GST: Introduction, Registration Process and Filling

Introduction:

The word “Tax” comes from the Latin word “Taxare” which means “to estimate”. Taxes in simple words refer to an involuntary contribution that is inflicted on the public by the government. Taxes were first introduced in 2800 B.C. to 3000 B.C. in Ancient Egypt. In India, the existence of taxation can be traced to exist in earlier times in history books such as Manusmriti and Arthashastra.

The Atal Bihari Vajpayee Government in the year 2000 came up with the idea of introducing GST (Goods and Services Tax). GST refers to a tax that is levied on the supply of goods, or services, or both. It is an amalgamation of all the indirect taxes which were previously imposed by the Central and State Governments including Luxury Tax, Octroi, Value Added Tax, Central Excise Tax, Purchase Tax, Service Tax, and Entry Tax, etc.

A formal Empowered Committee, headed by the then Finance Minister of West Bengal, Asim Dasgupta, was formed for this purpose. The Committee was empowered with the tasks of finalizing reports, and preparing other important exemptions, and rules, etc. In 2004, another report by Vijay L. Kelkar’s task force suggested that the implementation of GST would help to overcome the problems of the existing system^[1]. In the budget sessions which followed these years, 1st April 2010, was set as the deadline for the introduction of GST in India.  However, because of the clashing views of different stakeholders and a lot of political issues, the implementation of GST was pushed to 2017.

The 122nd Constitutional Amendment Bill was introduced in the Lok Sabha in 2016, to address the issues with the existing system. Four bills later, The Constitution (101st Amendment) Act, 2016introduced in India, a Goods and Services Tax (GST), from 1st July 2017. GST was introduced with the motto of “One Nation -One Market -One Tax”. It is one of the most important taxation system reforms in Indian history. Article 366(12A) of the Constitutional (101st Amendment) Act, 2016  defined GST as a tax levied on the supply of goods or services or both of them, excluding tax on the supply of alcohol.

Importance of GST

Goods and Services Tax was introduced as a measure that would mitigate the problems associated with the existing taxation system in India. Some of the pros of GST are^[2]:

1. GST benefits all stakeholders, including the government, industry, and citizens of the country.
2. GST has given a boost to the economy of our country and made the goods made in India globally competitive.
3. It reduces the cost of goods and services.
4. Removes existing economic barriers making India a Uniform and common National market.
5. Removes cascading effects of taxes.
6. Gave a huge push to the Make In India initiative of the Government of India.
7. Brings uniformity in taxation on imported goods and local products.
8. Improves the Balance of Payments’ position of India by giving a boost to Indian exports.
9. Widens the tax base and leads to compliance with GST by taxpayers.
10. Input tax credit facility leads to a seamless alignment of business operations.
11. The most important benefit is that the uniformity of laws, procedures, and tax rates throughout the system make it very easy for the citizens to comply with the provisions without failure.

Key Features of GST

Salient features of GST are as follows:

1. It applies to the supply of goods or services. This is in opposition to the prior system of tax on the manufacture or sale of goods.
2. GST is a consumption-based-destination tax. It is different from the system of origin-based taxation which existed before the introduction of GST.
3. It is a Dual-Tax in nature. This is because the Centre levies CGST (Central Goods and Services Tax) and the state levies SGST (State Goods and Services Tax), on the same base.

The constitution of India by Article 246, the 7th Schedule empowers the Central and State Government of India to impose and collect indirect taxes on transactions of goods and services.

GST Registration

GST Registration is the process by which a business owner gets registered. A registered person who pays GST must furnish a Tax Return. It is an official document showing the income of a person. It has to be filed with the appropriate tax officials to pay tax to the government. The registration can be done on the GST Portal which has been made available online.

Furthermore, the following people should complete their GST registration without failure:

1. Those who registered under the tax system even before GST was introduced.
2. (Input Service Distributors) ISD and supplier’s agents.
3. Every electronic commerce aggregator, and persons using it to supply goods.
4. Persons who provide access to online information and databases from outside India to people residing in India, except those who are registered, taxable persons.
5. All Non-Resident Taxable Persons, and Casual Taxable Persons.
6. A business entity that has a turnover of more than Forty Lakh Rupees must register itself as a normal taxable business entity.
   The threshold limits for businesses situated in states on the hills and North Eastern states is Ten Lakh Rupees,
7. Those who pay taxes according to the reverse charge mechanism.

