In India, the Goods and Services Tax was enacted on July 1st, 2017. However, the process of putting the new tax system into place started a long time ago. A task force that was formed in 2004 came to the conclusion that the current tax system should be improved by implementing the new tax structure.

The finance minister suggested implementing the GST legislation in 2006, which became law in 2011 thanks to a constitutional amendment bill approved in 2011. The Standing Committee began discussing GST in 2012, and a year later, it presented its report on GST.

Goods and Services Tax in India

The Goods and Services Tax, or GST. In India, it is an indirect tax that has mostly superseded other indirect taxes, including excise duty, VAT, and services tax. The Parliament approved the Goods & Service Tax Act on March 29, 2017, and it became effective on July 1 of that same year.

In other words, the provision of goods & services is subject to the Goods and Services Tax (GST). Every value addition in India is subject to the comprehensive, multi-stage Goods & Services Tax Law, depending on the destination. In addition, a single domestic indirect tax law, known as GST, applies to the whole nation.

How Goods & Services Tax Works in India

The process of Goods and Services Tax working in India is classified into 4 categories-

Manufacturer:

GST must be paid by the maker on both the product's added value and the raw materials they purchased.

Provider of Services:

In this instance, the product's purchase price and the value added to it will be subject to GST payment obligations on the service provider's end. However, the amount of GST that must be paid may be reduced by the manufacturer's tax payment.

Retailer:

The retailer is responsible for paying it on both the merchandise they purchased from the distributor and the profit margin they added. However, the total amount of GST that must be paid may be reduced by the retailer's tax payment.

Consumer:

On the item that was purchased, GST must be paid.

Types of Goods & Services Tax in India

There are 4 different types of Goods and Services Tax in India-

Central Goods and Services Tax:

The intrastate supply of goods and services is subject to CGST.

State Goods and Services Tax:

Like CGST, SGST is levied on local sales of goods and services.

Integrated Goods and Services Tax:

On cross-state sales of goods and services, IGST is levied.

Union TerritoryGoods and Services Tax:

The supply of goods and services in any of the nation's Union Territories—Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh—is subject to the UTGST tax. UTGST is assessed in addition to CGST.

Aim of GST

To implement the "One Nation, One Tax" philosophy

The GST has replaced several indirect levies that were in force under the former tax system. The benefit of a single tax is that each state applies the same rate to a specific good or service. Since the central government sets the tax rates and regulations, tax administration is made simpler. Common legislation like e-way bills for the transportation of goods and e-invoicing for transaction reporting can be introduced. Taxpayers are not burdened with numerous return forms and deadlines, which improves tax compliance. It is an integrated method for complying with indirect taxes overall.

Includes the majority of India's indirect taxes

In the past, India imposed a number of indirect taxes at various points throughout the supply chain, including service tax, value-added tax (VAT), central excise, and others. States and the federal government each have different controlled types of taxation. There wasn't a single, centralised tax that applied to both goods and services. GST was consequently implemented. All of the significant indirect taxes were combined into one under the GST. It has significantly lowered the taxpayers' compliance burden and made it simpler for the government to administer taxes.

Stopping taxes from increasing in a cascading fashion

Eliminating the cascading impact of taxes was one of the main goals of the GST. In the past, taxpayers could not offset the tax credits from one tax against another due to disparate indirect tax legislation. For instance, the VAT due during the sale may not be offset by the excise charges paid during production. Taxes began to increase as a result. Only the net value contributed at each level of the supply chain is taxed under the GST system. Due to this, input tax credits for both products and services flow smoothly, and the cascading impact of taxes has been reduced.

Prevent tax evasion

Compared to any previous indirect tax regime, the GST provisions in India are far stricter. Taxpayers may use only the invoices filed by their suppliers to claim an input tax credit under GST. The likelihood of obtaining input tax credits on fictitious invoices is significantly reduced in this approach. The introduction of e-invoicing has strengthened this goal even further. Additionally, because GST is a national tax with a centralised surveillance system, the crackdown on defaulters is much speedier and more effective. As a result, GST has significantly reduced the likelihood of tax fraud and evasion.

