GSTA Complete Guide to Goods Services Tax ( GST)
GST (Goods & Services Tax) is a single taxation system the combine all the different indirect taxes that we as a customers and vendors paying at center and state levels. GST will be applied to the manufacture, distribution, sales and consumer level of all goods and services in India and it will be effective from July 1.
Why GST is so effective and why should every one migrate?
The current tax system gives businesses very hard time as it contains multiple complex indirect taxes, complex compliance procedures, and intervention by several state and central tax divisions. Each state has different taxes and different compliance procedures. This sounds highly difficult to setup a business and transporting the goods from one state to another state. India as a country is at the bottom of table in ease of doing of business.
5 important reasons why we need GST
1. Multiple taxes and Surge Tax
Taxes, Taxes and Taxes!!! Tax on top of Taxes!!!
There are 20 different taxes at center and interstate levels that we are paying. Let us first understand what major taxes we are paying at state and center level, there are some other indirect taxes varies state to state which are not mentioned here.
Tax on Taxes: At each stage of a supply chain, taxes are applied on the total value of the product, even though it has already been taxed at the previous level. We all know that how difficult it is to get the input tax credit when the government wants to refund. These heavy taxes drastically increase the making charges of product (manufacturing cost, distribution charges, and whole sale charges) to the customer who buys the product in the next stage. On an average customer pays upwards of 25% – 35% in taxes by the time he buy a product.
2. Interstate Goods Transportation
When the goods transported from one state to another, 2% CST (Central Sales Tax) will be collected on the value of goods at each state border it crosses. For example if a product is manufacture in Hyderabad and you want to transport it to Delhi you need to pay total 8% of CST at 4 different state border crossing.
3. Compliance and Auditing
Different types of taxes on each state means that businesses in India today have to comply with multiple tax laws, different tax procedures, different tax rates and involvement of different tax authorities at each state level sounds cumbersome. Failing to comply and manage all of these processes puts businesses at risk with hefty penalties form tax authorities. Business owners become so stressful to deal with complex processes and often spend lot of time and money to get rid of these.
4. Filing the Tax Returns
As we do not have unified tax system since before independence we are still adding tax amendments as of now. We are a bunch of creative people finds a new way to generate income and find a new loophole and we are fixing it.
We fix it with the required amendment in the Law which further increases the volume of the act. Because of this we have difficulty identifying and filling the tax returns. I would like to remind you KBC.
Previously thre was no explanation in the act on how to tax income from game shows, so new amendment was brought. If no amendment, income from KBC would have been free and many people with utilize the same.
5.Lack of Taxation Knowledge
Our tax system is so complex and hard to understand, many business owners of SMB segment do not have good taxation knowledge and putting their businesses into risk by not meeting the audit compliance. We as citizens responsible to know what taxes we are paying and what services we are getting from government organizations.
How GST Help us overcoming these challenges?
Many financial experts believe that the GST will change the way we do business in India. Here are the advantages we have with GST complaint.
One Nation, One Tax System
Single tax system can reduce the complexity and burden of entire supply chain. It also simplifies the way we manage our taxes. It produces India as a single market and entity to do the business. It decreases taxes on manufacturers. Hence it increases their business and makes them more competitive at National and International level.
Reduced Taxes for majority of Goods and Services
Now business owners get Input tax credit which paid at every stage of supply chain hence they can reduce the manufacturing price and sell at lower price to the buyers. Hence customer and vendor both satisfied with purchase and sales.
Interstate Goods Transportation easy now.
Now with GST goods transported across the country, a combined tax called IGST (Integrated GST) will be collected by Central Government.
This will reduce the complexity and taxes for the vendors that need to pay upfront taxes or charges during the interstate transportation at each state border. GST is fully automated system, will ease your tax processing and allow for free movement of goods across the country, making India more competitive market place.
Compliance and audits are easy now !!!
GST system streamlines taxation with simple procedures which are automated in GST portal (online platform for GST process) and governed by a single tax authority called GST Council. Tax handling will be much easier once the entire taxation process moves to GST portal.
From registering for the GST to filing returns and getting Input Credits, everything has been automated and will be done online through the GST portal. This will provide flexibility for SMB (small and medium businesses) segment, reducing time and money that previously spent on managing the taxes.
How India will benefit with GST?
Introduction of GST would also make our life easy and our products more competitive in the domestic and international markets compare to china and other foreign countries. Industrialists estimated that this would instantly boast our economic growth. Both state and Central governments gain good revenue due to higher business growth and expanding the tax base and trade volumes. Transparency in Taxations will provide easy administration.
