Understanding Gst Laws:insights Into Goods And Services Tax (gst) Laws, Filing Procedures, And Common Issues Faced By Business

GST stands for Goods and Service Tax, it is a type of comprehensive tax introduced in India recently in 2017.Although, the idea first popped up in a session of Lok Sabha Sixteen years back by our former Prime Minister(Late Shri Atal Bihari Vajpayee ji).In the year 2006, the Union Minister in his budget for the year 2006 to 2007 made a proposal to introduce GST in the upcoming years(to be precise in 2010).The EC(Empowered Committee of State Finance Ministers) then, was requested to design a course/roadmap for the formulation(as the EC earlier made the structure of VAT(Value Added Tax), they were requested to design a roadmap).There were discussions held between the EC and the Union Government(basically things like, thresholds, exemptions, taxation of supplies and taxing the inter supplies were discussed).A report was summed up and submitted in 2009 in its FDP( First Discussion Paper).This First Discussion Paper basically laid down the foundation of the present day laws and regulations of the Goods and Service Tax.The Goods and Service Tax was earlier introduced too in the year 2011 in the lower house after the 115th amendment bill was introduced, but this lapsed as the government/Lok Sabha dissolved in 2013.Later in 2014 the Lok Sabha again passed the bill and after further discussions and its introduction into the Rajya Sabha and after the ratification by required number of State legislatures and assent of the President, the CGST(Central Goods and Services Tax Bill 2017) was introduced.Along with the Central Goods and Services Tax, there were other bills introduced too such as Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill).Developing further, the respective states adopted the policies and implemented the corresponding State Goods and Services Tax Bills.

Basically, the Goods and Service Tax which was introduced on July 1st,2017, is type of indirect tax which is present in multiple folds/stages and is destination based.The tax is said to be indirect in the sense, that it was the reason that other indirect taxes were subsumed by Goods and Services Tax.For e.g, the indirect taxes like the service tax, the excise duty, the VAT(Value Added Tax).The Goods and Services Tax was introduced which basically aimed at making a platform which is unified for all the services or goods in the market and aimed at eliminating the cascading effects of taxes.If observed closely, this implementation of a unified tax system has made the system of collecting the taxes quote systematic and proportionate, basically making the complex web of collecting taxes previously, much easier or simpler.Although the Goods and Service Tax is introduced for making things simpler, it may sometimes get a little complicated for enterprises which are either medium sized or small(SMEs).By means of this article the important key aspects of GST laws and the procedures of filing along with the problems a business may face from time to time.

The Structure of the GST Council

As per Article 279A(after the amended Constitution), the GST council is a joint forum of the Centre along with the states and contains different members such as the Union Minister of Finance(the chairperson), The Union Minister of SState, In-charge Revenue, Minister of Finance or Minister of Taxation or any other minister that may be nominated by each State Government((members).The Council is empowered and may recommend the necessary changes/recommendations to the Union oe State on basis of few things:-

• The different surcharges levied or taxes by the Union/The State or any regulatory body that has subsumed in the goods and service tax.
• Any goods/services that may subject to or be exempted from the goods and service tax.
• Rates including the floor rates and service tax.
• Rates or any special rates that may be only for a specified period(for e.g in case of any calamity,which may require additional resources for a juncture of time). 

These are the few among many instances in which the council may take action or suggest recommendations accordingly.The council is formulated in a way that the centre has 1/3rd voting power and the states have 2/3rd.Whereas the decisions are taken by the 3/4th majority.

Few other directly related sites or departments are the Central Board Of Indirect Taxes & Customs (under the Department of Revenue, Ministry of Finance, Government of India), Ministry of Finance, Department of Revenue, Tax Information Portal of States and UTs(Union Territories).

