GST Explained – Meaning, Components, and How to Apply
What is GST?
GST, or Goods and Services Tax, is a value-added tax levied on the supply of goods and services in India. It has replaced multiple indirect taxes like VAT, service tax, and excise duty. GST is designed to streamline the taxation system, making it more efficient and reducing the cascading effect of taxes. It is a destination-based tax, meaning it is levied at the point of consumption rather than the point of origin. This is the definition of GST in India. In this article we will talk about features of GST and other GST details.
History of GST (Goods and Services Tax)
The idea of a nationwide Goods and Services Tax (GST) in India was first mooted in 2000 during the Atal Bihari Vajpayee government. A committee was set up to draft the law, but it took almost two decades for the GST to become a reality. The Constitution (122nd Amendment) Bill, 2014, was introduced to Parliament in 2014 and after being passed by both houses and ratified by more than half the states, it became law in 2016. The GST Council, chaired by the Union Finance Minister, was set up to decide on the rates, exemptions, and thresholds, among other things. The GST was finally implemented on July 1, 2017, subsuming multiple indirect taxes at the central and state levels. Register your enterprise with the GST registrar to ensure eligibility for various business loans at Lendingkart that require GST compliance.
Meaning and objective of GST
Meaning of GST:
- GST stands for Goods and Services Tax.
- It is a comprehensive, destination-based indirect tax levied on the supply of goods and services.
- It is applicable throughout India, replacing various indirect taxes levied by the central and state governments.
Objective of GST:
- To create a unified national market by removing barriers to interstate trade and commerce.
- To simplify the tax structure by eliminating the cascading effect of taxes.
- To broaden the tax base and increase tax compliance by bringing more sectors into the tax net.
- To promote ease of doing business by providing a common tax regime.
- To enhance revenue collection for both the central and state governments.
GST registration is crucial for businesses seeking financial assistance. Consult the GST registrar to confirm your business’s GST status, enhancing your credibility when applying for working capital loans.
Advantages of GST
GST offers several advantages. Firstly, it simplifies the tax structure by subsuming various indirect taxes, leading to easier compliance and administration. Secondly, it eliminates the cascading effect of taxes, ensuring that taxes are levied only on the value added at each stage of the supply chain. This helps in reducing the overall tax burden on consumers. Thirdly, GST promotes transparency and accountability in the tax system, as it requires businesses to maintain detailed records of transactions. Lastly, GST facilitates the creation of a unified national market, boosting interstate trade and commerce. Overall, GST is seen as a transformative tax reform that has wide-ranging benefits for the economy. Maintain active registration with the GST registrar to facilitate smoother and quick MSME loan approvals.
Also Read: Types of GST in India – What is CGST, SGST and IGST?
GST registration
The process of GST registration involves several steps:
- Visit the GST Portal: Go to the official GST portal (www.gst.gov.in).
- Click on ‘Services’: On the GST portal homepage, click on the ‘Services’ tab and select ‘Registration’.
- Fill the Registration Form: Select the ‘New Registration’ option and fill in the required details such as PAN, mobile number, and email address. You will receive an OTP (One Time Password) on the mobile number and email address provided.
- Verify OTP: Enter the OTP received on your mobile number and email address to verify them.
- Fill the Form: Fill in the GST registration form with details such as business name, address, nature of business, bank account details, and upload required documents like proof of business, identity, address, etc.
- Submit the Form: After filling in all the details and uploading the documents, submit the form.
- ARN Generation: Once the form is submitted, an Application Reference Number (ARN) will be generated and sent to your registered email and mobile number.
- Processing of Application: The GST officer will verify the details provided in the application and may ask for additional information if required.
- GST Certificate: Upon successful verification, the GST registration certificate will be issued, and you can download it from the GST portal.
- Start Using GST: Once registered, you can start using GST for your business transactions and comply with GST regulations.
Documents required for GST registration
| Document | Description |
| PAN Card | Permanent Account Number (PAN) of the applicant |
| Aadhaar Card/ Voter ID/ Passport/ Driving License | Proof of identity of the applicant |
| Proof of Business Registration | Any document proving the existence of the business entity such as incorporation certificate, partnership deed, registration certificate, etc. |
| Address Proof | Any document verifying the principal place of business such as electricity bill, rent agreement, property tax receipt, etc. |
| Bank Account Details | Scanned copy of the first page of bank passbook or a bank statement containing the name of the account holder, MICR, IFSC, and bank branch details |
| Digital Signature Certificate (DSC) | Required for companies and LLPs (Limited Liability Partnerships) |
| Photograph | Passport-sized photograph of the applicant |
| Letter of Authorization/ Board Resolution | If the application is filed by an authorized signatory, a letter of authorization or board resolution authorizing the person to sign the GST application form. |
| Additional Documents (as applicable) | Depending on the type of business, additional documents such as proof of the constitution of the business, proof of appointment of authorized signatory, etc. |
GST registration fees
The GST registration fees depend on the type of business entity and the state in which the business is registered. Here are some key points regarding GST registration fees:
- No Registration Fee for Some Entities: Small businesses with an annual turnover below a certain threshold (usually ₹20 lakhs, or ₹10 lakhs for special category states) are exempt from GST registration and therefore do not need to pay any registration fees.
