Components of GST

The article 'Components of GST' is a thorough study of GST, its essential features, history, component, advantages and a few case laws.

India has implemented the Goods and Services Tax, an indirect tax, to help and promote the nation's economic expansion. The Goods and Services Tax Bill (GST) has been enacted in the majority of developed nations. GST was introduced in India, though, in 1999. However, on July 1, 2017, the Indian government reinstituted GST. The different taxes levied by the federal and state governments were replaced with GST. Because of this, the phrase "One Nation, One Tax" refers to the fact that all taxes in the nation must be paid in one place. The study offers sentiment analysis and bibliometric visualization of GST. However, it was noted that the sentiments of many Indian citizens were conflicted. Therefore, it is advised to review the structure and focus on continuous improvement.

What is GST?

In India, there is a very complicated system of indirect taxes. It has long been believed that the complexity of the tax code and the whole legal system discourages initiative and slows down corporate expansion. Despite being a single nation, India has internal barriers to interstate trade, commerce, and business due to the variety of tax structures that are currently in place. Although the introduction of VAT helped to eliminate significant differences in tax rates, structural reforms were still required. The introduction of the VAT also assisted in laying the foundation needed for the Goods and Services Tax, the next stage of tax reform.

Essential features of GST include the following:

• The tax is imposed on the goods and services given to the consumer. This indicates that the tax would be paid to the taxation agency that is in charge of the location of consumption (also known as the "place of supply").
• It is assessed up until consumption. In other words, GST will be charged at all phases of trading, production, storage, distribution, wholesale, and retail up to the point of ultimate consumption, but prior tax credits will be available for setoff. There would therefore be no cascading effect of taxes because GST maintains the idea of only taxing value adds. The ultimate customer will be required to pay the full tax burden.

History of GST

The initial conversation about India adopting GST took place in the year 2000, during the rule of the Atal Bihari Vajpayee government, and this marks the beginning of the GST's history, which spans more than 20 years. Since they had prior experience working with State VAT, a committee comprised of state finance ministers with authority was chosen for this task. In 2004, the Fiscal Responsibility and Budget Management Committee was established, and it advocated for the implementation of GST.

The then-Union Finance Minister stated that the GST would go into effect on April 1st, 2010, during the 2006-2007 Budget Speech. The implementation of the GST, however, had to be pushed out for several reasons. The 2011 Constitution (115th Amendment) Bill was presented to the legislature. This Bill, which was submitted to include some GST provisions, was carefully scrutinized by a Standing Committee. The Bill expired after the Lok Sabha was dissolved in 2014, necessitating the introduction of a fresh Constitutional Amendment Bill.

Components of GST

• CGST

It is an indirect tax on intra-state purchases that is levied and collected by the central government. Alcoholic spirits intended for human consumption are not included in such supplies. The Central Goods and Services Act of 2017 establishes the rules for this tax levy. And by the CGST Act, this tax is imposed on the transaction value of the goods or services provided. The price actually determined for the specified supply of goods or services is the transaction value.

By sections 12 and 13 of the CGST Act, the obligation to pay CGST must also arise when the goods or services are supplied. The same intra-state supply of goods will also be subject to the SGST part. Like CGST and IGST, SGST is also an element of the GST.

Imagine, for example, that Omkar Enterprises, a manufacturer in Punjab, provides Vipul Traders, a dealer in Punjab, with items. Omkar Enterprises supplies goods totalling Rs 1,000,000 after GST at 18%. The GST is deposited to the Central and State Governments because it is an intra-state supply. However, the entire GST of Rs 18,000 is deposited equally into various heads. The CGST account receives a deposit of Rs 9,000 as a result.

• SGST

The State Government imposes and collects this indirect tax on purchases made within the State. Alcoholic spirits intended for human consumption are not included in such supplies. The State Goods and Services Act (SGST), 2017, governs this tax levy. According to section 15 of the SGST Act, this tax is imposed on the transaction value of the goods or services provided. The price actually determined for the specified supply of goods or services is the transaction value.

Furthermore, as stated in sections 12 and 13 of the SGST Act, the obligation to pay SGST arises at the time of the supply of goods or services. The same intra-state supply of products will also be subject to CGST.

• IGST

The Central Government imposes and collects this indirect tax on the interstate supply of goods and services. Alcoholic spirits intended for human consumption are not included in such supplies. The Integrated Goods and Services Tax Act of 2017 governs this tax levy. Additionally, the Centre and State governments each receive the same amount.

For instance, Verma Traders in Maharashtra receive goods from Prakash Ltd, a company in Punjab. After GST at 18%, Prakash Ltd supplies goods totalling Rs 1,000,000. Since it is an interstate supply, only the Central Government receives the GST deposits. Therefore, only the CGST head receives the total GST deposit of Rs 18,000.

• UCGST

It is an indirect tax that the Union Territory imposes and collects on the supply of goods and services inside the state. Alcoholic spirits intended for human consumption are not included in such supplies. The Union Territory Goods and Services Act (UTGST), 2017, is in charge of this tax levy. According to Section 15 of the CGST Act of 2017, such a tax is imposed on the transaction value of the goods or services provided. The price actually for the specified supply of goods or services is the transaction value.

Who should register under GST?

