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Get to know GST tax slabs
Learn about the GST registration process
View the current GST rates in India
Learn how to calculate GST
The Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and the GST tax came into effect on 1st July 2017. GST brings uniformity in taxation and has replaced many indirect taxes in India.
Let’s delve a little deeper to understand the system of taxation before and after GST.
Prior to GST rates being finalised, the Centre and the State in their own merit and under their laid-out laws and systems calculated and charged taxes on a commodity or service depending upon multiple stages of taxation. At each node of the economic ecosystem, services or goods were subjected to independent variable taxes based on the destination and stage of the product in question. For example, VAT or Value-Added Tax, was collected by each state in India individually on your purchases of goods and services.
There were two issues with this consumption tax: Firstly, the percentage of this tax varied from state to state. Secondly, the tax you paid was levied on the cost of goods or services, after subtracting the cost of previously taxed materials or services. This garnered a lot of confusion and often led to double taxation.
GST was adopted to improve the collection of taxes at every nodal point and to integrate the country through a uniform GST tax rate. By removing the lengthy list of indirect taxes levied individually by the states and the center, the Indian economy would also receive a significant boost. GST was implemented after these four bills were passed by the government: Goods and Services Tax Bill, Integrated GST Bill, Compensation GST Bill, and Union Territory GST Bill.
GST was brought into action to reform the entire taxation system followed in India. The objective of GST bill is to offer a simplified system for taxpayers, both consumers and suppliers alike. According to the Finance Minister of India, Mr. Arun Jaitley, this simplified system will also help keep inflation in check. Moreover, GST addresses the lack of uniformity in various taxes applicable on different commodities and services in different states. By fixing the GST rates on goods and services depending on which category they come under, GST has made taxation more consistent and uncomplicated.
GST follows a 4-tier tax slab since the government found it unjustified to levy uniform tax rates on both necessities and luxuries. Thus, the GST tax slabs applicable to commodities and services in India are 5%, 12%, 18% and 28%. The regular commodities for mass consumption such as food grain, eggs, jaggery, salt, bread, etc., do not attract any taxation. Other commonly used commodities such as soaps, tea, sugar, spices, and toothpaste attract 12%-18% tax, which is lower than the earlier rate of more than 20%.
The vital benefits of GST are:
- It consolidates several different taxes into one
- It abolishes the cascading tax effect
- It reforms Indian taxation and represents the country as a common national market
- It helps make Indian goods, commodities, and services more competitive in the global as well as the local markets
Additionally, GST updates the present taxation system by removing an exhaustive list of direct taxes from the system and simplifies the taxation system with only three components of GST: CGST, SGST, and IGST. Here is the list of the earlier direct taxes that are no longer applicable:
- Central Excise Duty
- Duties of Excise
- Additional Duties of Excise
- Additional Duties of Customs
- Special Additional Duty of Customs
- State VAT
- Central Sales Tax
- Purchase Tax
- Luxury Tax
- Entertainment Tax
- Entry Tax
- Taxes on advertisements
- Taxes on lotteries, betting, and gambling
To benefit from GST, you will need to register to for it. Here is how you can register for GST.
GST registration process Since Prime Minister Narendra Modi has approved GST, it is compulsory for any and every individual and company who is engaged in the supply of good and services to register for it. The good news is you can register from the comfort of your home on the GST registration portal following a few easy steps.
- Log on to www.gst.gov.in registration portal
- From the menu on the page choose ‘Services’, click on it and select ‘Registration’
- Choose ‘New Registration’ to begin the Part A of the new GST registration process
- When a new page appears, select your status as GST practitioner or a tax payer
- Once the form opens, fill up the form with details such as the legal name of the business, the district and state for the business, email address, mobile number, PAN, etc.
- A successful submission of the details will take you to the verification stage; enter the OTP you receive and click ‘Proceed’.
- On successful verification, you will receive a Temporary Reference Number, which you will need to use to continue Part B of the new GST registration process.
- Enter this number and the Captcha Code to begin Part B.
