Salient Features of GST

Goods and Services Tax (GST) is a comprehensive indirect tax that has replaced several indirect taxes in India. It was implemented on 1st July 2017. GST has been introduced with the aim of simplifying the indirect tax structure, removing cascading effects, and creating a unified market for goods and services.

Salient Features of GST

Dual GST System

The GST structure in India is a dual GST system, which means that both the Central and State governments have the power to levy GST. The GST Council, which is headed by the Union Finance Minister and comprises the Finance Ministers of all the states, determines the tax rates and other modalities of the GST. The GST structure comprises of the Central Goods and Services Tax (CGST), the State Goods and Services Tax (SGST), and the Integrated Goods and Services Tax (IGST).

One Nation, One Tax

GST has brought about the concept of “One Nation, One Tax,” which means that a uniform tax rate is applicable across the country. This has helped in creating a unified market, reducing compliance costs, and increasing the ease of doing business. Earlier, different states had different tax rates, leading to confusion and compliance issues for businesses operating in multiple states.

Multiple Tax Slabs

GST has a multi-tier tax structure, with different tax rates for different goods and services. The tax slabs are 5%, 12%, 18%, and 28%. Additionally, there is a special rate of 0.25% on rough precious and semi-precious stones, and a cess on certain goods such as cigarettes, aerated drinks, and luxury cars. The multiple tax slabs have been introduced to ensure that essential goods are taxed at lower rates, while luxury goods are taxed at higher rates.

Input Tax Credit

One of the key features of GST is the Input Tax Credit (ITC), which allows businesses to claim credit for taxes paid on inputs used in the production of goods or services. This ensures that taxes are not levied on taxes, and the cascading effect of taxes is removed. However, the ITC is subject to certain conditions, such as the possession of valid tax invoices, timely filing of returns, and payment of taxes by the suppliers.

Composition Scheme

The Composition Scheme is a simplified tax regime under GST, which is applicable to small taxpayers with a turnover of up to Rs. 1.5 crores. Under the Composition Scheme, taxpayers can pay a flat rate of tax based on their turnover, without having to maintain detailed records or filing regular returns. However, taxpayers under the Composition Scheme are not eligible for ITC and cannot charge GST on their supplies.

E-way Bill

The E-way Bill is a document that is required for the movement of goods worth more than Rs. 50,000 within or outside a state. The E-way Bill is generated electronically and contains details such as the name of the consignor and consignee, the invoice number, the HSN code, and the value of the goods. The E-way Bill has been introduced to ensure the seamless movement of goods and to prevent tax evasion.

Reverse Charge Mechanism

Under the Reverse Charge Mechanism (RCM), the recipient of goods or services is required to pay the tax instead of the supplier. RCM is applicable to certain specified goods and services, and it ensures that tax is collected even from unregistered suppliers. The RCM has been introduced to prevent tax evasion and ensure that the tax base is widened.

Electronic Filing and Payment

GST has introduced electronic filing and payment of taxes, which has made the tax system more efficient and transparent. Taxpayers can file returns and make payments online, which has reduced the time and cost involved in compliance. The GSTN portal has been developed to enable taxpayers to file returns and make payments electronically.

Threshold Exemption

GST provides for a threshold exemption, which means that small businesses with an annual turnover of up to Rs. 40 lakhs are exempt from GST. In the case of certain special category states, the threshold limit is Rs. 20 lakhs. This exemption has been provided to reduce the compliance burden on small businesses and encourage entrepreneurship.

HSN Code

GST has introduced the use of Harmonized System of Nomenclature (HSN) code for the classification of goods and services. The HSN code is a globally recognized system for the classification of goods, and it helps in the identification and taxation of goods and services. The HSN code has been introduced to ensure uniformity in the classification of goods and services and reduce disputes related to classification.

GST Compliance Rating

GST provides for a GST Compliance Rating for businesses, which is based on their compliance with the GST regulations. The GST Compliance Rating is a measure of a business’s compliance with the GST laws, and it helps in the evaluation of the business’s reliability and credibility. The GST Compliance Rating has been introduced to promote compliance and deter non-compliance with the GST laws.

Conclusion

GST is a landmark tax reform that has brought about significant changes in the indirect tax system in India. The salient features of GST such as the dual GST system, one nation, one tax, multiple tax slabs, input tax credit, and composition scheme have had a positive impact on various stakeholders. 

The impact of GST such as the reduction in tax burden, increased transparency, and boost to the economy has been widely acknowledged. However, there have been some challenges in the implementation of GST, and the GST Council has been working towards resolving these issues. Overall, GST is a step towards a simpler, more efficient, and transparent tax system in India.