What is GST?

  • The advent of the GST (full form- goods and services tax) has replaced all of the indirect service taxes imposed on commodities and services, excluding a few of the state taxes.
  • GST, which is commonly known as the "Goods and Services Tax", was announced in the budget session of the year 2018. The goods and services tax is an indirect tax imposed on consumer products and services.
  • The advent of the GST (full form- goods and services tax) has replaced all of the indirect service taxes imposed on commodities and services, excluding a few of the state taxes. Now, after implementing GST, the consumers are liable to pay a specific percentage as the goods and service tax instead of paying a bunch of indirect taxes on the commodities and services.

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What is GST?
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GSTN (Goods and Services Tax Network)

 

The goods and services tax network is an online portal developed by Infosys Technologies and the Information Technology Network. The GSTN portal makes it easier for tabulating and calculating the taxation procedures and the databases related to GST.

 

This network is accessible to the general public, and any information updated on this portal is essentially public information. This portal can be accessed by the individuals registered with the GST portal, the central and state governments, and the business entities that fall under the umbrella of GST taxation.

 

GST history: Passing of the bill

 

After almost seven months of the formation of the Modi government in the year 2014, the former Finance Minister of India- Mr Arun Jaitley, proposed the proposition of the GST Bill in the Lok Sabha.

 

Later on, in 2015, Arun Jaitley announced the deadline for implementing the GST bill for the year 2017. But, the GST was imposed pre-maturely in the budget session of May 2016.

 

Finally, in the budget session of May 2016, after a lot of criticism and opposition from the opposition parties, the Lok Sabha announced the passing of the GST bill.  

 

Division of GST:

 

In India, the goods and services tax, i.e. GST, is divided into the following four categories:

  1. 5% GST
  2. 12% GST
  3. 18% GST
  4. 28% GST

 

In lieu of Covid-19, the 44th meeting of the GST Council announced revised rates of the essential commodities and services which are mandatory for the treatment of the disease. Following are the revised rates of the Covid essential commodities and services:

 

Covid essentials

Prior rate of GST

Revised rate of GST

Pulse oximeters

12%

5%

Hand sanitizers

18%

5%

Thermometers and other such equivalent instruments

18%

5%

Cremation furnaces and their installation rates

18%

5%

Ambulance services

28%

12%

 

The following commodities are exempted from being under the umbrella of the goods are services tax:

 

  • Products related to petroleum
  • Alcohol
  • Electricity

 

Only in the case of these essentials and commodities, the consumer is not liable to pay the goods and services tax; rather, the taxation on these commodities and essentials is regulated by the separate state governments.

 

An addition of 22% or more is added along with the other previous rates of GST to the following products:

 

  • Products containing tobacco
  • Luxury cars
  • Aerated drinks

 

The indirect taxes, which were earlier imposed on consumer services and products, were calculated to be roughly around 26.5%. After the imposition of the goods and services taxes, the indirect taxation on regular commodities and services is roughly around 18%.

 

The regulation and revision of the indirect tax rates under GST are maintained and regulated by the statutory GST Council. The imposition of GST made sure that the country's economic problems were resolved to a certain magnitude since now the consumers were to pay a fixed tax rate on different products and services.

 

But, since its implementation, GST has experienced a certain level of backlash from economists and critics. The following are some of the examples of backlash faced by the Central Govt. prior to the imposition of GST:

 

Backlash on GST prior to its imposition

 

  • Moderation of taxes: The critics have pointed out that with the implementation of GST, the Indian system will not handle, calculate, and regulate taxation activities. They further add that it seems unfeasible that we would be able to process as much as 3.5 billion invoices every month.
  • Inflation: There are experts like Neha Saraf and Sonal Verma (who are the co-authors of- The Note) who have mentioned that although the reduction of the tax rates may cause deflation in the short run up to 33 basis points, for the long run, the imposition of GST can potentially cause inflation of 60 basis points.
  • New GST laws: With the imposition of a new tax, taxation laws were also certainly revised. The experts critiqued that this could possibly create chaos in the Indian law system as the lawyers try to grasp the knowledge of the new taxation laws. They had also further added that the sudden change in the laws could also lead to a possibility of misinterpretation. 
  • Small businesses: Prior to the advent of GST, there were a number of small businesses which didn't fall under the radar of indirect taxation. Now, since the GST was being implemented, the small business owners were to tabulate the taxes they had to impose on their commodities and services if their goods or services fell under the radar of GST.

 

Since we have discussed some of the backlashes the economists and critics made on the imposition of the goods and services tax prior to its implementation, let us take a look at some of the advantages the goods and services tax brought along for the Indian economy.