GSTs Application Criteria & Composition of the Goods and Service Tax:

Basically the Goods and Service Tax is applied to every person who supplies goods or renders any service which exceeds the value of Rs.20 Lakh in a financial year would be eligible to pay the taxes.However, few states are exempted from the threshold of 20 lakh.Rather they have a threshold of 10 lakh rupees i,e if the amount of sales exceeds this mark tax has to be filed.Although a point that must be noted is that the above mentioned business have to be registered.Few other cases where GST is mandatory to be paid are, when a sale takes place between two states(inter state), any operator that an e-commerce operator and on many other accounts GST must be applied.

The GST is applied basically on the supply of goods or services or sometimes both.

• Suppliers of goods or services where the threshold limit is 10 Lakh are Manipur, Mizoram, Nagaland, Tripura.
• Suppliers of goods or services where the threshold limit is 20 Lakh are Uttarakhand, Sikkim, Meghalaya, Telangana etc.
• NOTE! Suppliers of services or both goods and services where the threshold limit is 20 Lakh are Assam, Jammu & Kashmir, Himachal Pradesh and all the other States.
• Suppliers of goods or services where the threshold limit is 40 Lakh are  Assam, Jammu & Kashmir, Himachal Pradesh and all the other States.

Instances that exempts people from paying taxes: If for example, a person or there is a foundation which is registered under the ITA(Income Tax Act) which works totally/exclusively for providing any charitable services(due to the social work the foundation/person may be exempted from paying taxes).

Before knowing the components of Goods and Service Tax, one has to know the basic structure on how Goods and Service Tax works.For different segments the tax works differently,by this it  is meant that for e.g a manufacturer has to pay Goods and Service Tax on the raw materials that are purchased in producing/manufacturing a good.Similarly, if there is a service provider, he will have to pay Goods and Service Tax for the product and the extra value that has been added to it.Likewise the retailer may have to pay the Goods and Service Tax on the product which he may purchase from the distributor. The Goods and Service Tax contains few components such as the CGST(Central Goods and Services Tax), SGST( State Goods and Services Tax) and the IGST(Integrated Goods and Services Tax). 

Basically the Three means:

1.    CGST(Central Goods and Services Tax): It is basically the tax that is collected by the central government on a sale related to an intra-state sale.For instance, if a transaction deal takes place within the State of Uttar Pradesh.

2.    SGST( State Goods and Services Tax): This is a tax that is collected by the State Government on an intra-state sale(this is quite similar to the method of collection of taxes that takes place by the Central Government, just it differs in the body that collects tax, here it is the state and in CGST the Union Government collects taxes).

3.    IGST(Integrated Goods and Services Tax): It is the tax that is collected by the Union Government in the transactions that take place between different states(inter state).For e.g if any transaction takes place between Uttar Pradesh and Telangana.

Earlier, when the goods were transferred or moved from one place to another,a Central Sales Tax (CST) of 2% was collected on the total value of the goods at the state border.

4.    UTGST(Union Territory Goods and Services Tax): It is nothing but the GST applicable on the goods and services supply that takes place in any of the five territories of India, including Andaman and Nicobar Islands, Dadra and Nagar Haveli, Chandigarh, Lakshadweep and Daman and Diu.-

 One of the the new things that has been added by the new Goods and Service Act, 2017

was the new regime of collecting taxes for instance, when a sale takes place within a state then according to the new regime of GST Act only CGST(Central Goods and Services Tax) and SGST( State Goods and Services Tax) are taken unlike the old regime where there was VAT + Central Excise/Service tax.The revenue collected here with due care and diligence is shared equally between the state and the Center.Whereas, if a sale was made to another state the regime mandates the application of IGST(Integrated Goods and Services Tax).According to the previous mentioned regime for transactions related to the inter state, Central Sales Tax + Excise/Service Tax were applied.Regarding the revenue distribution in this case, there is only one type of tax and that is the central one.Later the collected tax(by centre) is shares as IGST revenue on the basis of revenue goal.

Taxes that existed before the GST Act,2017.

Earlier, the system of tax was an indirect tax regime.Then, both the State and the Union levied different taxes.The State was mainly dependent on the VAT(Value Added Tax).Along with this, every state had a different compliance/Regulation or rules as per the industry or regarding the goods or the services.

