GST - Registration and its benefits
Introduction of GST in India
Goods and Services Tax (GST) is a value-added tax that was introduced in India on July 1, 2017. It replaced all indirect taxes levied on goods and services by the central and state governments. GST is a comprehensive tax that is levied on every stage of the production and distribution process, from the purchase of raw materials to the sale of the final product.
The introduction of GST was a significant reform in India's taxation system, aimed at simplifying the tax structure, reducing tax evasion, and promoting economic growth. Under the GST regime, businesses are required to register under GST and file regular returns based on their turnover. GST rates vary based on the nature of goods and services, with four tax slabs: 5%, 12%, 18%, and 28%.
The implementation of GST in India was a massive undertaking, involving the collaboration of central and state governments, businesses, and taxpayers. Despite some initial teething problems, GST has helped streamline the tax system and bring in more transparency and efficiency in taxation.
Benefits of GST in Indian tax system
The introduction of GST in India has brought several benefits to the tax system, some of which are:
Simplified tax structure: GST has replaced multiple indirect taxes levied by the central and state governments with a single tax. This has reduced the complexity of the tax system and made it easier for businesses to comply with tax regulations.
Increased transparency: GST has made the tax system more transparent by eliminating the cascading effect of taxes and providing a clear input tax credit system. This has reduced the scope for tax evasion and increased compliance among taxpayers.
Boost to economic growth: GST has helped in reducing the cost of production by eliminating the tax-on-tax system, leading to lower prices of goods and services. This has increased consumption and helped in boosting economic growth.
Improved efficiency: GST has enabled businesses to claim input tax credit for taxes paid on purchases, leading to the reduction in tax liability. This has improved the efficiency of the tax system and reduced the burden on taxpayers.
Integration of the Indian market: GST has made it easier for businesses to operate across the country by creating a unified market. This has facilitated the growth of businesses and made it easier for them to expand operations across states.
Simplified compliance: GST has introduced a digital interface for filing tax returns and compliance, making it easier for businesses to comply with tax regulations. This has reduced the compliance burden on businesses and increased their productivity.
Overall, the implementation of GST has led to the simplification of the tax system, increased transparency, and efficiency in the taxation process, and facilitated the growth of businesses, leading to a positive impact on the Indian economy.
How a customer pays less indirect tax under GST compared to VAT or service tax
Under the GST regime, a customer can pay less indirect tax compared to VAT or service tax in several ways:
- Elimination of cascading taxes: In the pre-GST regime, VAT and service tax were levied on top of each other, resulting in the cascading effect of taxes. However, under GST, taxes are levied only on the value-added at each stage of the supply chain, thereby eliminating the cascading effect of taxes. This has resulted in a reduction in the tax burden on the final customer.
- Lower tax rates: GST has replaced various indirect taxes levied by the central and state governments with a single tax. The GST rates are generally lower compared to the earlier tax rates, resulting in lower prices for goods and services. This has led to a reduction in the tax burden on the final customer.
- Input tax credit: Under the GST regime, businesses can claim input tax credit for taxes paid on purchases of goods and services. This credit can be set off against the output tax liability, leading to a reduction in the tax burden on the final customer. This has resulted in a reduction in the prices of goods and services.
- Increased competition: GST has created a unified market, allowing businesses to operate across states without facing multiple taxes. This has increased competition among businesses, resulting in a reduction in the prices of goods and services. This has led to a reduction in the tax burden on the final customer.
A tabular representation of how ultimate burden of GST falls on consumer
- A manufacturer sells a good A (sale 1) to wholeseller at Rs. 100/-
- Wholeseller sells it to retailer (sale 2) at Rs 120/-
- Retailer sells it to consumer (sale 3) at Rs. 150/-
|
Invoice Sale 1 |
Invoice Sale 2 |
Invoice Sale 3 |
|
Price 100 GST 10 |
Price 120 GST 12 |
Price 150 GST 15 |
|
Total 110 |
Total 132 |
Total 165 |
|
Wholesaler borne Rs. 10 GST and gets it recovered from retailer so ultimately GST borne by wholesaler is Rs. 0 |
Retailer bournes Rs. 12 GST and gets it recovered from consumer so ultimately GST bourne by retailer is Rs. 0 |
Consumer borne by consumer is Rs. 15 |
GST collected by Government :
- Collected by wholeseller = Rs. 10
- Collected by retailer = Rs. 2
- Collected by consumer = Rs. 3
Total tax collected is Rs. 15.
Overall, the introduction of GST has resulted in a reduction in the tax burden on the final customer due to the elimination of cascading taxes, lower tax rates, input tax credit, and increased competition. This has resulted in lower prices of goods and services and a positive impact on the economy.
Who is required to get GST registration
- Registration is mandatory if aggregate turnover exceeds threshold limit.
|
Sl No. |
State |
w.e.f 1 April 2019 (Notification No. 10/2019- Central Tax) |
|
FOR SUPPLIER ENGAGED EXCLUSIVELY IN “SUPPLY OF GOODS” |
||
|
1. |
Manipur, Mizoram, Nagaland, Tripura |
10 Lakh |
|
2. |
Uttarakhand, Meghalaya, Sikkim, Arunachal Pradesh, Puducherry, Telangana |
20 Lakh |
|
3. |
Rest States of India |
40 Lakh |
|
FOR SUPPLIER ENGAGED IN “SUPPLY OF SERVICES” OR BOTH “GOODS AND SERVICES” |
||
|
4. |
Manipur, Mizoram, Nagaland, Tripura |
10 Lakh |
|
5. |
Rest States of India |
20 Lakh |
Turnover 40 lac is not applicable if exclusively supply of following goods:
- Ice cream
- Tobacco and
- Tobacco substitutes (like pan masala etc.)
- Aerated Water
- Fly ash bricks or fly ash aggregate with 90% or fly ash content; Fly ash blocks
- Bricks of fossil meals or similar siliceous earths
- Building Bricks, Earthen or roofing tiles
In such case applicable turnover limit is 20 lac or 10 lac as the case may be for registration under GST
- Businesses registered under the old tax regime: Businesses registered under the old tax regime, such as VAT, excise duty, service tax, etc., are required to get GST registration, irrespective of their turnover.
- Businesses engaged in inter-state supply: Businesses engaged in inter-state supply of goods and/or services are required to get GST registration, irrespective of their turnover.
- E-commerce operators: E-commerce operators, such as Amazon, Flipkart, etc., are required to get GST registration, irrespective of their turnover.
- Casual taxable persons: Casual taxable persons, such as individuals or businesses engaged in occasional taxable supplies, are required to get GST registration.
- Non-resident taxable persons: Non-resident taxable persons, such as foreign companies or individuals engaged in taxable supplies in India, are required to get GST registration.
- Input service distributors: Input service distributors, who distribute input tax credit to their branches or units, are required to get GST registration.
It is important to note that GST registration is mandatory for the above-mentioned persons/entities. Failure to register for GST can attract penalties and legal action by the tax authorities.
