Introduction to GST: Explaining the concept and purpose of GST

India is a rapid-expanding economy, having not long ago left behind the UK to be the 5th largest economy internationally. The unwind of GST in 2017 is a significant fiscal reform in independent India and has been a tipping point for the nation’s economy. 

 

In this article, we will explore what GST is, the History of GST (Goods and Service Tax), Categories of GST, Purpose of GST, Registration of GST, How to understand the GSTIN – GST Identification Number, GST Payment, and GST Adjustments to Union Budget 2023-2024.

What is GST?

The Goods and Services Tax (GST) is a Value-Added Tax (VAT) imposed on the products and services sold for domestic utilisation. Consumers pay the GST, but the companies selling the products and services send it to the government.

History of GST (Goods and Service Tax)

In 2006, the Union Ministry of Finance suggested introducing GST from 1st April 2010. But, the Constitution Amendment Bill cleared the way for introducing the GST law in 2011, and the cabinet validated four additional GST bills passed in Lok Sabha. Later, GST became operative on 1st July 2017.

Categories of GST

There are four different elements of GST: CGST, SGST, IGST, and UTGST.

● CGST: The in-state supply of goods and services is subject to the imposition of Central Goods and Services Tax.

● SGST: State Goods and Services Tax, similar to CGST, is imposed on selling products or services in a state.

● IGST: Interstate transactions of goods and services are subject to the imposition of Integrated Goods and Services Tax.

● UTGST: Union Territory Goods and Services Tax is applied to selling products and services in the Union Territories in the country.

Purpose of GST

There are the following important purposes of Goods and Services Tax:

· To decrease costs associated with multiple tax compliances

· To increase resourcefulness and competence

· To make taxation easy by removing numerous tax systems

· To enhance the nation’s earnings

· To create ‘One Nation, One Tax’

· To replace most of the indirect taxes

· To increase taxpayer numbers in India

Registration of GST

A company that generates a revenue of Rs 20 lakhs and more in a financial year must apply for GST registration. It is important and compulsory for all service producers, buyers, and sellers to register. Any organisation that fits under GST must register itself in the GST portal developed by the government of India. The registered organisations will get a specific registration number called GSTIN. The entire process takes only 2-6 days to get processed.

Benefits of the GSTIN – GST Identification Number

The state where the individual or entity resides determines the GSTIN and the authorities provide it on the back of the business PAN card. This unique 15-digit identification number is a crucial tool for administering the GST system and offers several benefits.

Benefits to Individuals

Simplified documentation and increased transparency have made the entire experience easy for individuals. GST is a technology-driven tax regime that helps reduce tax evasion and corruption.

Benefits to Businesses

Businesses can claim Input Tax Credits on the taxes paid on their purchases, which helps reduce their overall tax liability. It provides a uniform tax structure across the country and allows more efficient functioning across state borders. Simplified documentation allows easier compliance, and removing check posts across the supply chain allows easier movement of goods through the nation.

GST Payment

Taxpayers must give GST every month and file GSTR-1 and GSTR-3B. Regarding refunds, taxpayers must submit the applicable forms. Taxpayers can make GST payments both online and offline. Taxpayers must originate a challan once they have made the payment.

GST Adjustments to Union Budget 2023-2024

The adjustments in GST, per Union Budget 2023-2024, are as follows:

· Section 10 amended: Composition scheme can choose if taxpayer delivers products through e-commerce operants.

· Section 16 amended: Ineffective to paying supplier invoice value with GST within 180 days from invoice allotment, recipient taxpayer must pay the value with compound interest under section 50.

· Sections 37, 39, 44, and 52: Limits taxpayers from applying GSTR-1, GSTR-3B, GSTR-9, and GSTR-8 after the end of three years from the deadline during the tax period.

Conclusion

 

The Goods and Services Tax (GST) is a tax imposed on most of the products and services sold for domestic use. Consumers pay for it, but the organisations selling the products and services hand it over to the government. GST is widely imposed across the country, favoured by the government for simplifying the taxation system, reducing delays, and promoting transparency, leading to higher compliance from individuals and businesses.

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