Broaden the base of taxpayers

In India, the GST has contributed to a larger tax base. Previously, the registration threshold for each tax legislation varied dependent on turnover. Since the GST is a combined tax applied on goods and services, the number of tax-registered firms has expanded. In addition, a few unorganised industries have also been brought inside the tax net thanks to the tougher legislation governing input tax credits. Take the Indian construction sector, for instance.

Online processes that make doing business easier

In the past, taxpayers had difficulty dealing with several tax agencies under each tax code. Additionally, even though return filing was done online, the majority of the evaluation and refund processes were done offline. Today, practically all GST procedures are completed online. Everything is accomplished with the stroke of a mouse, from registration to return filing to refunds to e-way bill production. It has greatly facilitated taxpayer compliance and added to India's overall ease of doing business. The government also intends to launch a centralised platform shortly for all indirect tax compliance, including submitting GST returns and electronic waybills and invoices.

A Better Distribution and Logistics System

Multiple documentation is not required as often for the provision of products under a single indirect tax scheme. Among its many advantages, GST reduces transportation cycle times, enhances supply chains and turnaround times, and promotes warehouse consolidation. Furthermore, the abolition of interstate checkpoints under the GST is most advantageous to the industry in terms of enhancing transit and destination efficiency. In the end, it assists in reducing the high expenses associated with warehousing and logistics.

To encourage competitive pricing and boost demand

The introduction of GST has also increased income from indirect and consumption taxes. The costs of products in India were greater than those in international markets as a result of the cascading impact of taxes under the previous system. Even within states, an imbalance in purchases occurred in certain due to the lower VAT rates in those areas. Consistent GST rates have helped to keep prices competitive both domestically and internationally. Thus, a further significant goal has been accomplished. This has increased consumption and generated larger earnings.

New Compliances Under GST

Along with the online filing of GST returns, the GST regime has also introduced several new mechanisms.

E-Way bills

By introducing "E-way bills," the GST created a centralised waybills system. This system was gradually introduced on April 1st for the intra-state movement of goods and on April 15th for the inter-state movement of commodities.

Manufacturers, traders, and carriers may easily create e-way bills under the e-way bill system for items that are delivered from their origin to their destination on a shared platform. Since this technique has cut down on time spent at checkpoints and helps to prevent tax evasion, tax officials have also profited.

E-invoicing

Businesses with an annual aggregate sales of more than Rs. 500 crores in any prior fiscal year are now required to use the e-invoicing system as of October 1, 2020. (from 2017-18). Additionally, beginning on January 1, 2021, this method was made available to those having a combined yearly revenue of more than Rs. 100 crore.

These companies are required to register their invoices on the GSTN's invoice registration system to receive a special invoice reference number for each business-to-business invoice. The gateway confirms the accuracy and legitimacy of the invoice. The digital signature and a QR code are then used to authorise.

Data input mistakes can be decreased, and invoice interoperability is enabled through e-invoicing. It is made to transmit invoice data directly from the IRP to the GST and e-way bill portals. Therefore, it will remove the need for manual data entry while submitting GSTR-1 and aid in the creation of e-way invoices as well.

How to Calculate GST Rates?

When submitting your taxes, figuring out how much GST must be paid can be time-consuming. Reverse charges, exempted supplies, ITC, and other features and considerations must all be taken into the concerned account. Making ensuring you pay the correct amount toward GST is important since failing to do so might result in you being charged an 18% interest penalty on the deficit.

The GST Calculator makes it easy for taxpayers to determine how much GST must be paid. You must enter all necessary information, including the month for which you are calculating GST, the actual date returns were filed, the tax liability for the month, the buys that are subject to the Reverse Charge Mechanism, the opening balance of both your cash ledger and your credit ledger, and the eligible ITC.

Conclusion
In 2016, the GST was implemented, and both houses of Congress approved the revised model GST statute. In addition, the Indian President approved. Four more GST Bills were passed by the Lok Sabha in 2017 and were subsequently approved by the Cabinet. Following the passage of four more GST Bills by the Rajya Sabha, the new tax system went into effect on July 1st, 2017.