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Goods and Services Tax (GST) in India - An Overview

Updated on November 20, 2024 , 55126 views

Goods and Services Tax (GST) is an Indirect Tax for the supply of goods and services in India. In other words, it is a tax that applies to most goods and services sold for domestic consumption.

The Goods and Service Act was passed on 29th March 2017 in the Parliament. It has now replaced many Taxes in India and it provides revenue for the government. The GST is a common tax and is taxed as a single rate across the nation and applies to goods and services including transportation services.

Direct Taxes no longer Applicable under GST

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

How does GST work?

The Goods and Services Tax (GST) is applied to the cost of certain goods and services. Businesses that deal in goods and services add the tax to the retail price of their product and the consumer who purchases the product pays the retail price of the product plus the GST. The amount paid as GST is forwarded to the government by the business or the trader.

Types of GST

There are four types of GST and they are as follows:

1. Central Goods and Services Tax (CGST)

CGST is a part of the Goods and Services Tax (GST) and falls under the Central Goods and Service Act 2016. This tax is payable to the centre. This tax is charged as per the Dual GST regime.

2. State Goods and Services Tax (SGST)

State Goods and Services Tax (SGST) is charged on the purchase of products within the state. This falls under the state government. This tax is payable to the state government.

SGST has replaced taxes like Entertainment Tax, State Sales Tax, Value-added Tax, Entry Tax, cesses and surcharges.

3. Integrated Goods and Services Tax (IGST)

Integrated Goods and Services Tax (IGST) is applied on inter-state transactions. This tax is applied to the transfer of goods and services from one state to the other. The Central government collects this tax and distributes it to the state. This tax helps the states deal directly with the Central government rather than each state.

4. Union Territory Goods and Services Tax (UTGST)

Union Territory Goods and Services Tax is applied to the supply of goods and services to any of the Union Territories of the country. These are Andaman & Nicobar Islands, Daman & Diu, Dadra & Nagar Haveli, Lakshadweep and Chandigarh. This tax is applied along with the Central Goods and Services Tax (CGST).

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Advantages of GST

The implementation of GST has brought in several advantages such as the birth of a common national Market
Removal of Cascading tax effect
Boost in exemption limit for small traders
Indian goods and commodities can compete at a global level
Benefit for small businesses through composition scheme
Decreased tax compliances
Everything related to GST is done online
Increase in the Efficiency of logistics

Registration for GST

The registration procedure is simple and can be done online.

Keep the GSTIN number and registered mobile number handy
Check out ewaybill[dot]nic[dot]in
In case you are a first-time taxpayer, you will have to register with ‘E-way bill registration’
You will then be directed to a page that will require your name, your trade, your mobile number and your residential address. You will then receive an OTP on the registered mobile number for verification
After the verification of the OTP, you will be asked to create a User ID
Create a password for the same and your account on the GST portal will be complete

GST Tax Slab Rates for 2024

1. No Tax

The government has exempted certain goods and services of taxes.

The list of Goods are as follows:

Goods with no GST Tax	Goods with no GST Tax
Sanitary Napkins	Bangles
Raw Materials used for broom	Fruits
Salt	Curd
Natural Honey	Flour
Eggs	Vegetables
Handloom	Chickpea Flour (Besan)
Stamp	Printed Books
Judicial papers	Newspapers
Deities made of wood, marble, stone	Rakhis made without the use of precious metal like gold, silver
Fortified milk	Saal leaves

Services with no GST tax are:

Hotels and lodges carrying a tariff below Rs.1000
IMM courses
Bank charges on Savings accounts and Jan Dhan Yojana

2. GST Tax Slab of 5%

The government charges 5% GST on the following Goods and Services.

The list of Goods are as follows:

Goods with 5% GST Tax	Goods with 5% GST Tax
Skimmed milk powder	Coal
Frozen vegetables	Fertilizers
Fish fillet	Coffee
Tea	Spices
Pizza bread	Kerosene
Unbranded namkeen products	Ayurvedic medicines
Agarbattii	Insulin
Sliced dry mango	Cashew nuts
Lifeboats	Ethanol- solid biofuel products
Handmade carpets and textile floor coverings	Handmade braids and ornamental trimming

Services with 5% GST tax are:

Small hotels and restaurants with transport services like roadways, airways
Standalone AC/Non-AC restaurants serving liquor, takeaway food
Restaurants in Hotels with a room tariff lesser than Rs.7,500
Special flights for Pilgrims (Economy Class)

GST Tax Slab of 12%

The government applies a tax slab of 12% to the following list of Goods and Services:

Here is the list of Goods:

Goods with 12% GST Tax	Goods with 12% GST Tax
Frozen meat products	Butter
Cheese	Ghee
Pickles	Sauces
Fruit juices	Toothpowder
Namkeen	Medicines
Umbrellas	Instant food mixes
Cell phones	Sewing machines
Man-made yarn	Handbags including pouches and purses
Jewellery Box	Wooden frames for photographs, paintings, mirrors, etc

Services with 12% GST tax are:

Business class air tickets
Movie tickets under Rs.100

GST Tax Slab of 18%

The government applies this tax-slab to the following list of goods and services

The Goods are as follows:

