GST - Goods and ServiceTypes

Tax: Meaning,
Objective, Advantages, and
Calculation
What is GST?
GST, or Goods and Services Tax, is an indirect tax
imposed on the supply of goods and services. It is a multi-
stage, destination-oriented tax imposed on every value
addition, replacing multiple indirect taxes, including VAT,
excise duty, service taxes, etc. Goods and services are
included under a single domestic indirect taxation law for
the whole of India. In this regime, tax is charged at each
point of sale.
History of GST (Goods and Services Tax)
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fascinating. It was first implemented as a tax regime in 1954
in France and later adopted by several countries, including
Australia, Canada, the United Kingdom, Spain, South Korea,
Vietnam, Monaco, etc.
In India, the GST came into force in 2000 after a committee
was set up by the then Prime Minister Atal Bihari Vajpayee, a
task force. Headed by the finance ministry’s advisor, Vijay L.
Kelkar, he concluded that GST could help improve the tax
structure in India. In 2006, the Union ministry of finance
proposed GST introduction from 1 April 2010. But, the
Constitution Amendment Bill to facilitate the introduction of
GST law was introduced in 2011. However, four
supplementary GST bills were passed in Lok sabha and
approved by the cabinet. Later, GST came into force on 1 July,
2017.
Upon implementation, the GST replaced the following central
taxes:
• Service tax
• Duties of excise
• Central excise duties
• Cess and surcharge
• Additional duties of excise
• Additional duties of customs
• Additional duty of customs
GST services also subsumed the following state taxes:
 • Entry tax
• Purchase tax
• Luxury tax
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• Central sales tax
• Entertainment tax
• Taxes on advertisements
• State cess and surcharges
• Taxes on gambling and lottery
Note that taxpayers who have an annual turnover of up to Rs.
20 lakh can be exempted from the Goods and Services Tax.
This cut off is at Rs. 10 lakh for special category states. The
GST law also extended the option of choosing a compounding
scheme and threshold exemption.
What is indirect tax?
Indirect tax is the tax levied on the consumption of goods and
services. It is not directly levied on the income of a person.
Instead, he/she has to pay the tax along with the price of goods
or services bought by the seller. The person paying the tax to
the government and the person bearing the liability to pay the
tax are thus, two different people.
Different types of indirect taxes in India
Earlier, different types of indirect taxes were imposed as
follows:
Service Tax: This is charged on the services availed by the
customer. For example, if the person books a hotel
accommodation, service tax is charged on the hotel booking
amount.
Excise Duty: This is paid for the manufacturing of goods. For
example, if a person manufactures cars, he is liable to pay
excise duty on manufactured cars.
Value Added Tax (VAT): This is paid on the value addition in
price during the sale of goods. For example, when the
wholesaler sells goods to a retailer.
Custom Duty: This is paid on the goods imported from outside
India.
Stamp Duty: This is paid on the sale of immovable property.
Also, stamp duty is mandatory on all types of legal
documents.
Entertainment Tax: This is levied on every transaction related
to entertainment. For example, movie tickets, video game
arcades, stage shows, exhibitions, amusement parks, and
sports-related activities.
Direct Taxes v/s Indirect Taxes
1. Meaning
Direct TAX-If a tax levied on the income or wealth of a person
is paid by that person (or his office) directly to the
Government, it is called direct tax.
Indirect TAX-If tax is levied on the goods or services of a
person is collected from the buyers by another person (seller)
and paid by him to the Government it is called indirect tax.
2. Incidence and Impact
Direct tax-Falls on the same person. Imposed on the income of
a person and paid by the same person.
Indirect TAX-Falls on different persons. Imposed on the
sellers but collected from the consumers and paid by sellers.
3. Burden
Direct tax-More income attracts more income tax. Tax burden
is progressive on people.
Indirect TAX-Rate of tax is flat on all individuals.
Therefore more income individuals pay less and lesser portion
of their income as tax. Tax burden is regressive.
4. Evasion
Direct tax-Tax evasion is possible.
Indirect TAX-Tax evasion is more difficult
5. Inflation
Direct tax-Direct tax helps in reducing the inflation.
