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.
Adoption of the Goods and Services Tax (GST)in India
India established a dual GST structure in 2017, which was the biggest reform in the country’s tax structure in decades. The main objective of incorporating the GST was to eliminate tax on tax, or double taxation, which cascades from the manufacturing level to the consumption level.
India has, since launching the GST on July 1, 2017, implemented the following tax rates:
- 0% tax rate applied to certain foods, books, newspapers, homespun cotton cloth, and hotel services.
- A rate of 0.25% applied to cut and semi-polished stones.
- 5% tax on household necessities such as sugar, spices, tea, and coffee.
- 12% tax on computers and processed food.
- 18% tax on hair oil, toothpaste, soap, and industrial intermediaries.
- The final bracket, taxing goods at 28%, applies to luxury products, including refrigerators, ceramic tiles, cigarettes, cars, and motorcycles.
The previous system with no GST implies that tax is paid on the value of goods and margin at every stage of the production process. This would translate to a higher amount of total taxes paid, which is carried down to the end consumer in the form of higher costs for goods and services. The implementation of the GST system in India is, therefore, a measure that is used to reduce inflation in the long run, as prices for goods will be lower.
Advantage of GST
Some of the advantages of GST in India are enlisted as follows:
- Mitigation of Cascading effect :Under the GST administration, the final tax would be paid by the consumer for the goods and services purchased. However, there would be an input tax credit structure in place to ensure that there is no slumping of taxes. GST is levied only on the value of the good or service.
- Abolition of Multiple Layers of Taxation :One of the advantages of GST is that it integrated different tax lines such as Central Excise, Service Tax, Sales Tax, Luxury Tax, Special Additional Duty of Customs, etc. into one consolidated tax. It prevents multiple tax layers imposed on goods and services.
- Resourceful Administration by Government :Previously, the management of indirect taxes was a complicated task for the Government. However, under the GST establishment, the integrated tax rate, simple input of tax credit mechanism and a merged GST Network, where information is available, and administration of resources are well-organised and straightforward for the Government.
- Enhanced Productivity of Logistics: the restriction on inter statement movement of goods has reduced. Earlier logistic companies had to maintain multiple warehouses across the country to avoid state entry taxed on interstate movements.
- Creation of a Common National Market: GST gave a boost to India’s tax to Gross Domestic Product ratio that aids in promoting economic efficiency and sustainable long – term growth. It led to a uniform tax law among different sectors concerning indirect taxes. It facilitates in eliminating economic distortion and forms a common national market.
- Ease of Doing Business: with the implementation of GST, the difficulties in indirect tax compliance have been reduced. Earlier companies faced significant problems concerning registration of VAT, excise customs, dealing with tax authorities, etc. The benefits of GST has aided companies to carry out their business with ease.
- Regulation of the Unorganized Sector under GST: it has created provisions to bring unregulated and unorganised sectors such as the textile and construction industries to name a few under regulation with continuous accountability.
- Reduction of Litigation: GST aids in reducing litigation as it establishes clarity towards the jurisdiction of taxation between the Central and State Governments.GST provides a smooth assessment of tax.
- Tackling Corruption and Tax Leakages: with the GST online network portal, the taxpayer can directly register, file returns and make payments of the taxes without having to interact with tax authorities. A mechanism has been devised to match the invoices of the supplier and buyer. This will not only keep a check on tax frauds and evasion but also bring in more businesses into the formal economy.
Disadvantages of GST :
The major drawbacks are as follows –
- Increased operational cost:- GST had directed businesses to update their old accounting to GST-compliant software or ERP to keep their businesses running. Nonetheless, the cost of purchase, installation of software along with training employees to use GST-compliant software can be quite substantial. Also, adherence to GST norms has increased the operational cost for small businesses as more firms are now forced to hire tax professionals to become more GST-compliant.
- A higher tax burden for SMEs:- Under the old tax regime, only businesses with an annual turnover of more than Rs.1.5 crore had to pay excise duty. However, under this new tax regime businesses with an annual turnover of over Rs.40 lakh must pay GST.
- Compliance burden:-This taxation regime has made it mandatory for companies to register with GST under all states they operate in. The entire process of registering with the regulating body, issuing GST-compliant invoices, maintaining digital record keeping and filing returns have increased the burden on SMEs and others significantly. Additionally, the infrastructure of all states in India is not equipped to implement the e-governance model followed by GST. Resultantly, several companies find it challenging to adopt or transition into this regime.
NOTE:-Based on this information, a tax-paying individual can develop a better understanding of the advantages and disadvantages of GST. In turn, it will help them develop ways to maximise their GST-related benefits and find ways around its shortcomings effectively.
Step by Step process for online GST registration.
The step-by-step procedure that individuals must follow to complete GST Registration is mentioned below:–
Step 1: Visit the GST portal – https://www.gst.gov.in
Step 2: Click on the ‘Register Now’ link which can be found under the ‘Taxpayers’ tab
Step 3: Select ‘New Registration’.
Step 4: Fill the below-mentioned details:
Step 5: On the next page, enter the OTP that was sent to the email ID and mobile number in the respective boxes.
Step 6: Once the details have been entered, click on ‘Proceed’.
Step 7: You will be shown the Temporary Reference Number (TRN) on the screen. Make a note of the TRN.
Step 8: Visit the GST portal again and click on ‘Register’ under the ‘Taxpayers’ menu.
Step 9: Select ‘Temporary Reference Number (TRN)’.
Step 10: Enter the TRN and the captcha details.
Step 11: Click on ‘Proceed’.
Step 12: You will receive an OTP on your email ID and registered mobile number. Enter the OTP on the next page and click on ‘Proceed’.
Step 13: The status of your application will be available on the next page. On the right side, there will be an Edit icon, click on it.
Step 14: There will be 10 sections on the next page. All the relevant details must be filled, and the necessary documents must be submitted.
Step 15: Visit the ‘Verification’ page and check the declaration, Then submit the application.
Step 16: Once completed, a success message will be shown on the screen. The Application Reference Number (ARN) will be sent to the registered mobile number and email ID.
Step 17: You can check the status of the ARN on the GST portal.
Qus:- Is GST registration free?
Yes, GST registration can be done online at Nil charges
Qus:- Is bank account mandatory for GST registration?
No, The bank account not mandatory at the time of GST registration.
Qus:- How can I get the GST registration number?
In order to get the GST number, you need to apply for GST registration by visiting the GST portal i.e., www.gst.gov.in. To start the process, you will need to have a valid email address, mobile number and a PAN for the business.
Qus:- How much does a GST number cost?
The government does not charge you any fees when it comes to registration for GST. However, if you approach a chartered accountant or consultant, they may charge you a professional fee as the entire registration process is a tedious one.
Qus:- Can I surrender my GST number?
Yes, you can surrender the GST number. However, you can do so only after one year from the date of registration