Benefits to Small Business Owners
Tax payers with an aggregate turnover in a financial year up to [Rs.10 lakhs] would be exempt from tax. The aggregate turnover is calculated at central level.
**All taxpayers eligible for threshold exemption will have the option of paying tax with input tax credit (ITC) benefits. Tax payers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption. (Aggregate turnover shall include the aggregate value of all taxable and non-taxable supplies)
What Taxes are subsumed under GST and what categories?
GST Tax Slabs:
GST Rates Structure
4 tier tax Structure has been introduced in GST
Edible oil, sugar, spices, tea, coffee (except instant)
Coal (instead of current 11.69%)
Mishti/Mithai (Indian Sweets)
Computers, Processed food
Hair oil, toothpaste and soaps (currently at 28%)
Capital goods and industrial intermediaries (big boost to local industries)
Small cars (+1% or 3% cess)
Consumer durables such as AC and fridge
Luxury & sin items like BMWs, cigarettes and aerated drinks (+15% cess)
High-end motorcycles (+15% cess)
Beedis are NOT included here
GST Tax Structure
The four-tier tax structure of GST has the following slabs a zero rate, a lower rate, two standard rates, and a higher rate. This article is aimed at providing a brief overview of each GST rate.
Zero rate tax will be applied on basic necessary goods of the consumer price index (CPI) basket - an index that constantly measures prices of commonly purchased consumer goods and services to measure inflation. The zero rate items would be all food grains, cereals, milk, and other essentials.
Including zero rate as part of the GST structure will keep the prices of basic items in check, regardless of whether the government decides to increase tax rates in the future.
A lower rate of 5% will be applied on the rest of the items in the CPI basket and other items of mass consumption. This, along with the zero rate tax, will help prevent inflation from having much of an impact on zero rate and lower rate items, keeping the prices of all essential items in check.
The GST council address to the press, said that the Council had finalized two standard rates (12% and 18%) in order to keep inflation in check.
Imagine a product, which is currently taxed at 13%, charged a rate of 18% GST. This would increase the price of the product by 5%, leading to inflation. To avoid this, the GST council decided to tax all goods and services that are currently taxed at 9-15% at a standard rate of 12%. Processed foods will also be taxed at 12%. The rest of the goods and services will be taxed the second standard rate of 18%.
All taxable services that are currently charged at 15% will now be moved to the 18% bracket. This could increase the price of a majority of services that are currently offered.
Taxes on white goods will be classified at a higher rate of 28%. This includes items such as small cars, electronics, appliances , TVs. ACs etc
Previously, the tax on white goods was around 27% (including an excise of 12.5% and VAT of 14.5%), but the cascading effect elevated the tax as high as 30-31%. This will be minimized by the new higher rate of 28%.
In addition to the above, a few other items were mentioned in the Council’s announcement of rates. These items, and the applicable rates on them are as follows:
Sugar, Tea, Coffee and Edible oil will fall under the 5 per cent slab, while cereals, milk will be part of the exempt list under GST. This is to ensure that basic goods are available at affordable prices. However, instant food has been kept outside this bracket so, no relief for Maggie lovers!
The Council has set the rate for capital goods and industrial intermediate items at 18 per cent. This will positively impact domestic manufacturers as seamless input credit will be available for all capital goods. Indeed, it is time for “Make In India”.
Coal to be taxed at 5 percent against current 11.69 per cent. This will prove beneficial for the power sector and heavy industries which rely on coal supply. This will also help curb inflation. Expect a good run for Coal India tomorrow.
Toothpaste, hair oil, and soaps will all be taxed at 18 percent, where currently they are taxed at 28 percent. Most of the cosmetics and fast moving consumer goods (FMCG) brands should get the benefit of this tax reduction. After all, Fair and Lovely might seem fairer in its pricing from now on!
The ‘mithai’ from the neighbouring sweet shop might lose some of its flavour as Indian sweets will now be taxable at 5 per cent. If you have a sweet tooth, this could hurt your pocket a wee bit in the coming days.
Plus, it was announced that:
for restaurants serving alcohol, the tax bracket will be 18 per cent
education, healthcare are going to be exempted from GST
services on Non-AC restaurants will be 12 per cent
For more details please download below files:
Download Complete Chapter Wise List of GST Rates for Services
Download Complete Chapter Wise List of GST Rates for Goods
First step to start GST registration is to fill and submitting an online application to get your GSTIN (GST Identification Number).
This is a unique number provided by government for each Organization or business entity.
