GST or Goods and Service Tax – Concept, History, Implementation, Benefits & more

Goods and Services Tax or GST is the tax scheme collected by the Government of India for Goods, supplies, and services that are provided to the customers.

It is an indirect tax that is multistage based, comprehensive, and destination-based. GST has replaced all the previous tax forms in the Government of India with exception of few indirect state taxes.

GST is a destination-based tax as the tax is exempted from the consumer and not the producer. Let us take a look at the history and more.

Read the article till the end to know more about GST.

What is GST or Goods and Services Tax?

GST is the only Indirect tax built for every part of India which eliminates multiple forms of Indirect taxes that existed back then.

Since it is one India one tax scheme, taxpayers don’t have to multiple taxes on multiple stages starting from production to consumption of the goods and services.

Thus, this system eliminates the burden of a consumer by eliminating double taxes on the same product.

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A brief history of GST

On 28th February 2006 Goods and Services Tax was first presented in the Parliament of India by the Government. It was presented to change the then ongoing Tax regime started in 1986.

VAT was introduced and implemented at the center as well as at the state level. In 1999, the Vajpayee government under the leadership of Atal Bihari Vajpayee, proposed one India, one Tax also known as the GST.

Thereafter, then Prime Minister Atal Vihari Vajpayee set up a committee to design the GST scheme. Asim Das Gupta headed the committee and was responsible for creating its network.

After the change in Government in 2004, the new finance minister proposed to roll out GST by 2010.

However, in 2011, the West Bengal government changed and Asim Das Gupta resigned from his post as the head of the committee. By then 80% task of creating its network completed.

The GST bill proposed in 2011 was opposed in the parliament and drafted for review. In 2013, it again presented in the parliament only to get opposed again and withdrawn.

Final GST Draft

After the change in Government in 2014, the GST bill was again introduced in the parliament in 2015 by the then Finance Minister of India, Arun Jaitley.

Arun Jaitley also set up a deadline of 1st April 2017 for the implementation but problems were still there from the opposition due to disagreements.

Finally, in 2016, the GST bill passed and then the President of India gave his resentment to the bill.

The Central goods and services tax bill, State Goods and services tax bill, Integrated Goods and Services tax bill, and the Union Territory Goods and services tax bill approved by the GST council.

On 29th March 2017, Lok sabha gave a go-ahead to these bills and on April 6 2017 the bills passed in Rajya Sabha as well.

Articles on Income Tax Planning and Policy 

Implementation of GST

GST scheme for taxpayers in India with effect from July 1st, 2017 by Joint Venture of President of India and Government of India.

The government launched it at midnight and which is considered to be a historic session in parliament to date.

After the launch, GST rates are modified to ease the middle class and lower class taxpayers of India. Revenue generated through GST is shared between state and central government on a 50% basis.

This scheme is the CGST and SGST where total revenue generated is divided and shared. For IGST, central shares 50% of revenue to the state where the goods are imported.

Taxes replaced by GST in India

Here are the various List of Taxes which are not applicable now are:

Central Taxes

• Duties of Excise for Medicinal and Toilet preparations
• Central Excise Duty
• Additional excise duty for goods of special importance
• Additional duties of excise for textile products
• Customs Excise duty
• Special additional customs duty
• Service Tax
• Central cess and surcharges relating to the supply of goods
• Central cess and surcharges relating to services provided.

State Taxes

• Sate Value-added Tax or VAT
• Luxury Tax
• Central Sales Tax
• Amusement Tax
• Entertainment Tax
• Entry tax of all forms
• Advertisement taxes
• Taxes on Gambling and lotteries
• Purchase Tax
• State Cesses and Surcharges related to supply of goods
• State Cesses and Surcharges related to services provided

What are the components of GST?

GST is subdivided into categories as this helps to avoid confusion and the government can administer taxes easily. Here is the list of components under GST India

Central Goods and Services Tax or CGST

Central GST or Central Goods and Services Tax or simply CGST is the GST levied by the central government of India on the purchase of goods and services.

This is the tax collected due to sales, purchases, and services occurred intrastate as well as interstate. The central government levies 50% of the total tax collected through GST in a state.

State Goods and Services Tax or SGST

State GST or State Goods and Services Tax or SGST is the tax share of the states from the overall tax levied through GST.

SGST is not possible for businesses or services out of state.