- Registration Fees for Other Entities: For businesses that are required to register for GST, the registration fees vary. As of the last update, the fees for normal taxpayers are ₹1000 (₹500 for CGST and ₹500 for SGST/UTGST). For businesses in some special category states, the fees are lower (₹500 total).
- Composition Scheme: Businesses opting for the composition scheme, which is available to small businesses with an annual turnover up to ₹1.5 crores (₹75 lakhs for some states), have to pay a lower registration fee.
- Late Fees: If a business fails to register for GST within the stipulated time or continues to operate without registration, it may be liable to pay late fees in addition to the registration fees.
- Payment Method: The registration fees can be paid online through the GST portal using various payment methods such as credit/debit cards, net banking, or NEFT/RTGS.
Difference between GSTIN and GSTN
The terms GSTIN and GSTN are often used interchangeably, but they refer to different aspects of the Goods and Services Tax (GST) system in India. GSTIN (Goods and Services Tax Identification Number) is a unique 15-digit alphanumeric code assigned to each registered taxpayer under GST. It serves as a crucial identifier for tax purposes and facilitates compliance with GST regulations. On the other hand, GSTN (Goods and Services Tax Network) is the IT backbone and infrastructure that supports the GST regime. It is responsible for the technological infrastructure, including the GST portal, used for GST registration, filing returns, and processing refunds.
Also Read: Check & Verify GSTIN/UIN Number Online?
GST rates slabs
GST rates in India are categorized into five slabs based on the type of goods and services. Here are the different GST rate slabs:
- Nil Rate: Some essential goods and services are taxed at 0%, meaning no GST is applicable on them. This includes items like fresh fruits, vegetables, grains, milk, and healthcare services.
- 5% Rate: This rate applies to essential items such as household necessities like sugar, tea, coffee, coal, and some capital goods.
- 12% Rate: Goods like computers, processed food items, and some other essential items fall under this slab.
- 18% Rate: Most goods and services, including consumer durables, fall under this slab. It is the standard rate for most goods and services.
- 28% Rate: The highest GST rate applies to luxury goods and services like automobiles, consumer electronics, and tobacco products.
When to file GST returns?
The filing of GST returns is a crucial aspect of GST compliance in India. Here are the key points regarding the timing of GST return filing:
- Frequency: GST returns are required to be filed either monthly, quarterly, or annually, depending on the type of taxpayer and their turnover.
- Monthly Returns: Most regular taxpayers (those with an annual turnover above ₹5 crores) need to file GSTR-1 (outward supplies), GSTR-3B (summary of outward and inward supplies), and GSTR-9 (annual return) on a monthly basis.
- Quarterly Returns: Taxpayers with an annual turnover up to ₹5 crores have the option to file quarterly returns for GSTR-1 and GSTR-3B. However, they still need to file GSTR-9 annually.
- Due Dates: The due date for filing monthly GSTR-1 is the 11th of the following month, while GSTR-3B is due on the 20th of the following month. Quarterly GSTR-1 is due on the 13th of the month following the end of the quarter, and GSTR-3B is due on the 22nd or 24th of the month following the quarter, depending on the state.
- Annual Return: The annual return (GSTR-9) is due on or before the 31st of December following the end of the financial year.
- Late Fees: Late fees for delayed filing of GST returns range from ₹50 to ₹200 per day, depending on the nature of the return and the number of days delayed.
New compliances under GST
Several new compliances have been introduced under GST to improve tax compliance and streamline processes. Some of these include the introduction of the e-invoicing system for businesses with a turnover exceeding a specified limit, which aims to reduce tax evasion and errors in invoicing. Another significant change is the introduction of the QR code on invoices for businesses above a certain turnover threshold, which facilitates digital verification. Additionally, the annual return filing process has been simplified for small taxpayers, providing them with a more straightforward compliance procedure. These new compliances aim to enhance transparency, reduce tax evasion, and improve the overall efficiency of the GST system.
Frequently Asked Questions
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