Demystifying GST: Portal, search, & how to apply for GST

The GST council in India:

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  Led by the Union Finance Minister.

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  Includes State Union Minister for Finance and Revenue and others.

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  Officers from central and state governments manage the Council Secretariat.

How goods and services tax (GST) works in India

GST operates in three main ways:

1. Multi-stage process : Each stage is taxed as products move from raw materials to the end customer. This includes buying raw materials, manufacturing, warehousing, wholesaling, and retailing.

2. Value addition : The value of a product increases at each stage of production. For instance, making flour and sugar into biscuits adds value. GST is applied to this increased value during every step.

3. Destination-based : Tax is collected where the product is consumed. For example, if goods are made in Tamil Nadu but sold in Gujarat, GST is paid in Gujarat, where the final consumer is.

These three aspects ensure that GST is fair and covers the entire supply chain while promoting value addition and consumption-based taxation.

Demystifying GST through illustration

Stage 1 | The cloth weaver

Imagine a cloth weaver crafting fabric for shirts. He acquires raw materials like thread, buttons, and equipment worth Rs 100, including a tax of Rs 10. As he weaves the fabric into a shirt, he adds the value of Rs. 30. The total worth of the shirt is now Rs 130 (Rs 100 + 30). At a 10% rate, the shirt’s tax becomes Rs 13. But with GST, he offsets the Rs 13 tax against the Rs 10 already paid for raw materials. Hence, the actual GST he pays is just Rs 3 (Rs 13 - 10), making GST a tax on value addition.

Stage 2 | The distributor

The fabric moves to a distributor who buys it for Rs 130. Adding a margin, let’s say Rs. 20, the total value becomes Rs 150 (Rs 130 + 20)—a 10% tax amounts to Rs 15. However, under GST, he can set off the Rs 15 tax against the Rs 13 tax he paid to the manufacturer. Hence, his effective GST payment is only Rs 2 (15 - 13).

Stage 3 | The buyer

Finally, a retailer purchases the shirt from the distributor. Adding a margin of Rs. 10 to his Rs. 150 purchase, the shirt’s value rises to Rs. 160 (Rs. 150 + 10). A 10% tax equals Rs. 16. Setting off this Rs. 16 tax against the Rs. 15 he paid to the distributor, the retailer’s effective GST becomes Rs. 1 (16 - 15).

To sum up the entire GST journey, the tax on the value chain, from raw materials to the consumer, is Rs. 10 + 3 + 2 + 1 = Rs. 16 in total. The consumer ultimately carries this tax.

GST in India: Changes in tax laws

GST significantly shifted India’s tax system, replacing various indirect taxes.

Earlier, taxes included:

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  Central Sales Tax

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  State VAT

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  Service Tax

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  Luxury Tax

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  Entertainment Tax

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  Entry Tax

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  Taxes on advertisements

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  Taxes on lotteries, betting, and gambling

GST simplified this by unifying taxes and creating a more streamlined tax structure.

Comparing GST tax to the old tax structure

Types of GST in India simplified

India employs a dual GST system, where the central government and states impose GST simultaneously. This system promotes shared taxation across the country.

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  CGST : Applies to goods and services moved within a state.

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  SGST : Pertains to goods and services produced within and sold within that state (intrastate transactions).

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  IGST : For interstate transactions involving goods and services exchanged between two states, the Center and states contribute to IGST.

This approach ensures that GST revenue is equitably distributed among the state and central governments, governed by the GST Act’s maximum tax rate provision.

How GST affects price reduction: Explained

Before GST, taxes piled up at every stage of the supply chain, leading to a tax-on-tax scenario for all buyers, even consumers.

GST eradicated this cascading effect. Tax is now applied solely to the value-added during each ownership transfer.

With a consistent indirect tax rate, GST enhances tax collection and fosters economic cohesion among states, thus aligning India with the global economy.

To illustrate, let’s revisit the biscuit manufacturer’s scenario to understand how GST influences product costs and taxes.

Calculations under the previous GST system

Each time taxes are transferred from one party to another, a cascading effect occurs, leading to the final tax liability resting with the customer.