Integrated Goods and Services Tax or IGST

IGST is the tax levied by the central government on sales inter-state. Here Tax collected shared among Central Government and destination state on imported goods and services.

Union Territory Goods and Services Tax or UTGST

This is the GST levied from the 5 Union Territories of India which are Andaman and Nicobar Islands, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, and Chandigarh.

This is the same as SGST but here instead of the state, the tax is collected from the 5 union territories shared with the respective UT’s only.

An HSN code or Harmonised System of Nomenclature for all Goods and accepted worldwide which is a unique 6-digit number.

However, this rule is for the farms that have a turnover of more than 15 million rupees. HSN code does not apply to companies whose turnover is less than 15 million rupees.

While filing the GST companies with turnover of less than 50 million and more than 15 million rupees have to mention the first two digits whereas companies with a turnover of more than 50 million rupees have to provide the first four digits of the HSN code along with GSTIN.

GSTIN is the unique identification number for the taxpayers when they register successfully on GST portal.

Benefits of GST to Indian Tax Payers

• GST Network is the backbone of the GST in India. This network support at the backend by a comprehensive and skillful IT system. It makes the work of the taxpayers very easy as they would find information related to their business online and under one roof. This makes easy and transparent Tax compliance.
• Under GST, tax structures across India are uniform which gives the ease of doing business and increases certainty.
• It ensures that there is no or minimum cascading throughout which helps to reduce the costs that are of hidden nature.
• It ensures that there is only one Tax Scheme from producer to consumer thus reducing hidden costs and bringing more transparency to the Tax regime in India.
• Since it replaced the old tax regimes, double taxes, and unnecessary indirect taxes, the prices of goods and services will be low which ensures benefits to the customers.

How GST eases the work of central and state governments?

• Central and State Governments can easily administer the GST as there will be no multiple indirect Taxes. A strong IT system backing its network will give ease of doing work to the Administration.
• Tax Compliance has got much easier with the GST scheme. Now the Government can keep an eye on the leakages. GST thus ensures smooth transfer of ITC or Input tax credit throughout the chain of transmission incentivizing compliance taxpayers.
• Since GST is an online-based Network with a strong IT backbone, hence I will decrease the cost of collection for the government.

More information related to GST and Tax Planning

Applicable Rates in GST scheme

There are 6 tax slabs under GST scheme for goods and services which are 0%, 0.25%, 5%, 12%, 18%, and 28%.

The higher slabs like 18% and 28% slabs are further on items without cesses and items with cess.

Goods with 0.25% GST (Goods Exempted from GST)

Fresh fruits and vegetables, buttermilk, natural honey, curd, milk, flour, bread, besan, all kinds of salt, hulled cereal grains, jaggery, fish, fresh meat, eggs, bindi, sindoor, kajal, bangles, drawing and coloring books, judicial papers, stamps, printed books, jute, newspapers, and handloom, hotels, and lodges with rates lower than 1000 rupees.

Making of plates and cups using leaves, bark, and flowers, dried tamarind comes in this slab, after 1st October 2019.

Goods with 5% GST

Apparel up to 1000 Indian Rupees and footwear up to 500 Indian Rupees, cream, packaged food items, skimmed milk powder, frozen vegetables, branded paneer, coffee, spices, tea, pizza bread, sabudana, rusk, cashew nut, ice, raisin, fish fillet, coal, kerosene, agarbatti, medicine, fertilizers, economy class air tickets, Train Tickets, small restaurants are some of the items under this list.

Catering services outdoor excluding ITC, wet grinders (along with stone grinders), marine fuel, specified commodities for petroleum operations falling under Hydrocarbon Exploration Licensing Policy includes to this slab after 1st October 2019.

Goods with 12% GST

Ghee, butter, frozen meat products, cheese, dry fruits in packaged form, sausages, animal fat, namkeen, fruit juices, ketchup & sauces, all diagnostic kits and reagents, ayurvedic medicines, Mobile phones, forks, spoons, umbrella, tooth powder, spectacles, sewing machine, indoor games, chessboard, ludo, carom board, apparels above Rs 1000, business class Flight ticket, non-AC restaurants, work contracts, and state-run lottery.

Railway wagon coach supplies, Polyethene bags woven and non-woven, slide fasteners, and other job work are in this list after 1st October 2019.

