Democracy is run by the representatives of the people, which costs money to run. So to run all the components in the government system, the government collects money from the people in the form of tax. In which direct taxes and indirect taxes are the main routes. In 2017, Goods and Services Tax were implemented in India, for which there was a lot of opposition and support too.
Here we will know in detail what is GST and how it works in India, what is its purpose of it. Mainly, many people work in this system, but do not understand this concept so here we will try to understand simple language that what is GST?
Generally people have the impression that only rich people give tax to the government, we take only facilities from the government. We get this information through all the mediums of media and we also say that the government gives people free of cost facilities under different schemes. In reality, the government gets around 50% of the income from indirect tax, which comes from the money of the common people, which is corporate tax , but it is collected from the common people.
The problem here is that the companies that run in India, their profit margin becomes very less from top to bottom, that means the one who has more capital earns more profit, so those who are opposing this tax system. Their profit of margin is earned by the above companies, so their profits are less, we get to see many such disputes. So here we will discuss all those topics and try to know what is GST.
Goods and Services Tax – What is GST? –
In the system of our democracy, tax is taken at three levels – the tax of the central government – the tax of the state government – and the local self-government institutions ie local bodies like municipalities, which collect money from the people in the form of taxes, on which they make arrangements at those levels. Provides services to the people. Before the introduction of GST in India in 2017, there were many taxes which were levied at these different levels, due to which there was an atmosphere of confusion among the common people.
Due to higher tax rate , people get more expensive goods and services. After 1990, the service sector in India grew up very fast, but there was no efficient system for taking tax for it. Service tax was introduced, but there was a lot of ambiguity about it.
The most basic reason for introducing GST was that the government had to pay tax as many times as the goods were traded for the goods which have already been taxed. , they had to reduce these tax systems of government so this was the purpose of bringing in the new tax system. We can say that there is only one type of tax system i.e. GST tax system for products and services.
History of GST –
Efforts were being made to bring this tax system since 2003, but finally in 2017 this tax system was implemented all over India, the reason for this tax system, taking so long. Whoever was the opposition to this law, would strongly oppose it. The law could not be implemented, so it meant that politics continued to take credit for this law. The important reason for introducing GST was that after 1990, India had made many changes in its economical policy.
Due to this reason their source of income, The earlier tax system became important, which was very complicated and many businesses were left out because of tax on tax. Another technical problem of implementing this tax was that in the democratic system of India, special powers were given to the states by the constitution, it is called federal structure, because of this many states were opposing this tax system.
India had to make a lot of legal changes to implement this tax system, the constitution had to be amended, due to which a strong government was needed at the center for this. In America, all the states have their special rights, so it is very difficult to implement that GST, but they have maintained their own tax system which has been very effective.
In India, this GST system had to be taken from the model of democracy of France and Britain, but the entire power in that country is with the central government, so they accepted this tax system, talking about India, it is a very big system and very complicated before that. We were running it under the tax system. Our tax system works by making 15 taxes of the central government and 20 taxes of the states, with the introduction of GST, many old taxes were abolished and this tax system was finally implemented.
GST Council – Regulatory Authority of GST –
The Goods and Services Tax (GST) is a tax on the supply of goods and services in India that has replaced many indirect taxes previously levied by the central and state governments. The GST is governed by a GST Council, which is a regulatory body responsible for the administration and implementation of the GST in India.
The GST Council is chaired by the Union Finance Minister and comprises the Finance Ministers of all states and union territories in India. The Council is responsible for making recommendations on various aspects of the GST, including tax rates, exemptions, thresholds, and procedural aspects. The Council also makes recommendations on the division of tax revenue between the central and state governments and the compensation to be paid to the states for any revenue loss due to the implementation of GST.
In addition to the GST Council, the GST is also regulated by the GST Network (GSTN), which is a non-profit organization responsible for providing the IT infrastructure and services for the implementation of the GST. The GSTN is responsible for developing and maintaining the GST portal, which is used by taxpayers to register, file returns, and make payments under the GST. The GSTN also provides support and training to taxpayers and tax officials on the use of the GST portal and related services.
Overall, the GST regulatory framework is designed to ensure smooth and efficient implementation of the GST, while also providing a transparent and accountable system for the collection and administration of indirect taxes in India.
POWER OF GST COUNCIL –
The GST Council is a constitutional body in India that is responsible for making recommendations on various aspects of the GST and overseeing its implementation. The Council has been given significant powers to ensure that the GST is administered in a uniform and efficient manner across the country. Some of the powers of the GST Council are:
- Recommend GST rates: The GST Council recommends tax rates for goods and services, and it has the power to revise rates from time to time. The Council ensures that the rates are uniform across the country and do not lead to undue tax burden on any segment of taxpayers.