The form is accessible from below link:
This section will cover the following topics:
Registration process for existing Tax Payers
Registration process for New Applicants
GSTIN (GST Identification Number)
Checking the status of your Application
Before diving into the process involved in GST registration, let’s take a look at the eligibility criteria for GST registration.
Businesses with the following aggregate turnover are liable to register and pay for GST.
Liable to register for GST
Liable to pay GST
Rs. 9 Lakh
Rs. 10 Lakh
Rest of India
Rs. 19 Lakh
Rs. 20 Lakh
Threshold limit is based on the yearly aggregate turnover of a business.
Aggregate turnover is the sum of all taxable, non-taxable, and exempt supplies. It also includes export of goods and services (if any).
Apart from the above mentioned criteria, there are a few cases where GST registration is mandatory. They are:
Businesses involving inter-state supply of goods and services
Casual taxable person
Non-resident taxable person
People who supply goods and services on behalf of a taxable person
Businesses that sell their products on ecommerce marketplaces
An online business that offers services under the aggregator model.
Input service distributors
While registering for GST, please make sure that you have soft copies of the documents mentioned below.
Constitution of Business
Principal Place of Business
Memorandum/Article of Association
Details of Authorized signatory
Letter of Authorization
Details of Bank account(s)
First page of the bank passbook
Photo of the business owner
Other supporting documents
Registration process for existing Tax Payers
If you’re an existing tax payer, you will receive a provisional username and password from the tax authority under whom you are registered. You can also reach out to the tax department to obtain the provisional username and password.
You will have to use these credentials to log into the GST portal and submit the necessary forms for obtaining GST registration. To start with the registration process
Log on to www.gst.gov.in
Click New user login and enter your provisional username and password
In the screen that follows, you will be prompted to enter your email address and mobile number
A One Time Password (OTP) will be sent to your registered email address and mobile number. (The one you receive in your email and the one you receive on your mobile number are different). Enter both the OTPs to complete the verification
Once the process is done, you will be taken to the screen where you will be asked to select a new username and password for your GST portal.
Enter the username and password of your choice and click Submit. You will get a success message informing about the update of your new username and password. You will then be redirected to the login screen where you will again have to login using your new username and password
The next step is to register for GST and receive a provisional GST number.
As soon as you log in, you will see the dashboard of the GST portal.
In the dashboard, click Provisional enrollment option present on the top left corner.
Under provisional enrollment, you will have seven sections which you will have to fill before submitting your application. They are:
Details about proprietor and partner
Principal place of business
Additional place of business
Goods and services
Under each section you will be asked to fill a form and upload the relevant document(s). For example, while filling the Business Details section, you will be asked to upload the proof of constitution of business i.e. proof for registering your business. Similarly, you will be asked for an address proof for your business while filling the Principal Place of Business section. So, keep a digital copy of all your necessary documents ready before filling up the applications. This will save you a lot of time.
After filling up all the seven sections, you will have to verify your details using Digital Signature Certificate (DSC) or E-signature. Enrollment for GST is not complete without the E-signature.
Upon digitally signing the application, you will receive an acknowledgement email in your registered email address.
If all the submitted documents are correct, the application would be processed within 3 working days and a provisional registration certificate will be issued to you. The provisional certificate is valid for 6 months and can be used until you receive the GSTIN.
Registration process for new applicants
As of now, registration for new applicants is not open as the government is currently in the process of migrating all existing tax payers to GST. Upon opening registration, a new business owner should follow the below mentioned steps to obtain GST registration.
New applicants should visit the GST portal and start the registration process by filling the REG-01 form.
The form has two parts: one for the verification of your PAN, mobile number and email address, and the other for filling business information along with relevant documents.
The first part involves realtime verification of your PAN number (from the CBDT database) followed by verification of your email address and mobile number using OTP.
Upon successful verification, a reference number will be generated and sent to your registered mobile number and email address.
You can use this reference number to fill the second part of REG-01
This involves entering all information about your business and uploading copies of relevant documents(you can find the list above)
After successful submission of the application, you will receive an acknowledgement from the tax department in the form of REG-02
Let’s take a look at a few scenarios that might occur during the registration process
There may be cases where you might have entered wrong/insufficient information while submitting the application. If the tax authority needs more clarification or expects the right information, he will electronically request clarification in the form of REG-03
Upon receiving REG-03, you will have to submit a clarification using the form REG-04. This should happen within 7 days from the date of receipt of REG-03
If the tax authority is still not satisfied, and if he rejects the application, he/she will communicate the same through REG-05. If the application is approved, the tax authority will communicate the same through REG-06
Upon successful approval of the application, you will receive the provisional registration certificate within 3 working days
GSTIN (GST Identification Number)
GSTIN is a 15-digit identification number issued by the tax department upon successful processing of your application.