 

Advantages and benefits of GST

 

 

  • Elimination of indirect taxes: With the imposition of GST, indirect taxes have been brought under a single umbrella. Earlier, a normal consumer was liable to pay several different taxes, and we even had to pay taxes imposed on other taxes, and this system could only be defined by one word- "hectic". With the imposition of GST, almost all indirect taxes have been brought under a single umbrella except for a few goods and services.
  • Changes in VAT: Prior to the imposition of the goods and services tax, the business owners who had a turnover of over 5 lakhs or more were liable to pay the VAT. Now, since the imposition of GST, the threshold for paying the VAT has been increased upto 22 lakhs and above. Hence, now the business owners are not liable for GST registration if they have a turnover of fewer than 22 lakhs per annum. 
  • Simplified online taxation procedure: Even though this was one of the most prime concerns of the critics that the Indian economic system would not be able to handle the filing, refund, and other procedures related to taxation, the implementation of GST has only simplified the process of taxation.

 

GST verification and other such procedures which fall under the same umbrella have been made online. Now, small business owners and other enterprises are able to easily perform GST registration without much hassle. 

 

  • Organizing the unorganized sector: Prior to the imposition of GST, several unorganized sectors such as India's textile and construction industries were hugely neglected in terms of taxation and other criteria. But, since the advent of the goods and service tax, online portals have been launched so that these and other such unorganized industries can pay their tax dues in a regulated fashion.
  • Improved market competition: With the dissolvement of inter-state check posts and reduction in transaction costs, the competition in India's trading and consumer market has certainly been on a hike. The World Bank had suggested that GST implementation is possibly one of the best measures taken by the Indian govt. For the improvement of the Indian economy.
  • Better control on tax evaders: Since all of the taxation formalities of GST have been made online, and this gives the monitoring body of taxation more autonomy and control over regulating the process of tax compliance. The tax evaders can now be easily bought under the radar of the GST Council, and proper action can be taken against such bodies, individuals, and organizations.

 

The statutory GST Council administered the regulation and monitoring of the taxation procedures, laws, and conducts under GST. 

 

More about the GST Council

 

The GST council constitutes almost 33 members, i.e. 31 members represent their respective states and union territories that are under the legislation of the Indian Govt. and the remaining two members from the GST Council represent the Central Govt.

 

The GST Council constitutes of the following members:

 

  • The chairperson of the council – The Union Finance Minister
  • Union Minister of States in charge of revenue or finance as the member
  • Ministers from each state and union territory in charge of finance and revenue as elected by the respective governments of the states and the union territories (as the members)

 

The GST Council is chaired by the Finance Minister of India – Nirmala Sitharaman, who is provided assistance by the finance ministers from all the Indian states.

 

GST verification

 

As a part of the verification process of GST, a unique number code known as the GSTIN, i.e. GST Identification number, is allotted to every individual who is registered to the GST registration portal.

 

The unique code for registration on the GST portal is a 15 digit PAN-based code allotted to every individual. The companies and individuals who fall under the umbrella of GST or are liable to pay the GST are advised by the Central Govt. to register under the GST portal login.

 

Benefits of GSTIN:

 

  1. The GSTIN can be easily accessed by the Central Govt. or any other judiciary body in case of impeachment of law related to taxation.
  2. The authenticity and the credibility of the taxpayer can be easily checked through the GSTIN.
  3. Any individual or business entity can easily register themselves to the portal with the help of a few simple clicks.
  4. It makes the task of paying the tax dues a lot easier and hassle-free.

 

The 15 digit number code of GSTIN consists of the following digits and alphabets:

 

  • First 2 digits- State code of the individual.
  • Next 10 digits- PAN number of the individual.
  • Next digit- Entity number of the same PAN card.
  • Next character- The alphabet Z, which is set by default.
  • The last digit- Check code which can either be an alphabet or a digit; this check code is used for the process of verification in case of an error.

 

Since the 21st of August 2021, the process of GST registration and verification has been subjected to a few drastic changes, such as the individuals being required to link their Aadhar Cards to their GSTIN as per the guidelines of the GST Council.

 

Aadhar authentication of GST registered individuals

 

  • The Aadhar authentication procedure has newly been introduced as a major step in GST verification of the Central Govt. The individuals and business entities registered on the GST portal login must verify their Aadhar Card on the same portal.
  • Individuals and business entities who fail to comply with this new law will be subjected to site verification by the tax department.
  • Individuals who have applied to verify their Aadhar Card for the GST verification portal will be provided approval after 3 business days. 

 

Steps for signing in on the GST registration portal:

 

  1. Open your internet browser and search for gst.gov.in
  2. Once you reach the site, you can click on the application button for GST registration
  3. As the next step, you must enter all your details and provide the necessary documentation mentioned in the portal.
  4. After you have provided the necessary documents and your details on the portal, it will be verified by a designated GST officer.
  5. And finally, as the last step, you will be provided with your unique GSTIN, i.e. GST Identification Number. 
  6. This GSTIN will help you create a login ID in the GST portal, and now you can select a username and password of your choice for the GST portal login.
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