- Once you start on this second stage of the registration, your previous application form opens with new and different tabs. These include Business Details, Authorised Signatory, Promoter/Partners, Authorised Representative, Principal Place of Business, Additional Places of Business, Bank Accounts, Goods and Services, State Specific Information and Verification. Click on each of these tabs to enter the required details and then choose ‘Save & Continue’ to proceed.
- At this stage, you will be prompted to fill in information regarding your bank account and upload a few documents.
- Now you will be asked to add your digital signatures on your completed application. You can do this using EVC, E-Signature, or Digital Signature Certificate. Companies and LLPs can use only Digital Signature Certificates.
- After this is done, click the ‘Submit’ option and all your updated details along with the uploaded documents will be saved.
- As a second stage of verification you will be required to sign within a pop-up window.
- Once done, your application will be submitted and an acknowledgment will be sent to your registered mobile number and email in the form of a reference number.
Here is the list of documents you will need to upload during the registration:
In case of proprietors, you do not have to submit this document. In case of a partnership firm, the partnership deed is a must.
You can submit any of the following documents as a proof of the business address.
- Latest property tax receipt/Municipal khata copy/Electricity bill is you own the property of business
- Rental or lease agreement for rented business space
- The documents/certificates issued by the Government for Special Economic Zones (SEZs)
All the owners and partners of the company are required to submit their individual Aadhaar Card, PAN, Voter ID, Ration Card, etc.
You can submit a scanned copy of the first page of your company’s bank passbook or a cancelled cheque for the same account.
Once all your documents are in order, your submission will be reviewed by a GST personnel who is in charge of verification. After thorough verification, your application will either be approved and you will be issued a GST number or it will be rejected based on incomplete documentation or application error. You can validate your submission at this stage to get a clearance on your application.
What will happen if you do not register and pay GST? You are liable to a penalty of 10% of your tax amount, subject to a minimum of Rs.10,000 in case you fail to register and pay GST. In case you are found to be deliberately withholding GST payments, then a 100% penalty will be levied on your tax amount.
Now that you know how to pay GST, here’s some clarity on how to calculate GST.
GST in India is calculated as a sum total of GST payable on reverse charge, inward supplies, and output supplies. This total is derived individually for every month and you will have to pay the amount calculated while filing GST returns on a monthly basis.
As a taxpayer, you will have to consider all aspects and charges such as reverse charge, exempted supplies, inter-state sales along with eligible and non-eligible ITC while calculating GST. Calculating the right GST amount will help you evade the 18% interest that will be levied in case your payment falls short of your actual obligation.
You can also use the GST calculator available with government of India’s GST portal to find out your total tax liability by filling in all the necessary amounts under the mentioned heads such as return filing month, current ledger balance, tax liability under RCM, etc.
Instead of calculating the GST applicable on the services or commodity you are providing manually, you can use the GST calculator to arrive at the total figure for your GST. The calculator is available on most financial websites. Doing the calculation via the calculator will leave no scope for miscalculation and you will be able to determine GST bases on the cost of products and services. The formula for the addition of GST is:
GST Amount = (Original Price x GST Rate) / 100
Net Price = Original Price + GST Amount
Example: Say you are selling a commodity from Mumbai and sending it to Kolkata for Rs.10,000, and the rate of GST applied on it is 12%.
The GST amount applicable for it will be (10,000 x 12) / 100 = Rs.1,200; and the net price will be Rs.10,000 + Rs.1,200 = Rs.11,200.
Goods and services have been categorised under the basic GST slabs of 5%, 12%, 18%, and 28%. But, GST rates are not applicable to goods and services for mass consumption which includes the following:
Jute, fish, eggs, fresh meat, milk, chicken, curd, fresh fruits, butter milk, vegetables, natural honey, bread, salt, besan, prasad, sindoor, printed books, bindi, judicial papers, newspapers, handloom, bangles, horn cores, bone meal, bone grist, horn meal, hoof meal, palmyra jaggery, hulled cereal grains, colouring and drawing books, etc.
