The Goods and Services Tax (GST) is an indirect tax system set to be introduced in India starting July 1, 2017. GST, the overall aim of which is to reform indirect taxation in India, will replace the traditional taxation exercised by the central and state governments. The idea behind GST is to amalgamate several central and state taxes into a single tax.
To a consumer, GST promises a reduction in the overall tax burden on goods, currently estimated to be at 25%-30%. The new regime also implies free inter-state movement of goods, free of state-level tax or entry tax. GST accounting is also expected to reduce paperwork involved in goods transfer.
Advocates of the tax regime point out that the GST model will minimize crusading or double taxation. GST is planned to make taxation a simpler online procedure, making it easier to administer and enforce. Another aspect of GST is that it will regulate the unorganized sector.
On the other hand, critics of the tax model say that it will imply higher tax burden for manufacturing SMEs and lead to an expansion of operating costs. For businesses, complying to GST may call for an overhaul of the existing software systems. It will also imply registration in multiple states. Moreover, unlike traditional systems, GST levy will fall in the middle of the year.
A registered taxpayer opting for the composition scheme must pay tax at a rate which is not more than 1% for manufacturer and traders and 5% for restaurants.
GST will cover all kinds of trade ranging from the sale, transfer, purchase, barter, lease, as well as import of goods and/or services. The taxation, administered through a dual model, will be applied both at the Union and State government levels.
Since GST is a consumption-based tax, the levy will be in the state where the goods or services are consumed and not the state where they are produced.
The composition scheme was conceived to help small traders with annual turnover less than INR 1.5 crore. This scheme is strictly for businesses that deal with goods. While services providers are out of its purview, restaurant sector taxpayers can opt for the scheme.
A dealer who opts for composition scheme are not eligible for input credit and cannot issue tax invoice.
Change is never easy. It is important to take a leaf from global economies that implemented GST and overcame the teething troubles to experience the advantages of having a unified tax system, easy input credits, and reduced compliances.
Once GST is implemented, most of the current challenges of this move will be a story of the past. India will become a single market where goods can move freely and there shall be lesser compliances to deal with for businesses.
An individual registered under GST can utilize the inputs in the below mentioned order:
Below here are the GST rates analysis against current regime. The rates are based on the latest GST bill:
Taxes Subsumed In GST
Returns to Be Filed
How your enterprise registers for GST will depend on whether you are a new user or one who is already registered under the traditional taxation system.
If you are a new user and not registered for the conventional statutory indirect taxation such as VAT, ST or Excise etc., registering your business will involve the following procedures:
If you own a business which is already registered for indirect taxation such as VAT, ST or Excise etc., you will need to register your business for migrating to GST.
You will need to take the following steps:
If you need help registering for GST, you can seek the services provided by chartered accountant firms in this field.