Decoding the GSTIN will give us the following information:
The first two digits represent the state code.
The next ten digits represent the PAN number of the business owner.
The thirteenth digit is the entity number of the PAN holder in a state.
The fourteenth character is “Z” by default.
The fifteenth digit is the checksum digit.
Checking the status of your Application
You can track the status of your GST application by following the steps mentioned below:
Log on to www.gst.gov.in** and scroll down to the bottom of the page.
Under Important Links, click Check Registration Status
In the screen that follows, you can check the status of your application by entering either your registration number, provisional ID, or your PAN number
Types of GST Returns and their Due Dates
We answer below questions in the following space
What are the various returns that need to be filed under new GST Law?
What date and time lines we need to file ?
Who is responsible to file these ?
A return is a document that a taxpayer is required to file as per the law with the tax administrative authorities. Under the GST law, a normal taxpayer will be required to furnish three returns monthly and one annual return. Similarly, there are separate returns for a taxpayer registered under the composition scheme, taxpayer registered as an Input Service Distributor, a person liable to deduct or collect the tax (TDS/TCS).
What to file?
Details of outward supplies of taxable goods and/or services effected
Registered Taxable Supplier
10th of the next month
Details of inward supplies of taxable goods and/or services effected claiming input tax credit.
Registered Taxable Recipient
15th of the next month
Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of amount of tax.
Registered Taxable Person
20th of the next month
Quarterly return for compounding taxable person.
18th of the month succeeding quarter
Return for Non-Resident foreign taxable person
Non-Resident Taxable Person
20th of the next month
Return for Input Service Distributor
Input Service Distributor
13th of the next month
Return for authorities deducting tax at source.
10th of the next month
Details of supplies effected through e-commerce operator and the amount of tax collected
E-commerce Operator/Tax Collector
10th of the next month
Registered Taxable Person
31st December of next financial year
Taxable person whose registration has been surrendered or cancelled.
Within three months of the date of cancellation or date of cancellation order, whichever is later.
Details of inward supplies to be furnished by a person having UIN
Person having UIN and claiming refund
28th of the month following the month for which statement is filed
All these returns are required to be filed digitally online through a common portal to be provided by GSTN, non-government, private limited company promoted by the central and state governments with the specific mandate to build the IT infrastructure and the services required for implementing Goods and Services Tax (GST).
CGST - The GST levied on an intra state transaction (same sate) has two components - CGST and SGST. The CGST or the Central Goods and Services Tax is the central component of GST that subsumes all indirect taxes collected by the centre (e.g.: CED, ST, etc.). The tax collected under this component becomes the revenue for the central government.
GSTIN - GSTIN or the Goods and Services Taxpayer Identification Number is a unique PAN-based 15-digit number given to a taxpayer who registers themselves under the GST law in a particular state of India. (A tax payer will have to register for the GST across all the states they operate in and the GSTIN will vary from state to state.)
GSTN - GSTN stands for the Goods and Services Tax Network. It is a non profit, non-government private limited company that will provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of the Goods and Services Tax (GST).
HSN code - The Harmonized System of Nomenclature (HSN) is an internationally accepted method of naming, classifying and identifying products; each identified by a 2-8 digit code (depending on your aggregate turnover - 1.5 crores (2 digits), 5 crores(4 digits) or more and sourcing method - local(2-4 digits) or imports(8 digits)), arranged in a legal and logical structure and governed by specific rules.
IGST - The IGST or the Integrated Goods and Services Tax will apply to all interstate state transactions. It will be uniform across all the states and is expected to be applicable to all forms of supply - be it sale, stock transfer or import of goods. The revenue earned under the IGST will be split between the central government and the destination state.
SAC - The SAC or the Services Accounting Code is an method of nomenclature that will be used to identify, classify and define services under the GST. They have already been defined under the service tax law and is expected to remain the same for the most part.
SGST - The GST levied on an intra state transaction (same sate) has two components - CGST and SGST. The SGST or the State Goods and Services Tax is the state component of GST that subsumes all indirect taxes collected by different states of India (e.g.: State VAT, Luxury tax etc.). The tax collected under this component becomes the revenue for the state government.
Additional cess - Cess in general refers to a tax that is levied on top of another tax. They are usually earmarked for a specific purpose. Under the GST, the additional cess will levied upon certain goods for the first five years post GST roll out in-order to compensate for the loss in taxes borne by the state governments due to the uniformization and reduction of tax rates associated with demerit goods under the GST.
