All about GST - Meaning, Objectives, Advantages, Types

---

Pre-GST Era

Before the introduction of GST, India's tax structure was a mix of indirect taxes levied by both the Central and State Governments. These taxes included:

• Central Excise Duty : Manufacturers paid Excise duty on production of goods.

• Service Tax : Service tax was paid on various services, distinguishing it from goods.

• Sales Tax : Sales tax was paid on sales of goods leading to cascading taxes.

• Octroi/Entry Tax :On the entry of goods into states. This complex system led to cascading taxes, increasing the overall tax burden on businesses and consumers.

  
  

History of GST

• 2000: Task Force on GST, headed by Vijay Kelkar, recommends implementing GST in India, under Atal Bihari Vajpayee Government.

• 2004: Empowered Committee of State Finance Ministers established to develop GST Model.

• 2006: Finance Minister P. Chidambaram announces GST plan in the Union Budget.

• 2009: First Discussion paper released on GST by Empowered Committee.

• 2011: 115th Constitutional Amendment Bill is introduced in Parliament but gets lapsed.

• 2014: NDA government led by PM Narendra Modi supports GST and revives the process. 122nd Constitutional Amendment Bill reintroduced & passed by Lok Sabha.

• 2016: Bill passed by Rajya Sabha, leading to Presidential assent for 101st Constitutional Amendment. Formation of GST Council to finalize GST Rates & Regulations.

• 2017: GST officially launched & implemented from 1st July, 2017.

• 2020: In response to COVID-19, GST Council introduces measures to support businesses, including deferring tax payments.

• 2021: GST collection hits record high amid economic recovery. E-Invoice mandate, COVID relief, Online Gaming - 28% GST.

• 2022: 5% GST on Electric vehicles & Solar panels, stricter scrutiny on ITC

• 2023: E-invoice Mandate Expansion, Changes to GST on Restaurant Bills.

• 2024: Unified Portal for GST Compliance, GST on NFTs, GST Simplification for MSMEs.

• 2025: Revised GST Rates on Luxury Goods, GST on Services in Digital Economy.

  
  

Salient Features of GST

• Unified Tax System : GST replaces multiple Indirect Taxes like Excise duty, Service tax, Sales tax, Octroi etc.

• Dual Tax Structure : Intra-State (CGST & SGST) & Inter-State (IGST).

• Broad Tax base : Includes wide range of Goods & Services that were previously out of the purview.

• Input tax Credit : Businesses can claim ITC for the tax paid on inputs (goods and services used for business) against the tax liability on output (sales).

• Composition Scheme : For small businesses, lower tax rates.

• E-Way bill System : Track movement of Goods, reduces tax invasion.

• Digitalized unified System : Filing of forms, payment of taxes etc all under unified platform.

• Tax on Value Addition: GST is levied only on the value added at each stage of the supply chain. This ensures a transparent and non-cascading tax structure

• Destination-Based Tax: GST is a destination-based tax system, meaning it is collected at the Point of Consumption rather than the Point of Origin.

• GST Council: A GST Council comprising the Union Finance Minister and State Finance Ministers decides on tax rates, exemptions, and other key policies related to GST.

• Simplified Filing: The GST system aims to simplify the filing process with monthly, quarterly, and annual returns that can be done online, reducing manual paperwork.

• Seamless Movement of Goods: GST has streamlined the interstate movement of goods, removing barriers like checkpoints and state-specific entry taxes.

• Exports and Imports: Exports are zero-rated, meaning no GST is charged on exported goods or services, and imports ****are subject to IGST.

• GST Tax Slabs

  Tax RateApplicable Goods & ServicesPurpose0%Essential goods-milk, eggs, curd, fruits, vegAffordability & accessibility5%Edible oil, tea, coffee, LPG, Life saving drugsBasic necessities12%Butter, ghee, computer, fruit juiceBalance affordability & utility18%Capital goods, industrial intermediaries, toiletriesReasonable prices28%High-end luxury items - car, ac, fridge & sin goods cig & alchoholHighest rate + cess in some cases

• Mandatory Registration under GST

  The minimum GST Annual turnover limit for registration is:

  • Rs. 40 lakhs for businesses dealing in goods.

  • Rs. 20 lakhs for businesses providing services.

  The threshold limit for GST registration is Rs. 20 lakhs for suppliers of goods and Rs. 10 lakhs for suppliers of services in the special category states, which are Arunachal Pradesh, Jammu and Kashmir, Assam, Manipur, Meghalaya, Mizoram, Sikkim, Nagaland, Tripura, Himachal Pradesh and Uttarakhand.

  Here are the categories requiring compulsory GST registration, regardless of turnover:

  • Individuals making inter-state taxable supplies.

  • Casual taxable persons providing taxable supplies.

  • Persons liable to pay tax under the reverse charge mechanism.

  • Electronic Commerce Operators.

  • Non-resident taxable persons providing taxable supplies.

  • Persons required to deduct tax under Section 51.

  • Agents or individuals supplying taxable goods or services on behalf of others.

  • Input Service Distributors.

  • Providers of online information and database access or retrieval services from outside India to unregistered individuals in India.

  • Any other persons or classes of persons as notified by the Government based on GST Council recommendations.

    
    

GST Returns

There are a total of 13 returns under the Goods and Services Tax (GST) regime.

• GSTR-1: This return is for reporting outward supplies or sales.

• GSTR-3B: A summary return that includes details of both outward and inward supplies, along with the payment of taxes.

• GSTR-4: Designed for taxpayers under the Composition Scheme, it provides a summary of their turnover and tax liability.

• GSTR-5: Filed by non-resident foreign taxpayers engaged in taxable activities in India.

• GSTR-5A: Filed by online information and database access or retrieval (OIDAR) service providers.

• GSTR-6: For Input Service Distributors to report the distribution of input tax credit (ITC) among their units.

• GSTR-7: For taxpayers required to deduct Tax Deducted at Source (TDS) under GST.

• GSTR-8: Filed by e-commerce operators to report supplies made through their platform.

• GSTR-9: An annual return that provides a consolidated summary of all monthly/quarterly returns filed during the financial year.

• GSTR-10: A final return filed when a taxpayer's GST registration is canceled or surrendered.

• GSTR-11: Filed by persons having Unique Identity Number (UIN) to claim a refund of taxes paid on their purchases.

• CMP-08: A quarterly return for taxpayers under the Composition Scheme to report their tax liability.

• ITC-04: Filed by taxpayers who are manufacturers to report the details of goods sent to a job worker and received back.

  
  

In addition to these types of GST returns, there are also statements of input tax credit available to taxpayers, namely:

• GSTR-2A (dynamic): Provides a dynamic view of inward supplies as reported by the suppliers.

• GSTR-2B (static): Offers a static view of inward supplies based on the supplier's return.