Calculations under the current GST tax regime

With GST, people can offset taxes paid on inputs when filing GST returns, reducing their tax burden and input costs. This lowers the selling price for sellers and the buying cost for customers. For example, the manufacturer value drops to Rs. 880 from Rs. 937.2, easing the final customer’s tax burden.

Advantages of GST for Indian businesses

The implementation of GST has brought several benefits to businesses in India. It has reduced consumer prices, eliminated tax cascading, lowered logistics costs, eliminated interstate taxation, and created unified markets.

Businesses have seen a reduction in compliance costs due to replacing 17 indirect taxes with GST.

GST processes, including registration, returns, tax payments, refund applications, and responses to notices, are conducted online through the GST portal. This digitalization has streamlined processes and reduced manual effort.

The cost of goods has significantly decreased, resulting in a unified market across state borders after fragmentation.

Eligibility requirements for GST registration

For most states in India, except for certain regions like north-eastern states, J&K, Himachal Pradesh, and Uttarakhand, businesses selling goods with a turnover exceeding INR 40 lakhs in a financial year must register for GST as standard taxable entities.

Service providers are required to register for GST regardless of their turnover, and particular category states have specific requirements for GST registration.

Individuals falling under various categories like casual taxable persons, input service distributors, non-resident taxpayers, TDS/TCS deductors, e-commerce retailers selling goods online, and those involved in inter-state supply of goods and services are also required to register for GST.

Registrar of GST

The Goods and Services Tax Identification Number (GSTIN) is a unique 15-digit number assigned to businesses after successful GST registration. Businesses operating in multiple states need separate GSTINs for each state. The central government allocates this number, and is essential for claiming refunds and ensuring authentication, verification, and fraud prevention.

Importance of GSTIN

A GSTIN is crucial for businesses seeking to avail of GST benefits. It facilitates refund claims when GST liability exceeds payments and aids authentication and fraud prevention.

GST certificate for Indian businesses

Indian businesses exceeding the GST threshold must possess a GST registration certificate as proof. Casual and non-resident taxpayers also require GST registration.

GST return filing in India

Businesses in India must file GST returns to calculate tax liability: these returns detail purchases, sales, taxes paid, and input tax credits. Easebuzz Smart Billing provides automated invoicing solutions for GST-compliant invoices.

GST return types

Various types of GST returns exist based on registration type. Regular taxpayers must file GSTR-1 monthly, outlining outward supplies. Businesses under the composition scheme submit GSTR-4 quarterly.

GST rate slabs for businesses in India

India’s Goods and Services Tax (GST) is categorized into five slabs: 0%, 5%, 12%, 18%, and 28%.

Certain products and services like petroleum, diesel, natural gas, and others are not subjected to GST rates; they are taxed as per individual state policies.

Here are some examples of items and their GST rates:

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  Handmade matches: 5%

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  State-owned lotteries: 12%

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  Mobile phones: 18%

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  Caffeinated beverages: 28% + 12%

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  Almond milk: 18%

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  Electric vehicles: 5%

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  Movie tickets > Rs.100: 18%

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  Color TVs & monitors up to 32 inches: 28%

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  Digital & Video Camera recorders: 28%

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  Processed foods: 18%

Calculating GST in India

To calculate GST for businesses, manufacturers, wholesalers, and retailers, use this formula:

For example, if a product/service is sold for Rs. 1,000 at an 18% GST rate, the net price would be 1,000 + (1,000 x 18/100) = Rs. 1,180.

GST composition scheme

Under the GST composition scheme, taxpayers with small turnovers can pay taxes at a fixed turnover rate, avoiding complex procedures. The threshold is INR 75 lakh for North-Eastern States and Himachal Pradesh.

CGST rates for composition dealers:

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  Goods Manufacturers and Traders: 0.5%

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  Restaurants without Alcohol: 5%

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  Service Providers: 6%

Advantages of the GST composition scheme

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  Start-ups and small businesses benefit from reduced tax liability, fostering growth in a competitive market. Lower tax rates improve liquidity, and fewer compliance requirements save time and resources.

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  The government supports small businesses by simplifying tax procedures and encouraging their development.

GST HSN and SAC codes simplified

The Harmonized System of Nomenclature (HSN) is a global standard for naming goods established by the World Customs Organization (WCO). In India, HSN is used under GST with a 6-digit code for classifying over 5,000 products, aiding tax classification.