Aggregate Turnover - Aggregate Turnover is the aggregate value of all taxable and non-taxable supply of goods and/or services, and exports of goods and/or services of a person (with a PAN) excluding taxes.
Global Product Development Company, with operations in the United states of America and Asia.
Emphorasoft is pioneer in delivering proven cost-effective business applications and solutions for medium size to small-scale companies across many industries.
Why are we best in this business ?
A little planning and use of accnu (online accounting solution) can put you top of your business.
With GST, new tas system has been introduced by replacing multiple indirect taxes with a one single tax system it is challenging
for the business owners to follow the new process.
Having new paperwork, new tax preparation, tracking all invoices, bills, returns and new filing process to deal are nerve wracking to start with. A little advance planning and using the accnu can make your life easy and put you on top of your business.
Here are few good reasons you want accnu:
Auto updated GST rates pre-set in accnu to make your life easy. accnu automatically calculate the GST math for you when you select a service or goods. This will save lot of your time and efforts while invoicing or billing to customers Accnu allows you to create invoices in the way you want it.
It will keep track of products, customers, invoices, purchase orders, bills and vendors of your business and are auto populate while you invoice your customers GST registration consultation:
Accnu support team will help you registering your business with GST compliences and walk you through the process.
Our on-demand charted accounant will assist you if you need any consultation on taxation.
GST Returns Filling:
There are 13 returns you need to file in a callender year from which you need to file 3 returns every month.
accnu can manage all your GST return fillings on your behalf with nominal fee, that way you can concentrate on your business.
Complete Financial Solution and more :
Accnu is not just a accounting software but it is a complete accounting soultion your business need.
It start with your book keeping, invoicing, ordering, billing, managing your customers, vendors, products or services, inventory ,accepting filling returns, providing beatiful and easy reports and dashboards. Everything you need to manage your business.
We know every one is busy with doing their business and does not have time to record their business transactions.
At Emphorasoft, we have a professional accountants who help you record all your transactions and create your invoices in the system and manage your book keeping for a very marginal charges. this will really help you to keep your business GST complient and spend your quality time on focusing to grow your business. you can save lot of money and resouces by outsourcing your book keeping.
Other Core Features :
Available any ware and any time !!!
Yes you heard that right! Here are the few awesome features that a business should consider and prepare to switch to cloud-base ERP System.
- Future updates and enhancements at zero cost.
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Thoughtful questions is how quickly a business can be restored to its previous state from the backup.
With accnu you don't have to worry about that. Your system will be backed up every day without your intervention,
that gives you the flexibility and the comfort you need when it is required most.
Invest in streaming operations and growing your business, not expanding your IT infrastructure. A wise company should have a proactive approach on where to invest to get achieve higher goals.
By replacing your existing system and other peripheral systems with accnu you can increase your transaction volume 7X without adding staff and reduce your month end closing cycle to 1 or 2 days.
One Business - One Solution:
If you think that your business is growing and your spending most of your time on handling day-day business processes
then it is a time to consider a clould based business solution that fits all your business needs.
Moving your company operations to "accnu", Integrated cloud-based solution allows you more efficient and effective business operations that are essential for growing your business and enabling employees to respond to the customer needs in a real time.
Real time Dash Boards and Analytics:
By moving the existing system to accnu, It is possible to access real-time information on elegant dashboards and eye caching reports allows you to analyze the situation and take better financial decisions.financial information and reporting helps business to grow. With MySmartScm top management can easily access reports to make financial investments in right place.
They no longer need to depend on multiple sets of excel spreadsheets which are produced by legacy system and dispersed centrally.
Our GST Knowledge Partner
CMA Bhogavalli Mallikarjuna Gupta Co- Founder of india-gst.in.
CMA Bhogavalli Mallikarjuna Gupta is an associate member of Institute of Cost Accountants of India and also has a Master’s Degree in Financial Management. He is also a Post Graduate Diploma holder in Computer Sciences. He is also a certified and qualified independent director.
Having two decades of experience in areas of in Finance, Accounting, Costing and Project Accounting in the manufacturing industry and IT industry. He has developed and implemented Enterprise Resource Planning Applications ( JD Edwards, Oracle E- Business Suites, Fusion Applications, LN, Baan) and Business Intelligence tools.
He is subject matter expert on Goods and Service Tax, speaker at various professional and trade bodies He is also an author of the book “Rollup Your Sleeves for GST, The Impending Tax Reform India”. His articles on GST are published in various souvenirs and online portals.