Today, we’ll delve into the Goods and Service Tax, commonly referred to as GST. While many of you might be familiar with its full form, you may not fully understand its meaning and implications. In this article, we’ll explore what GST is and the rationale behind establishing this tax system. Introduced in 2017, GST replaced various taxes that were previously imposed on consumers, consolidating them under one umbrella. Let’s take a closer look at the full form of GST.
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What is GST?
GST stands for Goods and Services Tax. It is an indirect tax introduced in India on July 1, 2017, replacing multiple other taxes such as VAT, excise duty, service tax, entry tax, and luxury tax. GST is applied to the supply of goods and services, and it is paid by the final consumer. This tax is calculated based on the price charged for goods or services and is levied at every stage of value addition.
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Types of GST in India
India’s GST system is divided into four main types:
- Central Goods and Services Tax (CGST): This is imposed by the central government on transactions involving goods and services. CGST is collected alongside State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST) and is split between the central and state governments. For example, if a business in Mumbai sells goods worth Rs 50,000 with an 18% GST rate, 9% goes to the state treasury and the remaining 9% goes to the central government.
- State Goods and Services Tax (SGST): This tax is applied by state governments on intra-state transactions of goods and services. SGST replaces taxes like VAT, octroi, luxury, entertainment, and purchase taxes. The entire SGST collected is retained by the state government.
- Integrated Goods and Services Tax (IGST): IGST applies to inter-state transactions and to goods and services that cross state boundaries. It also covers exports and imports. The IGST is shared between the central and state governments, with the state where the goods or services are consumed receiving its portion of the tax.
- Union Territory Goods and Services Tax (UTGST): UTGST is similar to SGST but is applicable in Union Territories like Puducherry and Daman and Diu. It replaces taxes that were previously imposed in these territories.
Each type of GST ensures that taxes are collected and distributed appropriately, streamlining the taxation system across the country.
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Understanding GST Rates and Registration
GST Slab Rates:
Goods and services in India are taxed under four GST slab rates: 5%, 12%, 18%, and 28%. The GST Council periodically updates these rates to ensure optimal pricing for various products and services. Below is a breakdown of goods and services under each GST slab:
5% GST Rate:
- Edible oils, spices, tea, coffee, sugar
- Coal
- Mats, coir mats, floor coverings
- Wind mills and flour mills
- Fertilizers
- Natural cork
- Devices for the disabled (e.g., Braille paper, hearing aids)
- Marble debris
- Indian sweets
- Accessories and parts for disabled vehicles
- Fly-ash blocks
- Biogas
- Incense sticks and kites
- Life-saving drugs (e.g., insulin)
- Numismatic coins
- Ice and snow
- Walking sticks
- Cashew nuts
- First-day covers and revenue tickets
- Stamp postmarks
- Motor car rentals without fuel charges
12% GST Rate:
- Frozen meat
- Fruit juices
- Diagnostic kits and reagents
- Sewing machines
- Handmade matches
- Dairy products
- Notebooks and exercise books
- Jewelry boxes
- Plastic garlands
- Two-way radios
- Fixed speed diesel engines
- Sauces, ketchup, spices
- Real estate construction
- Hotel stays costing between Rs 1001 and Rs 7500 per day
18% GST Rate:
- Dining or drinking at AC venues with liquor licenses
- Party arrangements with tents and food
- Movie tickets priced over Rs 100
- Household products
- Leatherless school bags and satchels
- Shopping bags and handbags (excluding basketry)
- Precast concrete pipes
- Outdoor dining
- Supply of works contracts
- Dental wax
- Electrical transformers
- Caps and their parts
- Measurement instruments (e.g., measuring tapes, calipers)
- Staplers, pencil sharpeners
- Tractor parts and accessories
- Plastic tarpaulins
- Pencil sticks for kajal
- Aluminium foil
28% GST Rate:
- Caffeinated beverages
- Dining or drinking at 5-star hotels
- Gambling
- Go-karting
- Ballet
- State-authorized lotteries
- Cars and two-wheelers
- Dishwashing machines
- Aerated beverages
- Tobacco products (e.g., cigarettes)
- Racing club services
- Washing machines
- Cement
- Paint
- Air conditioners
- Boats
GST Registration:
Businesses with a turnover exceeding Rs 20 lakh (or Rs 10 lakh for North Eastern and Hill States) must register for GST. This process is known as GST registration and typically takes 3-6 days.
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How to Register for GST:
To register for GST, apply through the Goods and Services Network (GSTN). After registration, you’ll receive a Goods and Services Tax Identification Number (GSTIN), a 15-digit number issued state-wise.
Documents Required for Online GST Registration:
- PAN card of the applicant
- PAN, Voter ID, or Aadhaar card of promoters and partners
- Proof of business address (e.g., lease agreement, utility bills)
- Bank account details of the firm or individual
- Partnership Deed or Incorporation Certificate
This guide aims to clarify GST rates and the registration process, helping you navigate these aspects more easily.