Here is a list of goods and services that are considered under the varied GST tax slabs.
- Apparels up to Rs.1,000
- Braille paper
- Braille typewriters
- Braille watches
- Cashew nuts
- Coir mats
- Domestic LPG
- Edible oils
- First day covers
- Fish fillet
- Floor covering
- Footwear up to Rs.500
- Frozen vegetables
- Hearing aids
- Milk food for babies
- Packaged food items
- Packed paneer
- Pizza bread
- Postage stamps
- Revenue stamps
- Roasted coffee beans
- Skimmed milk
- Stamp-post marks
- Transport services such as airways and railways
- Air travel in economy
- Sale of advertisement space for print media
- Supply of tour operators’ services
- Road transport by radio taxis and motor cabs
- Small restaurants earning turnover up to Rs.50 lakhs
- Animal fat sausage
- Apparel above Rs.1000
- Ayurvedic medicines
- Cake servers
- Carom board
- Chess board
- Diagnostic kits and reagents
- Exercise books
- Fish knives
- Frozen meat products
- Fruit juice
- Glasses for corrective spectacles and flint buttons
- Non-AC restaurants
- Packaged dry fruits
- Packed coconut water
- Playing cards
- Preparations of vegetables
- Sewing machine
- State-run lotteries
- Tooth powder
- Work contracts
- Air tickets by business class
- Guest houses, inns, and hotels with room tariff ranging between Rs.1000 and Rs.2500 per night
- Aluminium foil furniture
- Bidi Patta
- Branded garments
- Curry paste
- Electrical transformer
- Flavoured refined sugar
- Footwear priced above Rs.500
- Hair oil
- Ice cream
- Instant food mixes
- Kajal pencil sticks
- Mineral water
- Mixed condiments
- Mixed seasonings
- Optical Fiber
- Padding pools
- Swimming pools
- Preserved vegetables
- Salad dressings
- Steel products
- Weighing machinery (non-electrical or electronic)
- Services Subject to 18% GST:
- AC hotels serving alcohol to customers
- Guest houses, inns and hotels with room tariff ranging from Rs.2500 and Rs.5000 per night
- IT services
- Telecom services
- Aerated water
- After shave
- Aircraft for personal use
- Automobiles Motorcycles
- Ceramic tiles
- Chewing gum Molasses
- Chocolates devoid of cocoa
- Hair clippers
- Hair shampoo Sunscreen
- Pan masala
- Shaving creams
- Vacuum cleaner
- Vending machines
- Waffles and wafers coated with chocolate - Wallpaper
- Washing machine
- Water heater
- Weighing machine ATM
- Gambling and race club betting
- Cinema and entertainment
- 5-star hotels
- Guest houses, inns and hotels with room tariff of Rs.5000 and above
When do I have to file GST? Under the GST system, all regular businesses have to file three monthly returns and one annual return. Even though this means you file a total of 37 returns in a year, the most positive aspect of this system is that you are required to manually feed in the details pertaining to your income, services, vendors, etc. only once when you are filing return for the first time.
The second time onwards, the information is auto-populated based on the previous return you and your vendors submitted. As per GST updates put on www.gst.gov.in, make a note of the following revised dates to file your GST on time.
GSTR-6 (Jul'17 - Apr'18): May 31st, 2018
GSTR-6 (Jul'17 - Apr'18): May 31st, 2018
GSTR-4 (Jan-Mar, 2018): Apr 18th, 2018
GSTR-5A (Mar 2018): Apr 20th, 2018
GST TRAN-2: Jun 30th, 2018
RFD: 10–18 months after end of the quarter for which refund is to be claimed
Quarterly return for registered persons with aggregate turnover up to Rs.1.50 crore
GSTR-1 (Jan-Mar, 2018): Apr 30th, 2018
Turnover exceeding Rs.1.5 crore or opted to file monthly return
GSTR-1 (Mar 2018): May 10th, 2018
GSTR-1 (Feb 2018): Apr 10th, 2018
Yes! Providing taxable services to clients in any form as the owner of a small business or as a freelancer entails you to file GST. If you are a freelancer selling software services then unlike the past taxation system, you will be exempted of the cascading effect of service taxes and VAT. Instead, you will enjoy more of a breather with GST being your only obligation. However, as a freelancer you can enjoy a basic exemption if your turnover is within Rs.20 lakh.
