GST Roadmap

Goods & Service tax is an indirect tax which is levied on sale of goods & service. GST is a value added tax it means tax will be charged only on value addition at each point of sale. In India it is implemented on 1^st July’2017 and remove all other indirect taxes like VAT, Service Tax, Octroi & many other.

Features of GST:

1. GST will be leviable on supply of goods & service rather than manufacturing of goods or provision of service.
2. GST is destination-based taxation.
3. GST has subsumed all other indirect taxes like VAT, Service Tax, Excise, Purchase tax, Entry Tax, Entertainment tax & other indirect tax.
4. GST has a dual GST model; it means tax will be levied by central & state simultaneously. Central tax will be called CGST and state tax will be called SGST.
5. In case of Inter-state supply IGST will be charged which is collected by central government.
6. GST Input tax on purchase of goods can be adjusted with output tax liability on supply of service which is not available in previous taxation system.
7. In earlier taxation system excise was added to the cost of product but in GST system it will not added to the cost of product because excise has been replaced with GST.

Elements of GST:

1. GST is levied by Central Government, State Government & Union territory Government.
2. CGST will be go into account of central government, SGST will go into account of state government, UTGST will go into account of Union territory government & IGST will be shared between Central government& state government.
3. There is threshold limit of taking registration under GST. If aggregate turnover is more than 20 lakhs then GST registration is mandatory for some states this limit is 10 Lakhs.
4. There is a concept of Composition scheme for small & medium business where there is less compliance as compare to normal scheme. If turnover is less than 1.50 crore than entity can opt for composition scheme.
5. In GST there is a concept of E -way bill which is required to generated if value of supplied goods is more than the specified limit for tracking the movement of goods.

Types of GST:

1. CGST: CGST is known as central goods & service tax which is charged by central government on supply of goods and service within the state.
2. SGST: SGTS is known as state goods & service tax which is charged by state government on supply of goods and service within the state.
3. IGST: IGST is known as integrated goods & service tax which is charged by central government on supply of goods from one state to another state.
4. UGST: UGST is known as union territory goods & service tax which is charged by union territory government on supply of goods & service with in union territory.

GST has been introduced in which countries: GST has been introduced by France in 1954 for controlling the evasion of taxes and removing the cascading effect. Since then about 160 countries has been adopted GST which includes Canada, Singapore, United Kingdom, Brazil, South Korea, India & Many other countries. In India GST has come effect from 1^st July’2017.

Who has introduced GST in India / Roadmap of GST Introduction in India:

• Year 2000: In India first talk on GST has been started in 2000 at the time of Atal Bihari Vajpayee Government. Committee was set up for drafting GST law and representative of states were requested for examining the GST law.
• Year 2004: A task force concluded that existing tax structure has many issue/lapses which can be fixed by GST law or incorporated in GST law.
• Year 2005: First time finance minister of India said that it is government goal to implement GST in entire country.
• Year 2006: In budget, finance minster set the GST implementation date 1^st April 2010.
• Year 2007: In this budget also GST implementation deadline was 1^st April 2010.
• Year 2008: In this year Election commission was finalised dual structure of GST and implementation deadline remain same.
• Year 2009: First discussion paper was put on paper for further discussion and inputs and suggestion from various stakeholders.
• Year 2010: Government pushed computerised commercial tax and implementation of GST deadline postponed.
• Year 2011: Government introduce constitution amendment bill for introduction of GST but opposition party was not ready therefore bill was sent to standing committee for examination.
• Year 2012: Discussion on GST bill was started by standing committee.
• Year 2013: Standing committee submitted its reported to the parliament.
• Year 2014: GST Bill reintroduced by finance minister in parliament.
• Year 2015: GST Bill was passed in Lok Sabha and but not passed in Rajya Sabha.
• Year 2016: Finance minister prepare GST draft model law and made available for the public first time for taking their views and in the same year Rajya Sabha also passes the bill with four major amendments and after consent of president GST bill has become an ACT.
• Year 2017: GST Council finalised GST structure, GST revenue, Revenue sharing agreement and announced that GST will be applicable in India from 1^st July’2017.