Indirect TAX-Indirect inflation. tax contributes to
6. Shiftability
Direct tax-Cannot be shifted to others
Indirect TAX-Can be shifted to others
7. Examples
Direct tax-Income Tax, Wealth Tax, Capital Gains Tax,
Securities Transaction Tax, Perquisites Tax.
Indirect TAX-GST. Excise Duty.
Objective of GST
GST definition states that it is a tax that has replaced multiple
indirect taxes, like VAT, service taxes, excise, etc., in India.
Notably, gaining an insight into the objectives of this tax
regime helps to understand GST meaning better.
For instance, the primary objectives of the GST service tax
include:
• Elimination of the cascading tax effect: Under the
GST bill, taxes are levied only on the net value- added
portion, which eliminates the tax-on-tax regime and, in
turn, lowers the cost of goods.
• The subsumption of all indirect taxes: Except for a
few, indirect taxes under the state and central
government are subsumed into Goods and Services Tax.
• Increase the tax to GDP ratio and revenue surplus:
A high tax to GDP ratio indicates higher tax collections,
a sign of a strong economic system. A wider tax base
and increased tax compliance are more likely to result
in higher revenue for the government through GST
services.
• Decrease corruption level and tax evasion: The
GST bill aims to bring transparency in the tax system
resulting in fewer instances of a false input tax credit.
• Increase tax compliance: GST online aims to
increase tax compliance, especially in small and
unorganised businesses, by simplifying the GST
platforms registration and returns filing process.
• Increase in overall productivity and efficiency: The
Goods and Services Tax in India aims to remove
constraints regarding logistics and the lengthy claim
process of an input tax credit. Also, by subsuming the
entry tax, the overall productivity of enterprises is
expected to increase.
Types of GST
There are four different types of GST, which are as follows:
• State Goods and Services Tax (SGST): The state
government charges SGST on intra-state goods and
services transactions. Later, the revenue is collected by
the state where the transactions in question were carried
out.
• Central Goods and Services Tax (CGST): The central
government charges CGST on the intra-state transaction
of goods and services. The concerned body is also
responsible for collecting the revenue generated through
this tax.
• Integrated Goods and Services Tax (IGST): This GST
tax is charged on inter-state transactions of goods and
services and applied on imports and exports. Note that
both centre and State share the revenue collected through
IGST as per the GST bill.
 The state goods and service tax portion of this tax is
collected by the state where the goods and services in
question were consumed.
• Union Territory Goods and Services Tax (UGST): This
GST tax is levied by Union Territories and charged on all
transactions carried out in any UT in India. It is similar in
terms of payment rules on the GST platform and
distribution.

Transaction Old New Revenue

regime regime
Sale within a VAT + Central Shared
particular state (for Excise/ GST & between the
example sale within service State state and
Maharashtra) tax+central GST centre
excise
Sale between states Excise/ Integrated The centre
or more (for example service tax+ GST shares the
Sales from Delhi to central sales revenue as per
Maharashtra) goods’
Integrated destination
GST centre

GST registration
GST registration procedure
As per the GST regime, all businesses liable to pay service tax,
VAT, or central excise have to register under goods and service
taxes. An applicant can initiate the GST registration process on
the GST portal. Once the application is submitted, the online
portal will generate ARN status instantly.
With the help of the ARN, an applicant can check his/ her
application status. Applicants can also post queries if needed.
Usually, taxpayers will receive their GST registration
certificate and GSTIN within a week of their ARN generation.
ARN stands for Application Reference Number and is used to
track GST registration application status. GSTIN is a 15-digit
code allotted to every taxpayer registered with GST. Note that
GSTIN is mandatory for businesses with an annual turnover of
more than Rs. 20 lakh.