A person is referred to as a "person" in this context if they are an individual, HUF, company, firm, LLP, an AOP/BOI, any corporation or government company, a body corporate formed under the laws of another nation, a cooperative society, a local authority, the government, a trust, or an artificial legal entity. Such a person is liable to pay tax.

• Whoever creates an interstate taxable supply

Businesses that provide products or services over state lines are considered interstate suppliers and are required to register for GST.

• Informal taxpayer

The owner of a firm that occasionally provides goods and services but does not have a dedicated place of business must register for GST in India.

• The person who makes a reverse charge tax payment

Tax payment responsibility for the majority of products and/or services is with the supplier. Reverse charge is the term for situations where the recipient of the goods or services bears the tax (GST) burden rather than the supplier.

• Non-resident taxpaying individual

Any individual who occasionally provides products or services to recipients in India but does not have a permanent place of business or habitation there is considered a non-resident taxable person. Independent of the threshold for aggregate turnover, all non-resident taxable persons are obligated to register for GST.

• E-commerce operator

Electronic commerce is the distribution of products over a digital or electronic network, especially digital ones. Any individual who owns, manages, or administers a digital or electronic facility or platform for electronic commerce is referred to as an electronic commerce operator. Regardless of sales, registering for GST is mandatory for all operators of electronic commerce.

Advantages of GST

• Enhanced Corporate Efficiency

Unnecessary taxes and numerous tax filing requirements for various indirect taxes have been eliminated by this unified tax framework, which has improved company accessibility. With a solid IT infrastructure, GST compliance is made straightforward and standard for different enterprises and merchants. Businesses and other taxpayers can now make use of a variety of services via the online GST site, including GST registration, tax payments, GST return filing, GST refund requests, GST complaint submission, GST question resolution, and more. This increases process transparency and compliance ease, which boosts corporate effectiveness.

• Taxes' cascading effects are eliminated

Before the introduction of the GST, items were subject to repeated taxes at every stage of manufacturing, leading to double taxation. In this case, the same supply chain is subjected to several taxes at the federal, state, and local levels, which raised the value of indirect taxes. This ultimately raised the cost of products and services, burdening the final customer needlessly. GST completely modifies the rules by giving relief to the consumer at the end of the supply chain on both intra-state and inter-state purchases through tax credits like ITC. Due to the reduction in double taxes, companies can now sell their goods for less money.

• Existence of ITC Tax Credit

Contrary to the previous indirect tax system, which had no tax credit options at all, the GST introduces an easy-to-use input tax credit mechanism that allows suppliers to claim ITC on the export of goods.

• Higher Exports

The final production cost of "Make in India" products will be lower and more affordable as all significant national and state taxes, including CST, VAT, service tax, and others, are fully absorbed into GST. As a result, the demand for Indian exports rises as Indian goods become more competitive in the global trade market. Because there won't be much taxation on finished goods and services, there will be more consumption and production of goods. Exports, manufacturing sectors, and local businesses all benefit from this.

GST Certificate

The certificate of GST registration is in the form of REG-06. It lists the primary and additional places of business as well as the GST Identification Number (GSTIN). Only on the GST Portal is the registration certificate available for download; the government does not print physical certificates. Regular taxpayers, TDS and TCS applicants under the GST, anyone required to get a unique identification number under Section 25(9) of the CGST Act, non-resident taxpayers, including those offering OIDAR services, and taxpayers who migrated from the pre-GST rules are included in this category.

This certificate must be displayed by the taxpayer at both his main place of business and any additional locations mentioned on Form GST REG-06. It is outlined in CGST Rule 18(1), and any violation is subject to a fine of up to Rs. 25,000.

Case Law

Bharat Raj Punj v. Commissioner of Central Goods and Service Tax

The input tax credit was fraudulently obtained by issuing forged or false sale invoices, according to the case, key corporate executives were detained after giving statements that had been recorded. Additionally, the Rajasthan High Court dismissed the petitioner's Writ petition and only assessed a cost of Rs. 1,000,000. A violation of Section 132 of the Act has been made. It specifically addresses situations that result in the misuse of input tax credits. Without initially determining the tax, the Department may summon the offender or make an arrest based on reasonable suspicions.

Optival Health Solutions Pvt Ltd v. UOI

The Rectification or Revision of the GST TRAN-2 form should be approved or denied in this case. The petitioner was allowed to manually or electronically submit a new Form GST TRAN-2. The law allows someone who freely acknowledges filling out the form incorrectly or providing information that is untrue to correct or update the Form. The original Form GST TRAN-2 may be kept by the tax authorities for assessment purposes, and they may request that the petitioner give a justification for the revision or correction.

Conclusion

The GST forbade the old tax system, which consisted of VAT, Excise duty, Service Tax and other such taxes. As the name suggests, it charged for both services and goods. This tax was brought forward with the intention of One Tax One System.

References

1. Who Needs to Register for GST in India, Available Here

2. GST registration certificate & how to download it from the GST portal?, Available Here

3. Bharat Raj Punj v. Commissioner of Central Goods and Service Tax, S.B. Criminal Writ No. 76/2019

4. Optival Health Solutions Pvt Ltd v. UOI, W.P. No. 18879 (W) of 2018

Important Links