GST Registration Process:

• Step1: Go to GST portal
• Step2: Select New Registration and fill the below details
  • Select Taxpayer from drop down
  • Select State and then district from drop down
  • Enter business name of the entity
  • Enter PAN of the entity
  • Enter mobile no. and email id on which you will receive OTP
  • Click on proceed
• Step3: Enter the OTP received on mobile no. and email and click on continue
• Step4: Temporary reference number (TRN) will come
• Step5: Again, go to GST portal and select TRN enter the TRN and captcha code and click on proceed
• Step6: OTP will come on mobile no. and email id given earlier, enter the OTP and click on proceed.
• Step7: GST application status will show as “Draft” there are two icon there one is edit and second is delete. click on edit.
• Step8: Next page will come and there will be 10 section on this page where need to fill all the relevant details and soft copy of necessary document must be submitted here. Some of the documents are as below:
  • Photographs
  • Proof of place of business
  • Constitution of tax payer
  • Bank account details
  • Authorization form
• Step9: Once all the details filled and documents submitted go to the verification page and tick on the declaration and submit the application by any of the three mode:
  • Application submit using DSC
  • Using E-sign: In this mode OTP will come on mobile no. linked with Aadhar
  • Using EVC: This is electronic verification code, in this mode OTP will come on registered mobile no. of the applicant
• Step10: After completing the above step a success message will be displayed on the screen and ARN (Application reference number) will be sent on mobile no and email.
• Step11: After verification of the document GST number will be allotted to the applicant and applicant also check the status by entering ARN on GST Portal.

Benefits of GST:

1. GST removes the cascading effect.
2. GST introduces composition scheme for small tax payer which has lesser compliance
3. Hassle free goods movement by removing octroi & entry tax.
4. Reduce the cost of the product by removing the multiple taxes.
5. Reduces the operation cost by allowing the input of tax paid service availed against the output liability on sale of goods.
6. Unorganised sector has been regularised.
7. Reduced the evasion of tax.

Drawback/Limitation of GST:

1. Increased the cost of IT infrastructure because GST is 100% online compliance
2. GST increases the working capital requirement of business because now company need to pay tax on transferring material between branches or plant to branches if both are situated in different state.
3. Dual structure of GST instead of one GST
4. Some products are not covered under GST like petroleum product.
5. Multiple tax slab instead of single tax rate which creates confusion among the business and professional.

Products/Service not covered under GST:

1. Petroleum product
2. Motor Spirit (Petrol)
3. Aviation turbine fuel
4. High Speed diesel
5. Natural gas
6. Service provided by an employee to the employer in relation to his employment
7. Service provided by court/tribunal
8. Actionable claims other than lotteries, betting and gambling
9. Duties performed by MP, State legislature, panchayat and local authorities
10. Sale of land and building other than under construction building

Examples:

In the below example A is manufacture of Pen who buys raw material of Rs.50 which includes Rs.5 GST, his overhead cost is Rs.30 and he added profit margin of Rs.20 which totals become Rs.100.

Now A sold pen to B at Rs.100 and charged GST of Rs. 10. His output tax is Rs. 10 which will be adjust with his GST Input paid on Raw material therefore net output liability will come to Rs. 5 which A will pay to the government.

In the same way purchase value of B will be 110 which includes GST Input of 10 and B will sale to C at 130 after considering overhead cost and profit margin. His output liability will be Rs. 13 which will be adjusted with his input GST of Rs.10 which is paid to A therefore net output liability of B will be Rs. 3.

At the final stage product will be sold to end consumer by retailer at Rs.160 and he will charge GST Rs. 16 from customer but his net output liability will be Rs. 3.

So, in the above chain total GST will be Rs.16 which is paid by the end user but paid to the government at different stage of supply chain. Rs.5 will be paid be raw material seller, Rs.5 will be paid by manufacture, Rs.3 will be paid by Whole seller and Rs.3 will be paid by Retailer.

Particular	A (Manufacturer)	B (Whole seller)	C (Retailer)
Purchase Value		110	143
Raw Material Cost	50	0	0
Overhead Cost	30	10	10
Profit	20	10	7
Sale Value	100	130	160
GST @ 10%	10	13	16
Total Sale Value	110	143	176
Input tax	5	10	13
Output tax liability	5	3	3

Conclusion: GST works on the concept of one nation one tax, earlier every state has different tax rate for the same product and multiple tax levied by states but after introduction of GST there is one rate and one tax on each goods and service. Earlier separate tax is leviable on goods and service but now same tax i.e. GST will be leviable on goods and service both and tax paid on goods or service can be taken as input and reduced from the tax collected on sale of goods or service. GST also removes the cascading effect of tax and improve the hassle-free movement of goods.