- Division of tax revenue: The GST Council also decides on the division of tax revenue between the central and state governments. The Council ensures that the division of revenue is fair and takes into account the needs of the states.
- Recommend exemptions: The GST Council recommends exemptions from the GST for certain goods and services, based on their impact on different segments of society and the economy.
- Make recommendations on GST procedures: The GST Council also makes recommendations on various procedural aspects of the GST, such as registration, filing of returns, payment of taxes, and audits.
- Compensation to States: The GST Council also decides on the compensation to be paid to states for any revenue loss due to the implementation of GST.
Overall, the GST Council is an important body that plays a critical role in the administration of the GST in India. Its powers and responsibilities are aimed at ensuring a uniform and efficient tax regime that is fair to all taxpayers and contributes to the growth and development of the Indian economy.
STRUCTURE OF GST –
The Goods and Services Tax (GST) is a comprehensive indirect tax system that has replaced many indirect taxes levied by the central and state governments in India. The GST has a three-tiered structure, consisting of the following:
- Central GST (CGST): This is the tax levied by the central government on the supply of goods and services within a state. The revenue collected from CGST goes to the central government.
- State GST (SGST): This is the tax levied by the state government on the supply of goods and services within a state. The revenue collected from SGST goes to the respective state government.
- Integrated GST (IGST): This is the tax levied on the supply of goods and services between different states in India. The revenue collected from IGST is shared between the central and state governments, as per the recommendation of the GST Council.
The GST is administered by the GST Council, which is a constitutional body comprising the Union Finance Minister, the Finance Ministers of all states, and union territories with a legislature. The Council is responsible for making recommendations on various aspects of the GST, including tax rates, exemptions, thresholds, and procedural aspects. The GST Council has the power to decide on the division of tax revenue between the central and state governments and the compensation to be paid to the states for any revenue loss due to the implementation of GST.
In addition, the GST is also regulated by the GST Network (GSTN), which is a non-profit organization responsible for providing the IT infrastructure and services for the implementation of the GST. The GSTN is responsible for developing and maintaining the GST portal, which is used by taxpayers to register, file returns, and make payments under the GST.
Overall, the structure of GST is designed to create a comprehensive and uniform tax system that is efficient, transparent, and accountable. The system ensures that tax revenue is shared fairly between the central and state governments, and the GST Council plays an important role in regulating and administering the GST in India.
How GST changed the old tax system ? –
The constitution has empowered the central government and the state government to collect taxes by making laws. The local body can also run its system by collecting tax, so first the entry tax, octroi, etc. The local body tax was abolished due to the introduction of GST. Talking about the states, VAT. Sales Tax, Excise Duty, Entertainment Tax, Gambling Tax, Tax for advertisement which was earlier available to the states except for newspaper and television advertisements were abolished.
Why would all the states be ready to implement this tax system GST? The reason for this given that with the introduction of GST, the revenue of the state government would increase and the earlier expenditure for running this tax system would be reduced. As this tax system is the destination base, that is, the last transaction of any goods or services, where tax will be available to that state, earlier this production, sale and service were taxed at such different levels.
By changing it, the place of last transaction will get the amount of tax, due to which the large-scale producing states strongly opposed this tax. In which Tamil Nadu, and Punjab, which was very ahead in the country in terms of production in the country, by the way, Gujarat also produced There was a leader in the field, but the BJP government in the center and the BJP government in Gujarat also, so Gujarat did not oppose this tax so much.
How the GST tax system is works ? –
- TAX CALCULATION
- TAX PAYMENT
Who is eligible to pay the tax ? –
- One who works in production or service.
- Those who were associated with the old tax system before the introduction of GST.
- Those whose annual turnover is above 40 lakhs, it is necessary to register GST.
- Those who want to join the GST tax system themselves can also register.
- Foreign Indian can also join GST if he is involved in production and service.
How to do tax registration ? –
The process of tax registration is online, in which the taxpayers who were already associated with the old tax system and those who want to join the new taxpayer GST, all of them can register themselves through the online GST website, for this it is necessary. The documents have to be submitted online, which is checked by the tax authority and provides the GST certificate online.
Submitting GST RETURN –
As soon as you are registered with GST, after that all the purchase and sale data has to be submitted through RETURN on the online GST web site.
Those whose turnover is more than 5 crores, it is necessary to fill two RETURN in the month, and one RETURN at the end of the year.
For small business, it is necessary to fill RETURN once in three months.
