Goods and Services Tax (GST) is an Indirect Tax in India on the supply of goods and services. It is a multistage, destination-based tax as it is imposed at every step in the production process. Goods and services are divided into five tax slabs - 0%, 5%, 12%, 18% and 28%.

The tax came into effect from July 1, 2017, through the implementation of One Hundred and First Amendment of the Constitution of India. The tax rates, rules, and regulations are governed by the GST Council which consists of the finance ministers of the center and all the states.

India follows the dual form of GST. At the intra-state level, where goods and services are sold within the state, CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) is levied. When selling goods and services into other states (inter-state), IGST (Integrated Goods and Services Tax) is levied.

Evolution of GST in India

In February 2006, the then Union Finance Minister in his Budget for 2006-07 proposed that GST would be introduced from 1st April 2010. The Empowered Committee of State Finance Ministers (EC), which had formulated the design of State VAT was requested to come up with a road map and structure for the GST. Based on discussions within and between it and the Central Government, the EC released its First Discussion Paper (FDP) on GST in November 2009. The FDP spelled out the features of the proposed GST and has formed the basis for the present GST laws and rules.

Before the implementation of Goods and Service Tax (GST), the Indian taxation system was a farrago of central, state, and local area levies. By subsuming more than a score of taxes under GST, the road to a harmonized system of indirect tax has been paved making India an economic union.

HSN Code

HSN (Harmonized System of Nomenclature) is a 4 to 8-digit code for identifying the applicable rate of GST on different products.

GST Registration

GSTIN refers to the unique GST Identification Number that every business is allotted. Every taxpayer is allotted a state-wise, PAN-based 15-digit Goods and Services Taxpayer Identification Number (GSTIN). Having PAN is mandatory for register under GST.

GST Returns

In the GST regime, any regular business has to file two monthly returns and one annual return. This means total 26 returns in a year.

• GSTR-1 (Monthly or Quarterly): Details of outward supplies of taxable goods and/or services affected.

• GSTR-2 (Suspended): Details of inward supplies of taxable goods and/or services effected claiming the input tax credit.

• GSTR-3 (Suspended): Monthly return based on finalization of details of outward supplies and inward supplies along with the payment of tax.

• GSTR-3B (Monthly): Simple Return in which a summary of outward supplies along with Input Tax Credit is declared and payment of tax is affected by the taxpayer.

• GSTR-9 (Annually): Annual Return for a Normal Taxpayer.

• GSTR-10 (Once): Final Return when GST Registration is canceled or surrendered.

All taxpayers, except those registered under the Composition scheme, are required to file return FORM GSTR-3B and pay tax on a monthly basis. Every person who has registered for GST must file the return GSTR-3B including nil returns. The GSTR-3B for a particular month should be filed by the 20th of the following month. For example, GSTR-3B for July should be filed by the 20th of August, and the GSTR-3B for August should be filed by the 20th of September and so on.

Taxpayers with turnover up to Rs. 1.5 crore are required to file information in FORM GSTR-1 on a quarterly basis. Other taxpayers would have to file FORM GSTR-1 on a monthly basis.

The forms for the annual returns are FORM GSTR-9 and reconciliation statement in FORM GSTR-9C.

New Return System

The new return system is simple with two main annexures. One for reporting details of outward supplies (FORM GST ANX-1) and the other for availing input tax credit (FORM GST ANX-2) based on invoices uploaded by the supplier.

From October 2019 onwards, FORM GST ANX-1 is made compulsory. Large taxpayers (having aggregate turnover of more than Rs. 5 crores in the previous year) are to file FORM GST ANX-1 on a monthly basis whereas small taxpayers file first FORM GST ANX-1 for the quarter October 2019 to December 2019 in January 2020.