In today’s post, we’re going to demystify the Goods and Services Tax (GST), breaking down everything you need to know in simple, easy-to-understand terms. Sit tight; you’re in for an enlightening ride!

What is GST?

GST, or Goods and Services Tax, is a consumption-based indirect tax system that was introduced in many countries, including India, to replace a complex web of pre-existing taxes like excise, service tax, and value-added tax (VAT). GST is designed to streamline the taxation process and create a unified tax structure.

Under GST, the tax is levied at multiple stages of production and distribution, but it’s ultimately borne by the end consumer. It simplifies tax compliance for businesses by providing a single platform for tax filing and registration. GST is categorized into Central GST (CGST) levied by the central government and State GST (SGST) levied by individual states, with Integrated GST (IGST) applicable to inter-state transactions.

One of the key benefits of GST is its transparency and efficiency, as it reduces tax evasion and encourages formalization of the economy. It also helps eliminate the cascading effect of taxes, making products and services more affordable for consumers. However, GST implementation can be complex and requires businesses to adapt to new compliance procedures.

The Genesis of GST in India

Before GST, the Indian tax structure was a farrago of central, state, and local area taxes. The introduction of GST aimed to replace this complex system with a more streamlined and unified one. Launched on July 1, 2017, GST sought to simplify the tax landscape in India, making it easier for both businesses and consumers.

Components of GST | Types of GST

GST is a consumption-based tax, which means that it is levied on the final consumption of goods and services. It is levied at different rates on different goods and services, depending on their nature and value.

The four main types of GST are:

• Central GST (CGST): This is levied by the central government on intrastate (within-state) transactions.
• State GST (SGST): This is levied by the state government on intrastate transactions.
• Integrated GST (IGST): This is levied by the central government on interstate (between-state) transactions.
• Union Territory GST (UTGST): This is levied by the central government on transactions between states and union territories.

GST Tax Slabs

The GST tax slab in India is as follows:

The Goods and Services Tax (GST) in India is a comprehensive indirect tax levied on the manufacture, sale, and consumption of goods and services. It is a multi-stage tax that is collected at each stage of the supply chain, from the manufacturer to the consumer. The GST is divided into four slabs: 5%, 12%, 18%, and 28%.

• 0% GST: Essential items such as food grains, fresh vegetables, and milk are exempt from GST.
• 5% GST: Goods and services such as footwear, apparel, processed food items, and transportation services are taxed at 5%.
• 12% GST: Processed food items like frozen meat products, computers, and telecom services are taxed at 12%.
• 18% GST: Most goods and services fall under this slab, including household items, electronics, and IT services.
• 28% GST: Luxury goods such as cars, aerated drinks, and cigarettes are taxed at the highest rate of 28%.

In addition to the four slabs, there is also a cess on certain goods such as luxury cars, tobacco products, and aerated drinks. The cess is an additional tax that is levied over and above the GST rate.

The GST rates are reviewed and revised periodically by the GST Council, which is a body comprising representatives from the central and state governments. The GST Council has the power to change the GST rates, add or remove items from the GST slabs, and make other changes to the GST regime.

The introduction of GST has simplified the indirect tax regime in India and has made it easier for businesses to operate across the country. It has also helped to reduce the prices of goods and services for consumers.

Impact on Common Man

Wondering how GST affects you? From daily groceries to dining out, GST touches almost every aspect of your life. On one hand, items like clothes and electronics have become cheaper, but on the flip side, services like eating out have become more expensive.

How to Register for GST

Registering for GST is simpler than you think. You can apply online through the GST Portal. The registration is free, and the entire process can be completed in a few steps.

To register for GST in India, you can follow these steps:

• Visit the official GST portal: https://www.gst.gov.in/
• Click on the “Services” tab and select “Registration“.
• Click on the “New Registration” option.
• Select the type of taxpayer you are and enter your PAN number.
• Enter your email address and mobile number and click on “Proceed“.
• You will receive an OTP on your mobile number. Enter the OTP and click on “Verify“.
• You will be redirected to the Part A of the GST registration form. Fill in the required details and click on “Submit“.
• You will receive an ARN (Application Reference Number) on your email address and mobile number.
• Within 15 days of receiving the ARN, you need to upload the required documents on the GST portal. These documents include:
  • Proof of identity (PAN card, Aadhaar card, etc.)
  • Proof of address (bank statement, electricity bill, etc.)
  • Proof of business (business registration certificate, partnership deed, etc.)
• Once the documents are uploaded, you will receive a notification on your email address and mobile number.
• Your GST registration application will be processed and you will be issued a GSTIN (Goods and Services Tax Identification Number) within 3 working days.

Once you have received your GSTIN, you can start paying GST on your goods and services.

Here are some additional tips for GST registration in 2023

• Make sure that you have a valid PAN card before you apply for GST registration.
• If you are a business entity, such as a company or partnership, you need to have a valid business registration certificate.
• All the documents that you upload on the GST portal should be clear and legible.
• If you have any difficulty in registering for GST, you can contact the GST helpline or a GST consultant for assistance.

How to file GST and the GST returns

If you’re running a business, you’ll need to file GST returns. These are nothing but documents containing the details of your income, based on which tax liability is calculated.

To file GST and GST returns in India, you need to follow these steps:

• Register for GSTIN. You can register for GSTIN online on the GST portal (https://www.gst.gov.in/). You will need to provide your PAN number, Aadhaar number, and other relevant details.
• Create an account on the GST portal. Once you have registered for GSTIN, you can create an account on the GST portal. You will need to provide your GSTIN number and other relevant details.
• File your GST returns. There are different types of GST returns that you need to file, depending on your business type and turnover. The most common type of GST return is the GSTR-1 return, which is a monthly return that summarizes your sales and purchases.
• Pay your GST taxes. Once you have filed your GST returns, you need to pay your GST taxes. You can pay your GST taxes online through the GST portal or through a bank.

Here is a more detailed steps on how to file GSTR-1 return:

1. Log in to the GST portal.
2. Click on the “Services” tab.
3. Click on “Returns”.
4. Click on “Return Dashboard”.
5. Click on “File Return”.
6. Select the GSTR-1 return from the list of returns.
7. Enter the required details, such as your GSTIN number, the period for which you are filing the return, and your sales and purchase details.
8. Review the details and click on “Submit”.
9. Pay the GST taxes due.

You can also use a GST software to help you file your GST returns. GST software can automate the process of filing returns and help you to avoid errors.

Advantages and Criticisms

While GST has streamlined taxation, it’s not without criticisms. Small businesses argue that it has increased compliance costs. However, the unified tax structure has undoubtedly eased the way of doing business in India.

Conclusion

So, there you have it! A comprehensive look at GST, its impact, and its working mechanism. Whether you’re a business owner, a student, or just a curious reader, we hope this guide has shed some light on this pivotal taxation system in India.

Thanks for reading! If you find this article informative, please share it with your friends and family. For more financial insights tailored for the Indian market, stay tuned to The Bank Mantra.

If you think this blog is helpful, sharing it can help others too. Plus, it helps us keep producing high-quality content for you.

FAQ