Earlier in the case of Inter-State deals, the the goods were taxed as per the CST(Central State Tax..Unlike today, where IGST(Integrated Goods and Services Tax) is applied.The` system of collection of taxes by both, the Union and the state were often seen to be of an overlapping nature(such happened in cases where the local tax or some other taxes were collected by both the centre and the state).Another example to this system of collection of taxes was collection of excise duty(which was charged by the centre) along with the excise duty, Value Added Tax was chargeable too by the State.Due to this, the cascading effects  of collection of taxes was prevalent and led to a phenomenon known as  the “Tax Effect”.

Few of the following indirect taxes registered under the older regime of Taxes:-

• Duties of Excise
• Additional Duties of Excise
• Additional Duties of Customs
• Central Excise Duty
• Cess
• State VAT
• Luxury Tax
• Taxes on lotteries, betting, and gambling.
• Special Additional Duty of Customs
• Entertainment Tax
• Entry Tax
• Purchase Tax

The above mentioned taxes were replaced by the the current day taxes, i.e the CGST(Central Goods and Services Tax), SGST( State Goods and Services Tax) & IGST(Integrated Goods and Services Tax).

Few Advantages of The Goods and Services Tax

After the new regime of taxes(GST) came into effect  there were many advantageous things that happened.

1. The first being the Goods and Services Tax Act brought along with it a unified system of payment of taxes, unlike the system of collection of taxes, which was very complicated and heavily charged.
2. Goods and Services Tax is much more transparent tax than the indirect taxes that were earlier levied.
3. As the Goods and Services Tax is not or will not be a cost to registered tax retailers, hence accordingly there will be no hidden charges.
4. 4It would benefit people as the prices are brought down(varies from different tax slabs - for different goods and services).Therefore, as the price is less, the companies would benefit more as the consumption will increase(The Law of Demand and Supply).
5. Another advanced thing with the new taxation policy is it is backed by the GSTIN( Goods and Services Tax Identification Number, consists of a distinct 15-digit identification code allotted to each taxpayer (mainly dealers, suppliers, or any business entity) registered under the GST regime). 

Few Disadvantages of The Goods and Services Tax

• Few Segments that have been said to be negatively impacted due to G.S.T.For e.g the Aviation industry’s tax rates skyrocketed as G.S.T was introduced as the earlier taxes attracted a maximum tax of 5% to 6% ,but after the introduction of G.S.T increased to 9% to 12%.
• After the implementation of G.S.T, the pricing of garments or clothes increased. 
• Few reports claimed that the G.S.T was a disguise of Central Excise/Service Tax, V.A.T, and C.S.T. 

There were some more speculations and reports which do not convey the final verdict of G.S.T’s nature.Hence, they have not been included in this segment.

New Compliances under The Goods and Services Tax

Apart from online filing of the returns of the Goods and Services Tax, there have been several other systems for filing it.

e-bills(e-way bills)

G.S.T’s implementation introduced a centralised system of waybills by putting forward the concept of “E-way bills”.This concept was introduced just the following year after the introduction of G.S.T i.e in 2018.It was basically introduced when goods moved in a staggered manner in confinement of intra-state movement.

By the means of e-way bills mechanism, different manufactures, transporters or traders have an alternative of generating e-way bills for the transport/transfer of goods from one place(origin) to another(suggested/required destination) on a common ground portal for everyone.This is a mutual benefit for the authorities that collect the tax too(as it reduces the time that is taken at check-posts and also helps in reduction of tax evasion).

E-invoicing 

The system of E-invoicing came into effect a little later i.e in the year 2020.This was applicable to businesses which had an turnover aggregate(annually) more than 500 crore Indian Rupees(in any preceding year i.e 2018 or 2017).Furthermore, in the year of 2021, this mechanism improved or rather extended to those segments where an annual turnover aggregate was more that a sum of 100 crore Indian Rupees.To file these e-invoices, the businesses shall obtain a unique invoice code/reference number for every B2B invoice, by uploading it on the GSTIN’s registration invoice portal.If the verification done by the portal finds the correctness and the genuinity, it authorises the signature along with a QR code.

