India’s tryst with its most comprehensive indirect tax reform, the Goods and Services Tax (GST), has begun at the midnight launch event on June 30. India woke up to a new era of economic resurgence on July 1. GST aims to make India a common market with common tax rates and procedures and remove the economic barriers thus paving the way for an integrated economy at the national level.
You must have seen the various informative advertisements especially in the print media or the awareness programs and debates on news channels and might have also come across jargon like GSTN, GSP, GSTIN, CGST, SGST, IGST, UTGST since it has become almost impossible to ignore the revolutionary tax reform.
This article is a small effort from our side to acquaint you with the following key terms related to GST:
- GST COUNCIL
The GST Council is a constitutional body headed by the Union finance minister ( Mr. Arun Jaitley) as its chairman and the Minister in charge of Finance or Taxation or any other Minister, nominated by each state government as its member. As per Article 279A (4), the Council is ought to make recommendations to the Union and the States on important issues like taxes, cesses, and surcharges to be subsumed under the GST, goods and services which may be subject to, or exempt from GST, rates of GST, model GST laws and other related matters.
Goods and Services Tax Network (GSTN) is a not for profit, private limited company governed under section 8 of the companies act 2013. The Government of India holds 24.5%( Source: The ET) equity in GSTN, all States and the Empowered Committee of State Finance Ministers, together hold another 24.5% and balance 51% equity is with non-Government financial institutions. The GSTN is responsible for providing the IT infrastructure to introduce GST and connect the databases of states and the center. The information technology system will allow taxpayers to register themselves and file tax returns online. A ₹1,380 crore (Source: Business Standard) contract has been given by GSTN to Infosys to build and maintain technology network for the new indirect tax system.
- GST Suvidha Provider(GSP) & Application Service Provider(ASP)
Taxpayers have an option, either to directly access the G2B portal provided by GSTN or use third-party applications, which can provide varied interfaces on desktops, laptops, and mobiles to connect with the GSTN portal via secure GST system application program interface.GSPs and ASPs will provide much-needed support to taxpayers in the IT ecosystem for GST. ASPs will act as a link between the taxpayers and the GSPs.They will focus on taking taxpayers’ raw data on sales and purchases and converting it into the GST returns. The GST returns, or GSTRs will then be filed on behalf of the filer with GSTN via the GSP.But, while the extent of support provided by a GSP may be limited to providing enriched access to the G2B portal, the support provided by ASPs will extend much further and will address most of the taxpayer compliance difficulties.
- GST Identification Number (GSTIN)
It is a unique state-wise PAN-based 15-digit alphanumeric code allotted to every business registered under GSTN. Those who have not applied for GSTIN yet can do so now. The GSTN window is reopened for registrations and will remain open for three months. New applicants will get provisional certificates. Once they fill in the required details, their GSTIN will be confirmed.
Central Goods and Services Tax will come in place of central taxes like central excise duty, central sales tax, service tax, excise duty, additional customs duty or countervailing duty and special additional duty of customs. The revenue collected under CGST is for the Central Government. However, Input Tax Credit of CGST will be utilized against the payment of both CGST and IGST.
State Goods and Services Tax will be levied on the Intrastate movement of goods and/or services. The revenue collected under State Goods and Services Tax is for the State Government. However, Input Tax Credit will be utilized against the payment of both SGST and IGST.
Integrated GST will be levied on the supply of any goods and/or services in the course of interstate trade across India. Any supply of goods and/or services in the course of import into India and export of goods and/or services from India will also come under the purview of IGST.
Union Territories GST provide benefits same as that of SGST in Intra-Union Territory supply of goods and/or services. Currently, UTGST is applied to union territories of India namely Chandigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli, Andaman and Nicobar Islands. The definition of ‘states’ in the constitution includes union territories with their own legislature, namely Delhi and Puducherry. Therefore, they will still enjoy the SGST provisions. This means that on supplies within the union territories of Delhi and Puducherry, the taxes levied will be CGST +SGST, and on supplies from Delhi/Puducherry to another state/union territory, the tax levied will be IGST.
- Input Tax Credit (ITC)
The ITC forms the backbone of the GST regime in India. The GST is essentially a tax on value addition at each stage of the supply chain; every person, who is supplying goods or rendering services or an agent acting as such on behalf of such a person, can claim credits (over input taxes paid at each stage of supply chain) in the subsequent stage of value addition. The end consumer will, therefore, bear only the GST charged by the last supplier in the supply chain. An important point to note here is that the credit of CGST paid on inputs may be used only for paying CGST on the output, while the credit of SGST on inputs may be used only for paying SGST, except in the case of inter-state supply of goods.
- Output Tax
It means the CGST/SGST on the taxable supply of goods and/or services made by a taxable person or by his agent. It excludes the tax payable on a reverse charge basis.
- Reverse Charge Mechanism(RCM)
The GST has to be typically paid by the supplier of goods and services. But in some cases, the liability to pay the tax falls on the buyer known as Reverse Charge Mechanism. Following are some of the cases where RCM is applicable:
– When a business buys goods or services from a supplier who is not registered to pay GST. It should be ensured that all the entities who supply you goods and services are registered for GST. If they aren’t, you will have to pay the GST on their behalf under the reverse charge.
– Government departments making payments to vendors above a specified limit are required to deduct tax (Tax Deducted at Source, TDS) and e-commerce operators are required to collect tax (Tax Collected at Source, TCS) on the net value goods or services supplied through them.
– In the case of import of goods, an importer is liable to pay the GST under the reverse charge mechanism.
- Anti-Profiteering Clause
Clause 171 has been inserted in the GST bill which provides that it is mandatory to pass on the benefit due to a reduction in the rate of tax or from input tax credit to the consumer by way of commensurate reduction in prices. This clause further provides for the establishment of an authority against anti-profiteering in order to ensure its compliance. This is to prevent any inflationary impact on the price of commodities following the GST implementation.While the end consumer may have some reason to cheer, the industry is still doubtful of its implementation.
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