Tax calculation and tax payment –
After filing the tax RETURN, the payment Challan is generated, how many purchases were made for that period and how many sales were made, the remaining amount is the tax amount, this is also used for the RETURN of the service sector, the services provided and taken. The rest of the RETURN has to be filled for the services rendered.
Types of GST –
- CGST (CENTRAL GOODS & SERVICES TAX)
- SGST (STATE GOODS & SERVICES TAX)
- IGST ( INTEGRATED GOODS & SERVICES TAX)
- UTGST (UNION TERRITORY GOODS & SERVICES TAX)
CGST (CENTRAL GOODS & SERVICES TAX) –
Like our democracy, it is a federal democracy, where the states have the right to make their own taxes and laws, under this, whatever tax they do, it is generated by the central government under the GST. It is passed by making a law under Article 265 of the Constitution, and it is an indirect tax of the central government, which comes to the government from the taxpayer by combining the tax of the state government and the tax of the central government.
SGST (STATE GOODS & SERVICES TAX) –
This tax comes under the GST of the center by making a state law, which the central government collects from the tax payer and gives it to the states, this state government by making a law gives the central government the right to collect it. Instead of taxing the states through VAT, or sales tax, this tax system generates them instead of the states.
IGST (INTEGRATED GOODS & SERVICES TAX) –
The transactions that take place outside the states, that is, there is a sale and purchase transaction between two states, in which this tax is the destination tax, ie the state in which the last customer is located, that state gets its share, according to this, a part belongs to the state. It is called SGST tax and the part which belongs to the central government is called IGST tax.
UTGST (UNION TERRITORY GOODS & SERVICES TAX) –
This tax system has been created for the Union Territories in India like Delhi Pondicherry, in which these states are controlled by the Central Government, but for their development, the Central Government has to set aside their share through UTGST, its planning center Only the government does it.
Features of GST Law –
- GST This tax system has been created by repealing the old 17 laws of the central government and the states.
Tax on tax, the loophole of this tax system has been closed due to this law.
- Earlier, many local taxes had to be paid for transporting a vehicle from one place to another, which were stopped, which would help in saving time and money.
- For liquor, electricity, petrol and diesel, the old tax system of the states has been kept in the same way, which is called excise duty.
- With the introduction of this tax system, the tax rate is more visible, but in the old tax system, more tax had to be paid than a tax on tax.
- Due to the GST tax system, the cost of goods and services which were earlier available to be expensive will help to come down.
- For this, the Infosys company has created a web site in which every GST number is interlinked with each other, so it will help in stopping the incidents of tax evasion and will increase the revenue of the government.
- This tax system is a country where the central government has more powers, the tax system has been created for it, India is a country with federal characteristics, where the states have special rights, yet this system has been brought.
- Many people opposed this tax system, the reason for this was that their profit has been reduced by the arrival of this tax and further increasing the price of goods and services can reduce their sales.
- All businesses that are not goods will be considered as all services, by such an interpretation, all businesses have been brought under the purview of tax.
- First, separate tax for production, separate sales tax, by closing all this, this tax will be the destination base tax, so that the states of the last taxpayer will get the share of GST.
- The producer who is the beginning in GST tax will not get input benefit and the last customer will not get its benefit.
- Those who are beginning producers, their profit off margin is high, they go down very little, so small traders are opposing this law.
Critical Analysis of GST System –
- Due to this tax system being an end-to-end system, the states where mass production is done, that state does not get the benefit of GST.
- The profit and margin of small business is already very low and this profit is going to be reduced further with the introduction of this tax system, so they have more opposition to the GST system.
- Small businesses are not able to have a dedicated expert for the tax system like a large company can.
- The rate of tax system fixed by the government is much higher than the basic profit of small business, so there is a lot of dissatisfaction among small businessmen about it.
- States like Tamil Nadu and Gujarat do not get the tax benefit of GST, which has been given to the consumer states, for which Tamil Nadu protested a lot in the initial days.
In this way, we have seen here how the GST tax system works, we have seen here how much profit was made to the people under the law, how much profit was made to the business and how much was the benefit to the government. In the states where there is a government of different parties, those people say that the central government delays in giving their share of GST and the states have to depend on the center.
Whatever the flaws and the good in this law, only time will tell, but it will control the rising prices of goods and services to some extent, so that it will be affordable to the last customer. The success of the government in increasing the income of this tax system seems to have been met to some extent. Small businessmen seem to be somewhat angry with this tax system, but the government has been successful to some extent in convincing them.
The reality is another that opposes it or support it cannot go ahead without working in this system, so many businesses have settled on it. I hope I was able to explain as much as I can about in legal term GST.