E-invoicing basically allows helps in reducing the data errors.It is basically designed to pass the invoice information directly from the IRP(IRP is to accept e-Invoice document prepared by the taxpayer, verify that the document is valid as per the e-Invoice schema and perform additional checks on the contents of the e-Invoice) to the portal of G.S.T and the e-way bill portal.This basically reduces data errors, also it eliminates the manual requirement for filing the GSTR-1 data, ultimately helping in e-way bills too.

Different Slabs of Taxes under:

The Goods and Service Tax is applicable on different segments of goods differently.The major % bricks of G.S.T are 0%, 5%, 12%, 18% and 28%.The applicable tax is determined by the process of HSN(Harmonized System of Nomenclature).The H.S.N classifies the goods and services and their category and slabs it accordingly.The rates are decided under the H.S.N code for the Goods & Services Accounting Code(SAC) for Services.An important thing to consider here is while these rates are being levied that there should always be some uniformity and charity in the application of G.S.T rates.It is also important to note that in few cases certain goods and services could be exempted from being taxed under the norms of the latest taxation policies of G.S.T.While on the other hand, there are others which may be subjected to a compensation cess over or above the G.S.T rate(s).The concept of compensation cess is basically a type of compensation concept that is introduced for states if they incurred any potential loss due to the implementation of the Goods and Service Tax.One must note this is applied on a very specific category of goods and services few of the examples are aerated beverages, tobacco products and luxury items.

Few items have some registration and threshold limits by navigating the compliance and landscapes.The basic or the very fundamental requirement under the norms of G.S.T is getting registered or obtaining the registration licence based on the threshold limit prescribed by the the government(it varies from state to state).The basis of it the current threshold limits for registration are ₹20 lakh for most states and ₹10 lakh for special category states, including Jammu and Kashmir, Uttarakhand, Himachal Pradesh, and the North-Eastern states.

Also, and important thing to remember with regard to the G.S.T is that there are some specific/certain categories of business sectors such as the e-commerce operators and the related sales that takes place in the inter-state supplies.These have to mandatorily register themselves irrespective of the turnover amount they generate in one fiscal year.This is done to maintain the transparency between the parties,the consumers, manufacturers, the distributors basically covering the whole supply chain.

The Concept of Input Tax Credit (ITC)

One of the pivotal roles that exists in this segment of taxes is Input Tax Credit (ITC).The presence of Input Tax Credit has been one of the key components of the new regime of the G.S.T.The basic mechanism of Input Tax Credit (ITC) basically allows the businesses to claim credit for the amount of G.S.T paid on the inputs(goods or services) which are used for further supply of goods and services.The system or the mechanism of Input Tax Credit was designed to basically remove ny cascading effects that may be there in the market which would eventually reduce the overall amount of  burden a business or businesses face on recurring intervals, thereby this increases the competitiveness in the market.Yet, it is important to ensure by any format of a business that the compliance with the Input Tax Credit is meticulously followed as the provision could be challenging and if in the future any discrepancies or non compliances are found could lead to disallowing of the claims that were filed under the Input Tax Credit and also if these claims are hampered with (like if falsehood is found in any way) they are charged heavily in form of penalties and incur heavy amount of tax liabilities.

Process of Filing G.S.T

Complying with the G.S.T  filing procedures or norms/regulation is an aspect which is very critical.The key aspect to this is time, these tasks have to be done on time as the portal for submission of the requisite documents are for a window period only.The basic filing procedure basically consists of the nature of the business i.e what the business is about, what all does it handle, where it is based what products/services it offer etc., the types of returns that are filed along with the applicable regulations.

Below listed are the few types of GST Returns

Outward Supplies(GSTR-1): This is a type of detailed comprehensive report of the the details of the Outward Supplies of the supplied goods or the rendered services, which were used/made by the business or during the particular given tax period.This usually encompasses the information regarding the recipients, the different details of invoice, the taxable slab or the taxable value of the goods.An example to this could be the case of G.S.T.I.N ((Goods and Services Tax Identification Number which contains the details which are aforementioned such as the information regarding the recipients).GSTR-1 is basically a tax that is collected on quarterly basis or monthly basis(this depends).As mentioned before it contains outward supplies i.e sales.The returns have a total number of 13 sections.