Under GST, a reverse charge mechanism exists : Usually, suppliers pay GST, but under reverse charge, the receiver pays GST. Understanding this is crucial, as the government sometimes specifies its use.

GST offers input tax credits : Input tax credits in GST help reduce the tax on purchases (inputs) by the tax on sales (outputs). This simplifies refunds for central sales tax, entry tax, etc., which were complex before GST.

GST’s benefits : GST consolidates many taxes, including VAT, CST, and excise duty, allowing businesses to claim tax paid on purchases. This streamlined system promotes a smoother tax process.

Simplified guide to India GST payments and e-Way bills

India’s GST payment methods differ based on taxpayer categories:

1. Regular taxpayer :

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  Use Challan PMT-06 to pay via cash ledger while filing GSTR-3B.

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  Generate and pay Challan before/after logging in or during GSTR-3B filing.

2. Quarterly taxpayer (QRMP Scheme) :

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  Pay tax for the first two months of the quarter using PMT06 Challan.

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  Pay by the 25th of the month after the quarter for April-June (April & June).

3. Nil GST return taxpayer :

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  No Challan or payment is required.

4. Composition scheme taxpayer :

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  Sum up a turnover for the quarter and prepare CMP-08 Challan for tax payment.

Understanding GST e-Way bill in India:

E-Way Bills offer proof of goods movement. They’re mandatory for both inter and intra-state movement. GST-registered traders moving goods worth over Rs. 50,000 need an e-Way Bill.

Generate e-Way Bills via the GST mobile app, SMS, or API-enabled site integration. After generating, you’ll receive a unique e-Way Bill number for transporter, supplier, and recipient identification.

Simplified insights into managing the GST network in India

The Goods and Service Tax Network (GSTN) is the heart of GST operations in India, overseeing the GST portal and acting as the central database. Here’s how it works:

1. Reliable IT infrastructure :

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  GSTN ensures a robust and efficient IT infrastructure to support smooth GST operations across India.

2. Handling complex transactions :

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  Interstate trade’s Integrated Goods and Services Tax (IGST) requires intricate adjustments.

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  GSTN’s robust IT infrastructure enables swift settlements between states and the Center.

3. Secure data storage :

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  Keeping taxpayer information safe is a priority.

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  The Indian government strategically controls GSTN, ensuring confidentiality.

4. Expense sharing :

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  Central and State Governments share expenses equally (50:50).

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  States receive their due share based on taxpayers.

Expense types max limit

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  IT System Design Infosys is in charge of designing the IT system.

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  Outsourced Functions Include fraud analytics and security audits, determined by tender.

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  Running Office Costs Salaries, rent, IT equipment, etc.

GSTN, as a trusted entity, plays a vital role in facilitating seamless GST processes while ensuring security and efficiency.

Applying for GSTIN in India: A simple guide

If you’re ready to apply for GSTIN and have your business details like mobile number, email address, and PAN handy, follow these easy steps:

Step 1 : Visit the official GST portal: https://www.gst.gov.in/.

Step 2 : Find the “Services” tab and locate GST registration.

Step 3 : Choose “New Registration” and complete the required information.

Step 4 : Click ‘proceed’ to move forward.

Functions of GSTN in India:

GSTN, the interface between taxpayers and the government, offers key functions:

1. Entire process online : GSTN manages the GST as a whole process, from registration to return filing, making it accessible online.

2. Handling invoices : With around 3 billion taxpayers, GSTN processes invoices monthly, facilitating smooth transactions.

3. Returns and registrations : Around 70 to 80 lakh taxpayers file returns, and GSTN manages their registrations and return filing.

4. Payments and refunds : GSTN handles online payments and refunds, ensuring a hassle-free process.

GST helpline and app information:

For any assistance with your tax queries, reach out through the GST Helpline:

1. CBIC MITRA HELPDESK

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  Toll-Free: 1800-1200-232

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  Email: cbicmitra.helpdesk@icegate.gov.in

2. GSTN HELPDESK :

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  Helpline: 0124-4688999

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  Email: helpdesk@gst.gov.in

For further information, visit: https://www.gst.gov.in/contact