Goods with 18% GST

Pasta, cornflakes, biscuits, pastries, cakes, jams, preserved vegetables, ice cream, soups, mayonnaise, mineral water, mixed condiments and seasonings, footwear costing more than Rs 500, speakers, camera, monitors, electrical transformer, printers, optical fiber, sanitary napkins, tissue papers, notebooks, headgear and its parts, steel products, bamboo furniture, aluminum foil, Bars, Retro-Bars, 5-star restaurants, luxury hotels, IT services, telecom services, branded garments, and financial services. Almond milk also falls in this slab after 1st October 2019.

Goods with 28% GST

Chewing gum, molasses, waffles and wafers coated with chocolate, chocolate not containing cocoa, pan masala, personal care items, aerated water, deodorants, aftershave, shaving creams, hair shampoo, sunscreen, dye, paint, dishwasher, water heater, weighing machine, vacuum cleaner, washing machine, automobiles, 5-star hotel stays motorcycles, race club betting, and movie tickets above Rs 100, private lottery, etc. Caffeinated beverages in this slab after 1st October 2019.

There is some additional cess on some products. 1% cess to motor vehicles (petrol operated) which has a capacity of 10 to 14 passengers. 3% cess on diesel-operated vehicles with 10-14 passengers.

GST or Goods or Services Tax – Conclusion

GST is still in its initial stage and government has to do a lot of amendments to it. Government has  to take care of difficulties and consider the changing nature of the market for GST changes.

It will take a lot of time to assess the success or failure of GST as its effects are long term. Changing legislation can lead to further changes in its structure and scheme.

Monitoring the GST network is the key to the overall collection and has improved over time. Government needs to take care of the refund to the MSME’s from GST.

Government have to make sure that MSME don’t face any difficulties in future. Taxpayers should also comply with the GST laws strictly to make it a success.

GST FAQs

Ques – How do I contact the GST officer?

Answer – It has now become very easy to contact the GST officers given there are several helpline numbers to help individuals with their queries. The GST helpdesk customer care number – 0124-4688999, while in order to contact a GST officer the individual can log in to GST website and click on services and obtain contact details to solve their query.

Ques – Where is GST not applicable?

Answer – There is a specific set turnover limit which attracts a GST; however for business whose aggregate annual turnover is less than the specified turnover, they are accepted from the GST.  Hence the business that falls below a specified turnover slab does not require paying the GST.

Ques – Is GST included in MRP?

Answer – Yes, the MRP that we pay for products (on whom the GST is applicable) are inclusive of the Goods and Service Tax.

Ques – What is ARN in GST?

Answer – Application Reference Number or ARN is a unique umber that is attached to each and every GST transaction which is completed at the government verified GST portal. One receives their ARN number the same time one submits their GST enrolment application.

Ques – What is LUT ARN number?

Answer – When an individual submits their LUT online, they in return receive or an Application Reference Number is generated.  An individual is however obligated to submit the LUT as soon as one receives their ARN no.

Ques – What is GSTR-3B? What is the late fee for GSTR -3b?

Answer – For GST registered business holders and service providers, there is a requirement to file a self attested or declared GSTR-3B document. While one files their GSTR-3B document they are also supposed to attach with the GSTR 1 as well as the GSTR 2 return forms.

Ques – What is difference between GSTR 1 and 3b?

Answer – Business holders require sending a monthly analysed return by the 20^th of the next month, which is often referred to as the GSTR – 3B. Whereas when we talk about the GSTR -1, it can be either monthly or quarterly. The GSTR-1 is also filed by the taxpayer to provide in depth details about their supplies that took place that exact month.

Ques – Is GSTR-3b monthly or quarterly?

Answer – Every registered business holder which covers the eligibility for the GST application is obliged to send a monthly GSTR-3b. The GSTR-3B must be self attested, covering the entire sale summary of that very month along with the tax liability.

Ques – Can we file STR-3b without payment of tax?

Answer – No, when it comes to filing the STR-3b the total accountable due tax is required to be paid by the individual. In other words the GSTR-3B return can only be filed subsequent to a total payment of the tax due.

Ques – How do I check my GSTR 3B status?

Answer – The IT department developed GST portal is the one time solution for all the individual queries regarding the return statuses. The taxpayers need to visit the portal and proceed with their credentials. The individual is thereafter supposed to choose the ‘services’ and click on ‘track return status’ which will show the status of their GSTR 3B on screen.

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