• Table 1, 2 & 3 talks about the legal trade names, the special/unique identity number i.e the GSTIN the aggregate turnover that the company or any business had in the previous year.
• Table 4 talks about the outward supplies  to registered persons in general.This also includes UIN holders.Unique Identification Number (UIN) under GST is a special classification provided to certain entities such as diplomatic missions, UN bodies, and other international organisations. It allows these entities to claim refunds on the GST paid on their purchases.
• Table 5 talks about  outward inter-state supplies to unregistered persons where the invoice value is more than rupees 2.5 Lakh Rupees.
• Table 6 talks about the zero rated supplies or the deemed exports of the industry.
• Table 7 talks about the supplies that have been made to any unregistered person(these supplies cover everything except the ones in table 5).
• Table 8 talks about the supplies(outward supplies) that are NIL rates mostly or exempted and are of non G.S.T nature.
• Table 9 talks about the outward supplies that are taxed under table 4,5 and table 6 of the previous tax compliances or periods.The composition of the GSTR-1 Return basically includes debit or credit notes, refund vouchers which may have been issued during the present periods of taxation.
• Table 14 talks about the Suppliers -reporting the ECO operators G.S.T.I.N wise sales via e-commerce operators under which these e - commerce operators are liable to collect TCS u/s 52 or liable to pay tax u/s 9(5) of the CGST Act.
• Table 15 talks about the e-commerce operators which is reports bot Business to Business or Business to Consumer/Customer, sales which are in accordance with GSTIN(which are usually through e-commerce operators) on this the e commerce operators have to submit/deposit a TCS(Tax collected at Source).Section 9(5) of G.S.T Act is defined as output tax which e-commerce who is not the actual supplier will pay. GST Provision is applicable on the E-Commerce as he is liable to pay the tax as supplier of the services.

These are the few table contents that could be important while considering filing for GSTR-1.

GSTR-3B (Summary Return):GSTR-3B (Summary Return) is declared(self declared) summary of the returns that consolidates the details of the inward supplies, outward supplies and the eligible Input Tax Credit (ITC) claimed by the business.This is a very important or crucial document for tax authorities to assess the liabilities of the G.S.T and the compliances that a business has to follow or the compliances of the businesses itself.This is basically files monthly for regular tax payers.

GSTR 9 (Annual Return): It is somewhat like GSTR 1 as it is also filed annually.This is filed because to reconcile the the supply and ITC claimed during the fiscal year.This also basically provides a comprehensive idea of the business’s compliance of G.S.T and serves as a basis for audits and assessments. 

GSTR 7 (T.D.S Return): These returns are filed by the businesses which are specifically responsible for deducting the Tax Deducted at Source(TDS) while making any form of payments to their specific suppliers.It ensures proper reporting and the remittance of the deducted Tax Deducted at Source to the government.

The frequency of filing G.S.T returns may vary based on the type of return or the amount of turnover of the business.Aforementioned is the data of GSTR 1 and GSTR 9 which are filed annually whereas the GSTR-3B is typically filed monthly for regular taxpayers.This is important to be noted that these filing frequencies may be subjected to change based on the specific updates or any specific regulatory updates or some requirements for certain categories of a business.Another essential is adhering to the due dates for filing these returns as any delays may impose any penalties and interest charges.These due dates for different segments if G.S.T returns are specified in the G.S.T laws and must be followed with due diligence to copley with the norms. Late filing or non-filing of returns may result in severe consequences, including interest liabilities, late fees and potential legal actions.The G.S.T can be paid in several modes such as by means of debit/credit cards, online banking, or over-the-counter payments at authorised banks.

How G.S.T returns are filed Online 

Step 1:Register for GSTIN

It is a 15-digit number that is generated based on your state code of operation and PAN.One who is unregistered needs to register to get the GSTIN number.

