Guide on Goods and Service Tax (GST) for beginners

This article is a basic guide on Goods and Service Tax (GST) for beginners, which will be further improved from time to time. The purpose of this guide is to explain GST in a simplified manner and linking the useful information that every tax payer must know.

Goods and Service Tax (GST) is a new tax regime that India has chosen for collecting indirect taxes. It is going to be a mix of VAT Laws, Service Tax laws and Excise laws.

Earlier we had VAT for states, Taxes on services and excise by central government. However GST aims to amalgamate these taxes into a single tax called as GST.

Principal to charge GST will be based on value addition at each stage. Normally the value of taxable sale will be the transaction value.

GST is to be paid by every registered tax payer except where supply is not chargeable. Input tax credit can be availed on purchase made.

Under GST government will have 3 major Act to regulate the tax levy and tax collection.

1. Central Goods and Services Tax Act
2. Interstate Goods and Services Tax Act and
3. State Goods and Services Tax Act by each state.

Unlike the general perception it may not pass the one nation one tax dream. On each supply/sale tax will be paid to central government as well as state government.

In invoice issued under GST, tax will be paid under different headings such as CGST, SGST and IGST. Normally if you are selling/supplying goods within state, you need to charge SGST and CGST otherwise IGST.

If the tax rate of product you are supplying is 18%, you have to divide this 18% as 9% for CGST and 9% for SGST. Complete 18% in case of IGST.

Like any other tax law, there should be 3 important elements present to attract levy of tax.

1. Taxable things,
2. Taxable Event, and
3. Taxable person

In case of GST, Taxable thing is Goods or services or both which are taxable under GST Laws.

Taxable event is supply, unlike actual sell it is supply of Goods or services or both when taxable event occurs.

Taxable person is a person who supply goods or services or both in course of or incidental or in connection with business.

It should be noted that GST is applicable on goods supplied with consideration or without consideration. Certain specific supplies/sell are included in GST to be classified as supply even though no money is collected by seller.

For example, in course of business if you sold a Dell laptop in exchange of an Apple laptop, GST will be charged on this transaction. I have written an article to calculate value on these kind of transactions. You can read valuation rules to understand this concept further.

Registration liability under GST

You need to register under GST if your annual turnover exceeds Rs. 20 Lakhs. Further if you are already registered under existing laws such as VAT, Service tax or excise you need to migrate to GST.

I recommend to read the article, Registration procedure and applicability.

Do not miss to read GST on E-commerce and GST on E-commerce online sellers to understand how GST will impact this sector as GST specifically contains provision governing E-commerce industry.

Tax Returns under GST

Every tax payer need to file a monthly return, along with details of inward and outward supplies.

You can read, Returns under GST for complete understanding of returns and information to be filed by tax payers.

However, person who have opted composition scheme return will be filed on quarterly basis instead of monthly basis.

It should be noted that filing of return is compulsory even if you had zero supply during the month of quarter.

Along with monthly return, you need to file an Annual statement along with Audit report (if applicable).

Audit under GST

You have to get your accounts audited by a chartered accountant or a cost accountant if aggregate turnover during the year exceeds 1 crore.

This audit report has to be submitted along with annual statement before 31^st December.

E-Way bills under GST

Those who have heard of E-Sugam in Karnataka, this is a similar concept. All states have a form for transportation of goods delivery.

Similarly in GST we will have a E-way bill for goods supplies valued more than 50,000. E-way bill is to be generated by providing invoice details.

A reference number will be generated for smooth transportation of goods.

GSTN Suvidha Providers or GSP under GST

GST is huge and there will be huge number of tax payers who will file their returns, upload sales and purchase details on GST Portal.

Though government has a sophisticated web portal for filing all these details, however government has invited private players to provide these facilities to tax payers.

These private players are named as GSP or GSTN Suvidha Providers. These private companies to first register with GSTN to become a GSP.

You can sign up with any GSP with file your returns or other information and all information that will be available on government portal will also be available on these portals.

Now, the mind crunching activity is to decide whether to sign up with a GSP or use government managed GSP portal for filing your returns.

You can decide whether to select GSP managed web portal or government portal based on UI, UX and cost factor.

User experience should be the main criteria for selection of GSP.

There are many GSP already registered with government.