Goods with 18% GST Tax	Goods with 18% GST Tax
Flavoured refined sugar	Cornflakes
Pasta	Pastries and Cakes
Detergents	Washing and cleaning items
Safety glass	Mirror
Glassware	Sheets
Pumps	Compressors
Fans	Light fittings
Chocolates	Preserved vegetables
Tractors	Ice-cream
Soups	Mineral water
Deodorants	Suitcase, briefcase, vanity case
Chewing gum	Shampoo
Shaving and after-shave items	Facial make-up items
Washing powder, detergents	Refrigerators
Washing machine	Water heaters
Televisions	Vacuum cleaners
Paints	Hair shavers, curlers, dryers
Perfumes	Marble and granite stone used for flooring
Leather clothing	Wristwatches
Cookers	Stove
Cutlery	Telescope
Goggles	Binoculars
Cocoa butter	Fat
Artificial fruits, flowers	Foliage
Physical exercise equipment	Musical instruments and their parts
Stationery items like clips	Few diesel engine parts
Few parts of pumps	Electrical boards, panels, wires
Razor and razor blades	Furniture
Mattress	Cartridges, multi-functional printers
Doors	Windows
Aluminium frames	Monitors and television screens
Tyres	Power banks for lithium-ion batteries
Video games	Carriage accessories for disabled, etc
Aluminium foil Furniture	Padding pools Swimming pools
Bamboo	Cigarette Filler Rods
Bio-fuels Powered Buses	Second-hand large and medium cars and SUVs

Services with 18% GST tax are:

Restaurants in hotels with tariff at over Rs.7,500
Actual bill of hotel stay below Rs.7,500
Outdoor Catering (input tax credit to be available)
Hotels, inns, guest houses, which have a room tariff of Rs.2,500 and above but less than Rs.5,000 per room per night
IT and Telecom services Theme parks, water parks and alike

GST Tax Slab 28%

The government applies a tax-slab rate of 28% for the following items

The Goods are as follows:

Goods with 28% GST Tax	Goods with 28% GST Tax
Waffles and wafers coated with chocolate	Sunscreen
Dye	Hair clippers
Ceramic tiles	Wallpaper
Dishwasher	Automobiles Motorcycles
Aircraft for personal use	Pan masala
Tobacco	Cigarette
Bidis	Cement
Yachts	Weighing machine ATM
Vending machines	Aerated water

Services with 28% GST tax are:

Race club betting & gambling
Actual bill of hotel stay above Rs.7,500
Five-star Hotels
Entertainment & Cinema
Hotels, inns, guest houses, which have a room tariff of Rs.5,000 and above per room per night

GSTIN – GST Identification Number

GSTIN is a 15-digit distinctive code that is provided to every taxpayer. It is provided based on the state you live and the PAN.

Some of the main uses of GSTIN are as follows:

Refunds can be claimed
Loans can be availed with the help of the number
Verification process is easy with the help of the GSTIN

GST Return

A GST-Return is a document that contains the information of the Income that a taxpayer should file with the government authorities. Registered traders are to file their GST Returns with details regarding their purchases, sales, input tax credit and output GST.

Countries that Collect GST

The first country to bring in GST was France. It implemented GST in 1954 and since then about 160 countries worldwide have roped in GST. Some of the countries with GST are Canada, Australia, Singapore, India, Vietnam, Monaco, Spain, Italy, United Kingdom, Nigeria, Brazil and South Korea.

GST Certificate

Business with an annual turnover of Rs. 20 lakh and more are required to register under GST system. The GST registration certificate is issued in Form GST REG-06, which is an official document issued by the concerned authorities for a business enrolled under this system. The certificate is available only in digital form, which means there is no physical copy issued.

GST Certificate contains following data:

GSTIN
Legal Name
Trade Name
Constitution of Business
Date of liability
Address
Period of Validity
Types of Registration
Particulars of Approving Authority
Details of the Approving GST officer
Date of issue of the certificate
Signature

Inception of GST

The idea to bring GST into an active movement in India dates back to the beginning of the 21st century.

Here is the timeline:

Year	Activity
2000	The government headed by Atal Bihari Vajpayee were in talks about the GST. A committee was set up to plan the course of action headed by Asim Dasgupta, Finance Minister of West Bengal.
2003	A task force was set up under Vijay Kelkar, the then advisor to the Finance ministry. Tax reforms were to be suggested by the task force.
2004	Vijay Kelkar suggests replacing the tax regime with GST.
2006	Then Union Finance Minister, P.Chidambaram, proposed the implementation of GST by April 1, 2010, during the budget of 2006-07.
2008	The committee set up, submitted a report regarding the roadmap of GST if implemented in the country.
2009	The committee prepared a paper for discussing GST. Finance minister Pranab Mukherjee announced the basic structure for GST.
2010	Implementation of GST was postponed to April 1, 2011.
2011	The Congress Party introduced the Constitution (115th), Amendment Bill, for the implementation of GST. The Bill was passed to a standing committee after facing resistance from the Opposition.
2012	Meetings were held with state Finance ministers and the deadline for issues to be resolved is set for December 31, 2012.
2013	P. Chidambaram made the provision of Rs. 9,000 cr to compensate for losses due to GST.
2014	Just as the Standing Committee cleared GST for implementation, Lok Sabha dissolved and the Bill lapsed. New Finance Minister, Arun Jaitley, introduced the Constitution (122nd), Amendment Bill, in the Lok Sabha.
2015	A new date was set for the implementation of GST as April 1, 2016. GST Bill was passed in Lok Sabha but not in Rajya Sabha.
2016	Rajya Sabha passed the Constitution Amendment Bill. The GST council agreed on the four slab structure with an added cess for luxury and sin goods.
2017	GST was finally implemented on July 1, 2017.

Conclusion

Well, Goods and Services Tax (GST) did face some flak as people had certain concerns regarding their spending capacity. However, recently it has been getting a positive response from the consumers in India because of its success.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.