Step 2:Log in to the GST portal

https://www.gst.gov.in/ is the site where after getting registered one must Log in with their respective username and its password and click the services tab.

Step 3:Returns dashboard 

An option called the ‘Returns dashboard’ is there on the site of G.S.T.One has to choose a financial year for which you are filing the GST return.Choose the appropriate one from the drop-down menu provided. 

Step 4: Prepare online 

One will be given options of how you wish to file, one must then select the return you wish to file.Then for the online GST return process, click on the ‘Prepare Online’ option.

Step 5: Enter details

Enter all the details correctly in the fields provided. If one has any pending late fees, details of that as well when you are filing your GST returns are to be filled too, then these details are to be saved and to click on proceed further.

Step 6: Check submission status

After the GST return form has been submitted, it is to be ensured that the status of the G.S.T return has been changed to ‘Submitted’.

Step 7: Tax payment

When the status shows the return has been submitted, then you need to click on ‘Payment of Tax.’ You will see a ‘Check Balance’ option which you need to click. The balance shown will reveal the credit and cash balance.

Step 8: Offset liability

You must click on the option that says ‘Offset Liability’ to make the GST payment online in a few minutes. You need to then check the relevant boxes for declaration purposes. Then click on ‘File Form with DSC’/’File Form with EVC’ and then make the payment.

Few Major Problems Faced by the Businesses due to the G.S.T

The implementation of the Goods and services tax was a monumental shift in the taxation system as it unified the process of collecting taxes which was quite complicated.Despite being said as a simpler form of tax, the new regime of G.S.T has given some hard time to few segments of taxpayers.

Classification of the Goods and Services:By determining  the correct HSN code for the goods and S.A.C for services it becomes very crucial for filing an appropriate application for G.S.T rates.Due to the variety of products and product lines the classification process becomes challenging.Incorrect product lines could lead to potential disputes over the applicable tax rates and liabilities.

Place of supply rules: Identifying the correct place of supply for goods and services is essential for determining the applicable GST (CGST, SGST, or IGST). This becomes particularly complex in cases of inter-state or cross-border transactions, where businesses must navigate intricate regulations and guidelines.

Valuation of supplies: Determining the appropriate value of supplies is a crucial aspect of GST compliance. This includes considering discounts, incentives, related-party transactions.

Ambiguity in Anti-Profiteering The concept of anti-profiteering under GST was introduced to ensure that businesses pass on the benefits of reduced tax rates to consumers. However, the lack of clear guidelines has resulted in ambiguity, making it challenging for businesses to determine compliance. This uncertainty can potentially lead to legal disputes and hinder the intended positive impact on consumers. 5. Technical Glitches in GST Portal Despite efforts to digitise and streamline the taxation process, technical glitches in the GST portal remain a persistent issue. Businesses frequently encounter challenges in filing returns, generating e-way bills, and navigating the portal for various processes. Addressing these technical issues is crucial to maintaining the efficiency and reliability of the GST framework.

FREQUENTLY ASKED QUESTIONS ON G.S.T

1.    What is GST? How does it work?

G.S.T is one of the indirect taxes that is applicable for the whole nation, which basically makes India a unified segment for the tax payments.

It is filed in various stages by the process of value addition.It is based on various factors like type of goods or service and the final consumer bears the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

2.    What benefits does G.S.T have?

The new regime of G.S.T introduced with it an easy compliance, uniformity of tax rates and structures, removal of cascading, gain to manufacturers and exporters.

3.    What types of G.S.T does India have?

At the Central level C.G.S.T; At the State Level S.G.S.T;For inter-state transactions      I.G.S.T and for the Union Territories U.G.S.T is levied.

4.    How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?

In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST is levied.

5.    How will imports be taxed under GST?

The Additional Duty of Excise or CVD and the Special Additional Duty or SAD presently being levied on imports will be subsumed under GST. As per explanation to clause (1) of article 269A of the Constitution, IGST will be levied on all imports into the territory of India.