Documents required for GST registration
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complete the process:
Sole proprietor or individual
• PAN
• Address proof
• Aadhaar card (owner)
• Bank account details
• Photograph (Owner)
Partnership firms inclusive of LLP
• PAN
• Address proof (partners and place of business)
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• Registration certificate or board resolution (for LLP)
• Photographs of authorised signatories and partners
• Proof of appointing an authorised signatory
Hindu Undivided Family (HUF)
• PAN (HUF)
• Address proof
• Bank account details
• Photograph of the owner
• Aadhaar card and PAN card (Karta)
Company (both Indian and foreign, public and private)
• PAN (company)
• Bank details
• Address proof (principal place of business)
• PAN and Aadhaar card (authorised signatories)
• PAN and address proof (directors of the company)
• Article of association or Memorandum of association
• Proof of appointment of an authorised signatory
• Photographs (directors and the authorised signatory)
• Certificate of incorporation provided by the Ministry of
Corporate Affairs
Advantages of GST
The introduction of GST is touted as one of the biggest tax
reforms in India. To know more about the impacts of GST, it is
imperative to learn more about its advantages and
disadvantages.
In this regard, the most prominent advantages of GST include:
• Removal of the cascading effect of tax: The
implementation of GST has brought indirect taxes under
one umbrella, successfully eliminating the cascading tax
effect and lowering the amount of compliance one must
consider. For example, previously, service tax and VAT
had their respective returns and compliance, but with the
introduction of GST, entities only have to file one
return. This, in turn, simplifies the process of inputting
tax credit claims.
• A uniform tax structure: GST has brought the entire
country under one tax regime; it facilitates uniformity
in processes, laws, and tax rates across India.
• Simplified GST online process: All Goods and
Services Tax processes can be initiated online,
including registration and Goods and Services Tax
return (GSTR) filing. This has simplified the process
significantly and made it possible for start-ups to get
registered with GST services without hassle in one
place.
• Regulation of the unorganised sector: The GST bill
effectively streamlines the processes related to online
compliance, payments, and claim processes. Further, it
helps the unorganised sector, bringing them directly
under the regulation of goods and service tax norms.
• GST extends the composition scheme for all small
businesses: Small businesses with an annual turnover
up to Rs 1.5 crore (Rs 75 lakh for special category
States) can become beneficiaries of GST’s composition
scheme. The said scheme allows businesses to reduce
their taxes.
Besides these, the GST bill has replaced 17 indirect taxes with
one uniform tax. It has lowered the cost of goods and boosted
demand for them, bringing in more revenue for both the centre
and state governments.
GST registration fees
It is important to note that the government does not levy GST
registration fees if an individual decides to register through the
online GST service tax portal. However, suppose that an
individual wants to seek professional help from an authorised
chartered accountant or GST practitioner for GST services. In
that case, they will have to pay a fee to avail of the professional
service.
GST login for existing users
Existing users can access GST service details by simply
logging into the GST portal. Notably, the GST bill and its
online portal have simplified the GST registration and
payment process. The portal has also made accessing details
such as allotted GSTIN, orders, and notices easier. You will
require the credentials for GST login, such as username and
password, and follow a few steps to access such details from
the GST portal.
The below steps explain the GST portal login process.
Step 1: Visit the official
Goods and Services Tax
portal
Step 2: Navigate to the right-
hand corner of the homepage
Step 3: Click on the ‘Login’
button
Step 4: Enter your username, password, and CAPTCHA code
and click on the ‘login’ button
Step 5: After completing GST login, you will be redirected to
the dashboard, where you will find the summary of GST
credit, ‘pay tax’ tab, ‘file returns’ tab,
Annual aggregate turnover or AATO, saved forms, notices
received, etc.
If you do not have your credentials, you can easily retrieve
them through the GST services portal. All you need to do is
click on the ‘forgot password’ button on the login page and
follow the subsequent steps.
GST rates slabs
In a broader sense, there are 4 GST tax slabs in India. GST
rates have been structured to ensure that food items and
essential services are kept in the lower tax brackets, while
luxury items and services fall in the higher brackets. Based on
their type, more than 1,300 goods and nearly 500 services are
categorised under four different goods and service tax slabs –
5%, 12%, 18%, and 28%. Note that the GST on gold does not
belong to these categories and is at a slab of 3%. Similarly,
semi-precious and rough precious stones come under the
special GST services slab of 0.25%.
GST rates in India
The GST rates in India can be summarised as follows:
Under the 5% slab
Goods: The goods under this slab include apparel up to Rs.
