GST (Goods and Services Tax) Overview
GST is a tax on goods and services, classified as an indirect tax. It is imposed on the sale and purchase of goods and services. The GST rate is 18% per annum.
Types of GST:
1. SGST (State Goods and Services Tax):
SGST is a tax levied by the state government on intra-state transactions (transactions within the same state).
2. CGST (Central Goods and Services Tax):
CGST is a tax levied by the central government on goods and services within the state.
3. IGST (Integrated Goods and Services Tax):
IGST applies to inter-state transactions (transactions between different states). It is the tax levied by the central government on transactions where goods and services are sold between states.
Note: SGST and CGST are applicable for intra-state transactions, while IGST is for inter-state transactions.
GST Rates
- Exempted: Certain goods and services are exempt from GST.
- 5%: GST is charged on goods like essential food items and some services.
- 12%: GST is levied on goods and services such as processed food, computers, and other semi-luxury items.
- 18%: This is the standard GST rate and is levied on most goods and services.
- 28%: GST is applicable on luxury items and items of high value.
- 28% + Cess: This is applicable for very specific high-end luxury goods or services.
GST Example: Transaction Scenarios
Scenario 1:
- Mr. X has a salary of Rs. 10,000, while Mr. A and Mr. B each have loans of Rs. 20,000.
- The total cost of the project is Rs. 30,000/month.
- GST rate: 18%
| Particulars | Mr. X to Mr. Y (Gujarat to Gujarat) | Mr. A to Mr. B (Gujarat to Rajasthan) | Mr. B to Customer (End User) in Rajasthan |
|---|---|---|---|
| Sales Amount | Rs. 10,000 | Rs. 20,000 | Rs. 30,000 |
| CGST (9%) | Rs. 900 | Rs. 2700 | - |
| SGST (9%) | Rs. 900 | Rs. 2700 | - |
| IGST (18%) | - | Rs. 3600 | - |
GST Registration and Compliance
Turnover Limit for Registration: Businesses whose turnover exceeds Rs. 50,000 are required to register for GST.
- E-Way Bill: Businesses involved in transporting goods worth more than Rs. 50,000 must generate an E-way bill.
Types of Taxable Persons:
- Casual Dealer: A person who occasionally sells goods/services, requiring GST registration.
- Registered Dealer: A person engaged in continuous business transactions who is registered for GST.
Documents Required for GST Registration:
1. For a Proprietorship:
PAN card, Aadhar card, shop establishment certificate, and bank details.
2. For a Partnership:
PAN card, Aadhar card, shop establishment certificate, and partnership deed.
3. For a Company/LLP:
PAN card, Aadhar card, shop establishment certificate, certificate of incorporation, and MOA/AOA.
GST Return Filing
Monthly Returns:
- GSTR-1: Details of taxable sales. To be filed within 10 days of the month-end.
- GSTR-2: Details of taxable purchases to claim Input Tax Credit (ITC). To be filed within 15 days.
- GSTR-3: A summary of final sales, purchases, and tax payments. To be filed within 20 days.
- GSTR-5: For foreign non-resident taxpayers. To be filed within 20 days.
- GSTR-6: For Input Service Distributors. To be filed within 20 days.
- GSTR-7: For TDS (Tax Deducted at Source) authorities. To be filed within 10 days.
- GSTR-8: For e-commerce operators to collect tax. To be filed within 10 days.
Quarterly Returns:
- GSTR-4: For businesses using the composition scheme. To be filed within 18 days.
Annual Returns:
- GSTR-9: For the annual summary of transactions. To be filed by December 31st.
Final Returns:
- GSTR-10: To be filed when a business cancels or surrenders its GST registration.
GST Liability Calculation
Let’s take the example of Mr. X (Registered Dealer):
- Input Tax Credit: Mr. X has a credit of CGST Rs. 900 and SGST Rs. 900.
Transactions:
1. Mr. X sells goods to Mr. B (Rs. 8,000 within Gujarat):
- CGST 9% = Rs. 720
- SGST 9% = Rs. 720
2. Mr. X transfers goods worth Rs. 5,000 to his Rajasthan branch:
- IGST 18% = Rs. 900
3. Mr X sells goods worth Rs. 15,000 to Mr C in Mumbai:
- IGST 18% = Rs. 2,700
- Total Tax Liability: Rs. 5,040 (CGST + SGST + IGST)
Less: Input Tax Credit:
- CGST: Rs. 720 (within Gujarat) & Rs. 180 (Rajasthan branch)
- SGST: Rs. 720 (within Gujarat) & Rs. 180 (Rajasthan branch)
- IGST: No credit for IGST paid in interstate sales.
Net Tax Liability:
- CGST: Rs. 540
- SGST: Rs. 270
- IGST: Rs. 3,240
Conclusion
The GST system is designed to simplify tax compliance by replacing multiple indirect taxes like VAT, excise duty, and service tax with a single, uniform tax. Businesses need to ensure they maintain the correct documentation, file returns on time, and understand the GST structure to avoid penalties.
