GST Form: There has been quite a lot of buzz in the country regarding the implementation of GST or Goods and Services Tax which is scheduled to be launched on the 1st of July, 2017. GST is being launched with the aim of revolutionizing the entire tax economy of India. But, why such a big step has been taken? Or why the country needs GST? How is it going to work or affect us? There are so many questions to be answered. But, before that, we need to clear our concepts about GST. In this article, we are going to discuss everything about GST, in-depth.
What is GST?
GST is the implementation of a unified indirect tax all across the country on both goods and services. It calls for the elimination of all other forms of taxation that has been long prevailed in the country. In the present taxation system, goods and services are being taxed at each stage at varying rates by both the Union and the State Government separately. But, under the GST taxation system, taxes will be levied only on the value added at each stage. To put in simple words, it is a single tax that is being collected at multiple points. Thus, the final buyer will shoulder only the GST charged by the last dealer in the chain of supply, with set-off advantages at all the past stages.
The implementation of GST is not something new. It was first introduced in the budget session of 2007-08, and since then it has been long pending. But, under the governance of Mr. Narendra Modi, it has been finally brought into action. Under the GST system of taxation, the government has categorized the various goods and services under various tax slabs of 5%, 12%, 18% and 28% to be followed. Though, it has been noticed that most of the items are being categorized under the 18% tax slab while certain items of daily use have been kept tax free. There are 3 kinds of applicable GST taxes based on the stages of revenue collection:
- CGST (Central Goods and Service Tax): Revenue collected by the Central Government.
- SGST (State Goods and Service Tax): Revenue collected by the State Government for the Intra-State Sales.
- IGST (Integrated Goods and Service Tax): Revenue collected by the Central Government for Inter-State Sales.
How Does GST Work?
GST tax system is consumption based which implies that it is levied on goods and services where the final or actual consumption takes place. GST is collected on every value-added item at all stages of sale and purchase in the supply chain. Through this system, the manufacturer can claim back the GST rate paid by him through tax credit mechanism. But consumer being the last person in the supply chain will have to bear the GST charged by the dealer which means GST is collected at the point of Sale.
It is a system of indirect taxation where the tax is passed on until the last stage of sale wherein the final customer bears the GST charged on the items. Under GST, the final cost to the consumer will come out be much lower than before. This is because GST abolishes the system of double charging at every step of the supply chain.
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Why is GST Important?
The current tax system in India is quite complex. This is because the tax structure is divided into two- Direct Taxes and Indirect Taxes. In the case of direct taxes, the liability cannot be shifted on to someone else. A proper example to this would be Income Tax where a person who earns the income is alone liable to pay the tax imposed on it. Whereas, when it comes to Indirect Taxes, the liability can be passed or shifted on to someone else. This happens when the shopkeeper must pay the VAT on his sale, and he passes it onto the customer. Now, the customer is entitled to pay both the price and the VAT imposed on the item so that the shopkeeper can deposit the collected VAT to the government. The shopkeeper has no other way of recovering whatever he has paid out of his pockets during the time of transactions and therefore, he shifts the liability on to the customer. This leads to the increase in the final cost of the item for the customer. To address this issue, GST is being launched to abolish the system of double charging.
Read More: What is SGST, CGST, and IGST
GST Form and Returns
A GST form is a document that is required to be filed by a taxpayer to the tax administrative authorities of India. According to the GST system of taxation, a taxpayer has to furnish three monthly GST forms and one annual GST form. Similarly, there are different GST forms for taxpayers who are registered under the composition scheme, a person liable to collect or deduct tax and a taxpayer registered as an Input Service Distributor.
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GST forms are for:
- Regular Dealer
- Composite Dealer
- Foreign Non-Resident Taxpayer
- Input Service Distributor
- Tax Deductor
- E-Commerce Operator
- Government department and UN Bodies
Based on the GST law, every registered dealer has to file a GST form or return for the mentioned tax period. A GST form has to be filed even if there was no business activity during the prescribed tax period of return.
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Types of GST Forms and Due Dates:
- GSTR1: Outward supplies made by taxpayers (sales) by 10th of the next month.
- GSTR2: Details of inward supplies of taxable goods and services effected claiming input tax credit by 15th of the next month.
- GSTR3: Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of the amount of tax by the 20th of next month.
- GSTR4: Quarterly return for the composite taxpayer by 18th of the month next to a quarter.
- GSTR5: Return for the non-resident foreign taxpayer by the last day of registration.
- GSTR6: Return for input service distributor (ISD) by the 15th of the next month.
- GSTR7: Return for tax deducted at source (TDS) by the 10th of the next month.
- GSTR8: Return for e-commerce operator by the 10th of the next month.
- GSTR9: Annual return by 31st December of next financial year.
- GSTR10: Final return within three months of the date of cancellation or date of cancellation order, whichever is later.
- GSTR11: Details of inward supplies to be furnished by a person having UIN by 28th of the month following the month for which statement is filed.
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Benefits of GST
GST is being implemented with the hope of improvising and revolutionizing the entire tax system in India. The benefits that tag along with the launch of GST can be summarized as follows:
Read More: What is GST?
For Business and Industry
- Easy Compliance: The GST regime in India will be backed by an end-to-end and robust IT system which will make services related to taxpaying such as registrations, returns, payments, etc., available online to the taxpayers. This would make compliance transparent and quite easy.
- Uniformity of Tax Rates and Structures: GST will ensure that the rates and structure of indirect taxes remain the same throughout the country, irrespective of the choice or place of business.
- Removal of Cascading: With the implementation of GST the hidden costs of doing business will be reduced which would ensure minimal cascading of taxes.
- Improved Competitiveness: Reduction in the cost of the transaction in business would gradually lead to a competitive and improved trade and industry.
- Gain to Manufacturers and Exporters: The subsuming of major taxes under GST at the Central and the State level would result in the reduction of the cost of goods and services manufactured locally. This will promote increased competitiveness of Indian products and services in the International market and give a good boost to the Indian exports.
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For Central and State Governments
- Simple and Easy to Administer: The abolition of multiple taxes both at Central and State levels by GST will make it easier and less complicated to administer the taxes levied on goods and services.
- Better Controls on Leakage: Because of the robust IT system, it will lead to an improved and better tax compliance.
- Higher Revenue Efficiency: GST is believed to cut down on the overall collection of the tax revenues by the government and therefore, it will result in better revenue efficiency.
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For the Consumer:
- Single and Transparent Taxes Proportionate to the Value of Products and Services: Due to the multiple taxes imposed on goods and services by the Central and the State Government, the cost of almost all the items are laden with hidden taxes which result in the increase of the cost of the item. But, GST will make sure that there is only one tax and that should be from the manufacturer to the consumer who would promote transparency of the payment of taxes by the final consumer.
- Relief in Overall Tax Burden: The abolition of double charging and hidden costs will eventually lead to the cut down on the overall burden of taxes levied on most commodities and thereby, benefitting the customers.
GST is being launched with the hope of getting fruitful results. It is set forth to bring a great in the entire history of taxing economy in India. So let’s all cooperate with the government to make this change happen.
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