Yes, you can file GST returns online in two ways. Either use your registered account on the www.gst.gov.in portal or file GST via reliable accounting software. The GST portal will automatically show your next return under the 'Things to do' tab when it is time for you to file again. The software, on the other hand, will have all your data saved from the previous times, which will make it easier and quicker to file the next GST returns. So, keep a tab of the return dates and set a reminder to file GST on a timely basis.
You can file various types of GST returns every month. As per the CGST Act, 2017, apart from the common returns such as GSTR 1, GSTR 2, and GSTR 3, you will even have to file an annual return. If you are registered under the GST Composition Scheme then you will have to file your returns on a quarterly basis along with the annual GST return. You will have to either take the direct route or apply file GST online or use download the GST forms and fill them offline and then upload them to file GST.
GST PCT 1: Application for enrolling as a Goods and Service Tax practitioner
GST PCT 2: Application for Enrolment Certificate for Goods and Service Tax practitioner
GST PCT 3: Show cause notice for disqualification
GST PCT 4: Order of rejection of application for enrolment as GST practitioner/or disqualification to function as a GST practitioner
GST PCT 5: Authorisation/withdrawal of authorisation of a Goods and Service Tax practitioner
Filing GST returns on time will ensure that you get timely refunds and it will help you avoid penalties arising from delays. Further if you fail to file your GST return on time then a fine is levied as penalty on your total liability. However, The GST Council has announced relaxed filing of GST Returns for the first six months. Penalty levied as late fees for not filing GSTR-1 is Rs.200 per day of delay (Rs.100 as per CGST Act and Rs.100 as per SGST Act). The delay is calculated from the next day after the due date. However, as per the latest GST news, the late fees have been reduced to Rs.50 per day and Rs.20 per day respectively when you file a nil return.
GST increases the ease of doing business and based on the flexible taxation parameters set out since July 2017, GST will minimise your interactions with tax officials and maximise your independence as a business owner. This will financially strengthen your way of doing business by stopping you from paying hefty amounts for unethical tax practices to get your work done. Additionally, your earlier financial obligations towards VAT, Central State Tax, Excise, Octroi, and other cesses have been completely demolished. This will now allow you to save at least 32% of your revenue, which as a manufacturer, you may have lost paying varied taxes in the past.
If you are running a service-based business then unlike past taxation slabs, you will now have to pay 18% as GST. So, this will obviously need you to build at least 3% more working capital strength as compared to earlier 15% taxation. However, if you are in a manufacturing business maintaining warehouses at different parts of the country, then under GST system you will benefit by saving on your tax obligations. This is because in the past you had to pay state levied taxes at several checkpoints while distributing your readymade goods, pay VAT on import-export duties, and pay CST based on the state rates for where you were selling your goods. However, now the simpler GST system allows you to save on your capital.
GST is indirect tax and unlike your personal Income Tax you do not have to pay GST from your own pocket. You charge your customers GST on the services or goods they avail and purchase from you. You simply collect these taxes paid by them on what you offer and submit it to the government. But, you need to follow a stringent calculation for this as your GST amount is determined based on your sales and other coefficients. In addition, your invoice to your customers will carry the GST rate you are taxing them on based on their actual purchase.
This means that you are stuck with dues based on the services you have provided. However, once you register on the GST portal then as per the GST law, the filing of returns without payment of taxes will not be considered. This means that unless you have paid the self-assessed tax in full and filed your return and your vendors have also filed their return, the ITC or input tax credit for your vendor will not be confirmed.
Thus, it is important to keep a tab on the latest GST news from time to time, follow a strict regime to file GST and charge your customers the right amount as well.
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