1,000, agarbatti, Braille items (watches, paper, typewriters),
coir mat, cashew nuts, domestic LPG, edible oils, floor
covering, fish fillet, fertilisers, first-day covers, frozen
vegetables, footwear up to Rs. 500, hearing aids, insulin, milk
food for babies, medicines, matting, packed paneer, packaged
food items, pizza bread, postage stamps, roasted coffee beans,
revenue stamps, rusk, sugar, stent, sabudana, stamp-post marks,
skimmed milk, and tea.
Services: The services under this slab include road transport by
motor cabs and radio taxis, supply of tour operators’ services,
restaurants with a turnover of up to Rs. 50 lakh, air travel by
economy class, sale of advertisement space, transport services
such as railways and airways.
Under the 12% slab
Goods: The goods included under this slab encompass
ayurvedic medicines, almonds, apparel above Rs. 1,000,
animal fat sausage, butter, bhujia, chutney, chess board, carom
board, cake server, reagents and diagnostic kits, exercise
books, fruits, frozen meat products, fish knives, forks, fruit
juice, glasses for corrective spectacles, ghee, jam, jelly, mobile
phones, namkeen, notebooks, non-AC restaurants, pickle,
packed coconut water, sewing machine, tongs, tooth powder,
work contracts.
Services: Services under this section include hotels, guest
houses, inns with a tariff between Rs. 1,000 and Rs. 2,500
each night. This slab includes air tickets purchased for the
business class as well.
Under the 18% slab
Goods: Some of the goods covered under the purview of this
slab include aluminium foil, furniture, biscuits, bamboo,
branded clothing, CCTV, camera, cakes, corn, curry paste,
envelopes, footwear priced above Rs.
500, hair oil, instant food mixes, ice cream, mineral water,
mayonnaise, monitors, padding pools, pasta, printers, preserved
vegetables, soups, soaps, salad, dressing, steel products, tissues,
tampons, toothpaste, weighing machines (both electronic and
non-electronic variants), etc.
Services: Under 18% GST slab include telecom services, AC
hotels that serve alcohol to patrons, IT services, and hotels
with room tariffs ranging between Rs. 2,500 and Rs. 5,000
each night.
Under the 28% slab
Goods: Aerated water, personal use aircraft, aftershave,
automobile motorcycles, ceramic tiles, chocolates without
cocoa, dishwasher, deodorants, dye, hair shampoo, paan
masala, paint, shaving cream, shavers, vacuum cleaners, water
heater, washing machine, etc., are a part of this slab.
Services: Services attracting 28% GST include 5-star hotels,
gambling and betting in race clubs, hotels with a nightly room
tariff of Rs. 5,000 and above, cinema and entertainment.
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GST calculation
How to calculate GST
In India, GST (Goods and Services Tax) is calculated as a sum
total of GST payable on reverse charge, inward supplies, and
output supplies. This total is derived individually for every
month, and you will have to pay the amount calculated while
filing GST returns every month.
As a taxpayer, you will have to consider all aspects and
charges such as reverse charge, exempted supplies, inter-state
sales, along with eligible, and non-eligible ITC, while
calculating GST. Calculating the right GST amount will help
you evade the 18% interest that will be levied if your payment
falls short of your actual obligation.
You can also use the GST HYPERLINK
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Government of India’s GST portal. It is to find out your total
tax liability by filling in all the necessary amounts under the
mentioned heads, such as return filing month, current ledger
balance, tax liability under RCM, etc.
GST calculation formula
GST amount = (original
price x GST rate) / 100
Net price = original
price + GST amount
example: Say you are selling a commodity from Mumbai and
sending it to Kolkata for Rs. 10,000, and the rate of GST
applied on it is 12%.
The GST amount applicable for it will be (10,000 x 12) / 100
= Rs. 1,200; and the net price will be Rs. 10,000 + Rs. 1,200 =
Rs. 11,200.
GST return filing
When to file GST returns?
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filed by taxpayers with the concerned tax administrative
authority. This document comprises income/ sales or/ and
purchase/ expense and proves useful in computing an entity’s
tax liability.
