The Ultimate Guide to GST: Simplifying the Complexities of Taxation

GST stands for Goods and Services Tax, an indirect taxation system the Indian government implemented on all goods and services from 1st July 2017. With its reform, a single GST replaced all the indirect taxes applicable to different goods and services, including services tax, VAT, purchase tax, excise duty, etc. Governed by CBIC (Central Board of Indirect Taxes and Customs), it is a destination-based, multi-stage, comprehensive tax that applies to every value addition.

In the following sections, we will discuss what is GST, how to make GST payment and other important things about the single taxation system. 

How Does GST Work?

Here is how the GST taxation system works:

• The manufacturer pays GST for the raw material they purchase and the value they add by manufacturing the product.
• The service provider pays GST on both the purchase price and the added value. However, the manufacturer’s GST payment can be deducted from the total GST they must pay.
• The retailer pays GST on the product’s price they pay to the distributor and also on the margin they add to it. However, their tax payment can be deducted from the total GST amount to be paid.
• Consumers pay GST on the product or service they purchase.

Four Components of GST

GST has four different components: 

1. CGST or Central Goods and Services Tax: Payable on all intra-state supplies of goods and services.
2. SGST or State Goods and Services Tax: Payable on the sale of all goods or services inside a state.
3. IGST or Integrated Goods and Services Tax: Payable on inter-state transactions of goods and services.
4. UTGST or Union Territory Goods and Services Tax: Payable on the supply of goods and services in the Indian Union Territories, namely Chandigarh, Lakshadweep, Andaman and Nicobar Islands, Dadra and Nagar Haveli, and Daman and Diu.

Objectives of GST Implementation

The following are the primary objectives of GST implementation:

• Minimising the cost
• Enhancing efficiency and productivity
• Simplifying taxation by eliminating multiple taxes
• Enhancing business compliances
• Improving the country’s revenue
• Replacing most of the indirect taxes
• Widening the Indian taxpayer base
• Decreasing the cascading effect of taxation

Who Must Register for GST?

These individuals and entities must register for GST:

• Online commerce aggregators
• Suppliers through online platforms
• Taxpayers paying taxes according to the reverse charge mechanism
• Agents of suppliers and service distributors
• NRI taxpayers
• Businesses with a turnover exceeding a threshold limit
• Individuals who registered before the introduction of the GST law

GST Registration

Any entity eligible for GST registration must register itself through the Indian government’s GST portal. Registered companies receive GSTIN, a unique registration number. All sellers, buyers, and service providers must register if their income exceeds Rs 20 Lakh in a financial year. Documents required for GST registration include the PAN card, address proof, Aadhar card, owner’s photograph, and bank account details.

GST Calculation

Calculating the GST amount is essential when submitting IT returns. It includes considering several aspects of the taxation system, including input tax credits, reverse charges, exempted supplies, etc. Correct GST payment is crucial, as failure may result in an 18% interest penalty. Therefore, taxpayers can use an online GST calculator to determine their GST amount. It uses the following formula to calculate the GST amount: GST amount = (Original price x GST rate) / 100.

GST Payment

Taxpayers can pay GST both online and offline. Regardless of the payment method, calculating the tax amount is important after deducting all input taxes according to the Input Tax Credit policy. After calculating the tax liability, one must generate a GST challan by following these steps:

• Challan Generation Without Login

• Visit https://www.gst.gov.in/ 
• Click on Services 
• Select Payments 
• Create Challan
• Fill out the required fields
• Download the challan

• Challan Generation With Login

• Visit https://www.gst.gov.in/
• Log in to the portal
• Select an option to generate the challan on the dashboard
• Fill out the required fields
• Download the challan

Remember, the GST challan is valid for 15 days, and the taxpayer must pay the tax within 20 days after the month’s end. 

After understanding what is GST, the time comes to pay the applicable taxes at the right time. To simplify the GST payment process, open an account with an authorised bank that has digital integration with the official GST portal to collect GST from account holders.