- June 10, 2019
- Posted by: filingfunda
- Category: Uncategorized
In the era of multiple Indirect Taxes (“IDT”), the Indian tax network was getting complex day by day. Indirect taxes such as Excise, Central Sales Tax, State wise Value Added Tax, etc were creating a lot of complexities in the business world. Further, different Input Credit rules were pushing the cost on a higher side and also leading to Cascading effects of the Indirect Tax System.
A simple split between the Goods and Services was not available. For example, the construction of a building with material was considered to include both Goods as well as Services and was accordingly charged on proportionate basis. This was creating a negative impact on the economy.
The Global world had already moved into a GST era where goods and services were taxed under one head. These economies were able to pull new business ventures considering GST as a low compliance law.
It was after considering the above effects, India adopted GST from 1st July 2017 where Goods and Services were brought under one roof and the cascading effects of IDT were eliminated. The tax rates were kept less than the earlier IDT era.
GST is a detination based tax. Accordingly, the GST revenue is shared with the point of consumption. For example, Consider goods manufactured in Maharashtra and are sold to the final consumer in Karnataka. Since Goods & Service Tax is levied at the point of consumption. So, the entire tax revenue will go to Karnataka and not Maharashtra.
Advantages of GST
- Removes cascading effect of tax
- Easy to understand compared to earlier IDT era
- Less compliances
- Higher limit for registration on compulsory basis
Components of GST
GST in India has been classified into 3 types:
|Central GST (“CGST”)||For transactions within the same state (Intra State transactions)||Revenue retained by Centre|
|State GST (“SGST”)||For transactions within the same state (Intra State transactions)||Revenue retained by State|
|Integrated GST (“IGST”)||For transactions with other states (Inter State transactions)||Revenue given to Centre who shall then share with the state based on destination of the goods|
Changes brought in by GST in India
GST has removed this cascading effect as the tax is calculated only on the value-addition at each stage of the transfer of ownership.
This indirect tax system under GST has improved the collection of taxes as well as boosted the development of Indian economy by removing the indirect tax barriers between states and integrating the country through a uniform tax rate.
Registration Limit under GST
Any supplier of goods and/or services having a sale of more than Rs. 20 lakhs per annum is required to get registered under GST. Annum shall mean the financial year beginning from 01st April and ending on 31st March.
Composition scheme was introduced for the small taxpayers considering the size of the business. Any supplier having an annual turnover upto Rs. 1.5 crores in a financial year is eligible to register under the composition scheme. The taxpayer registered under the composition scheme has to file the returns quarterly as compared to the others who file monthly. Further, the tax rate and the filing procedure is simpler for composition scheme. The only disadvantage being that the supplier cannot claim the Input Tax credit of the purchases made.
GST returns and their due dates
|GST return||Turnover < Rs. 1.5 crore per annum||Turnover > Rs. 1.5 crore per annum|
||Frequency||Due Date||Frequency||Due Date|
|GSTR3B||Monthly||20th of the following month||Monthly||20th of the following month|
|GSTR1||Quaterly||30th of the following quarter||Monthly||11th of the following month|
|GSTR2||Filing currently suspended||NA||Filing currently suspended||NA|
|GSTR3||Filing currently suspended||NA||Filing currently suspended||NA|
|GSTR9||Annually||31st December of the next financial year||Annually||31st December of the next financial year|
(For composition tax payers)
|Annually||31st December of the next financial year||Annually||31st December of the next financial year|
Penalty for late filing of returns
- NIL returns : If Nil returns are not filed within the due date, the penalty of Rs. 20/ day ( Rs. 10 for CGST and Rs.10 for SGST) of default calculated from the due date till the date of actual filing of return
- Normal returns: If Normal returns are not filed within the due date, the penalty of Rs. 50/ day (Rs.25 for CGST and Rs. 25 for SGST) of default calculated from the due date till the date of actual filing of return. The maximum is Rs. 5000. There is no late fee for IGST.
Interest for late payment of GST
Delay in payment of GST attracts interest @18% p.a. calculated from the due date of payment till the actual date of payment.
HSN Codes and SAC codes
The Harmonized Commodity Description and Coding System generally refers to “Harmonized System of Nomenclature” or simply “HSN”. It is a multipurpose international product nomenclature developed by the World Customs Organization (WCO). It first came into effect in 1988.
Similarly, SAC codes are used by service providers to identify the service lines.