Under the GST tax regime, registered dealers have to file
GSTR, which includes:
• Sales
• Purchase
• Output GST
• Bank account details
• Input tax credit
As per goods and service tax norms, regular businesses that
have an annual aggregate turnover of more than Rs. 5 crore
must file one annual return and two monthly returns, i.e., a
total of 25 returns in one year at the online GST platform.
However, under the QRMP scheme, the number of Goods and
Services Tax returns varies for those who file quarterly GSTR-1
filers. In that case, they have to complete a total of nine GST
service tax returns in a year, inclusive of the annual return and
GSTR-3B. Likewise, the number varies for special cases such
as composite dealers, who must file GSTR five times a year.
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New compliances under GST
In addition to filing goods and service tax returns online, the tax
regime has also introduced multiple new systems.
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for inter-state movement of goods on 1 April 2018 and
intra-state movement of goods on 15 April 2018. With the
help of this system, traders, manufacturers, and
transporters can easily generate e-way bills for
transported goods.
It is also beneficial for tax authorities and has helped
decrease time at check-posts. Further, it has even been
effective in reducing tax evasions.
• E-invoicing: The GST bill system applies to businesses
with an annual turnover of over Rs. 100 crore in the
preceding fiscal year. Such businesses must obtain a
unique invoice reference number for all B2B invoices by
uploading them on GSTN’s online invoice registration
portal.
The said portal verifies the accuracy and authenticity of
the invoice and subsequently authorises the businesses
with a digital signature and QR code.
The biggest advantages of e-invoicing include reduction
of data entry error and a boost in inter- operability of
invoices. The system helps transfer invoice information
from IRP to the GST platform and e-way bill portal
instantly. Plus, it eliminates the need to file GSTR-1
manually.
• HSN code requirements: Businesses must mention their
SAC/ HSN code on all supplies of goods or services on
tax invoices from 1 April 2021. For example, B2B
supplies for a registered entity with an aggregated
turnover of up to Rs. 5 crore in the preceding year must
mention their 4-digit HSN code on the invoice.
Similarly, B2B or B2C supplies for registered entities with
a turnover exceeding Rs. 5 crore in the preceding year
have to mention their 6-digit HSN code on the invoice.
Notably, any changes in mentioning 4/ 6-digit HSN or
SAC code must be detailed under Table 12 of the GSTR-1
form.
Disadvantages of GST
The major drawbacks are as follows –
INCREASED OPERATIONAL COST
GST had directed businesses to update their old accounting to
GST-compliant software or ERP to keep their businesses
running.
Nonetheless, the cost of purchasing, installation of software,
along training employees to use GST-compliant software can be
quite substantial. Also, adherence to GST norms has increased
the operational cost for small businesses as more firms are now
forced to hire tax professionals to become more GST-compliant.
HIGHER TAX BURDEN FOR SMEs
Under the old tax regime, only businesses with an annual
turnover of more than Rs.1.5 crore had to pay excise duty.
However, under this new tax regime, businesses with an annual
turnover of over Rs.40 lakh must pay GST.
Compliance Burden
This taxation regime has made it mandatory for companies to
register with GST in all states they operate in. The entire process
of registering with the regulating body, issuing GST-compliant
invoices, maintaining digital record keeping, and filing returns
have increased the burden on SMEs and others significantly.
Additionally, the infrastructure of all states in India is not
equipped to implement the e-governance model followed by
GST.
PENALTY AND FINES
There's a lack of awareness and resources to comply with the
GST system. Many GST taxpayers fail to understand the
nuances of the system resulting in no or less payment of the tax.
The ultimately attracts penalties and fines which elevates their
costs.

Resultantly, several companies find it challenging to adopt or

transition into this regime. Based on this information, a tax-
paying individual can develop a better understanding of the
advantages and disadvantages of GST. In turn, it will help them
develop ways to maximise their GST-related benefits and find
ways around its shortcomings

CONCLUSION
GST has improved the transparency of the indirect tax system in
India. The GST regime has a robust information technology
system, enabling real-time tax payments and credit utilisation
tracking. This has resulted in improved tax compliance and
reduced the scope for tax evasion.