Types of GST Registration^[3]

GST Registration is of various types. Some of these are:

Normal Taxpayer

In India, the majority of the taxpayers belong to this class. There exists no mandate regarding deposits or expiry dates for normal taxpayers. 

Casual Taxable Person

People conducting seasonal businesses can opt to be in the category of the casual taxable person. An advance amount that is equal to the probable Goods and Services Tax liability has to be deposited during the time seasonal business is being conducted. Three months are given for this purpose however, the period can be renewed.

Composition Taxpayer

A person who wishes to get the Goods and Services Tax Compensation Scheme must apply for being a Composition Taxpayer. ITC cannot be availed under this.

Non-Resident Taxable Person

A person residing anywhere outside India, supplying goods to persons residing in India can opt for Non-Resident Taxable Person GST Registration. An advance amount equal to GST liability has to be deposited for the time the business is in operation. The period for this type of registration is three months which is extendable on expiry.

Documents required for GST Registration^[4]

The documents that are necessary to complete GST Registration are:

1. Aadhaar Card,
2. Address proof of the business,
3. A valid PAN,
4. A canceled cheque,
5. Bank Account Statement,
6. Certificate of Incorporation of business/Any document giving proof of establishment of business,
7. Important documents of officials like the director’s Identity proof, Address proof, photo ID, etc.
8. Digital Signature wherever and whoever’s required,
9. Authorization Letter/Board Resolution.

GST Registration Process^[5]

The GST Registration process is online on https://www.gst.gov.in and very easy to comply with. The step by step procedure for the same is as follows:

Step 1: Openhttps://www.gst.gov.in.

Step 2: Under the “taxpayers (Normal/TDS/TCS)” option, select “Register Now”.

Step 3: You will see two options available. Select “New Registration”.

Step 4: Against “I am a”, a drop-down menu will be available.

The dropdown menu has options like Taxpayer, Tax Deductor, Tax Collector, GST Practitioner, Non-Resident Taxable Person, UN body, Consulate/ Embassy of foreign Country, Other notified person, and Non-Resident Online Service, Provider.

Select “Taxpayer” from this list.

Step 5: Further select State/UT, District, enter the legal name of the business which is mentioned in the PAN, PAN, active Email Id, and working Mobile Number (One Time Password will be sent on the e-mail id and mobile number entered). Click on Proceed.

Step 6: A Temporary Reference Number (TRN) will be displayed. Note it down.

Step 7: Open the same GST Portal once again. Under the “taxpayers (Normal/TDS/TCS)” option select Register.

Step 8: From the page that opens, click on “Temporary Reference Number”

Step 9: Enter the Temporary Reference Number and the characters as displayed in the Captcha image. Then press Proceed.

Step 10: One-Time Password will be received on the registered email id and contact number. This is to be entered on the page displayed. Click Proceed.

Step 11: The status of the application for GST Registration will be available on this page. There will be an option to edit the same on the right side. Click on the edit icon.

Step 12: There are ten sections on this page. All essential details must be entered and important documents must be submitted for successful submission of the application.

Step 13: On the verification page, check the declaration. The application can be submitted using the following options: 

1. EVC- Electronic Verification Code: Code is sent on the contact number entered.
2. E-Sign: One-time password is sent to the contact number which is linked to the Aadhar Card. Digital Signature Certificate must be used.

Step 14: On successful submission of the application a message showing the same will be displayed on the screen. An Application Reference Number will be received on the email id and contact number which was registered earlier. The status of this number can be checked on the GST Portal itself.

Input Tax Credit

Input Tax Credit means that a person can reduce his tax liability by balancing the amount of taxes already paid on inputs. This means that if a person has paid taxes on the purchase of a product or a service from a registered dealer, he can adjust it with the tax collected by his own selling the product or service, and thus balance the liability^[6]. Furthermore, ITC can only be claimed for business purposes. In no case, it can be claimed for someone’s personal use or supplies that are exempted under the Act, or such supplies for which no provision of ITC has been made available. Every taxpayer must disclose the amount of ITC claimed in Form GSTR-3B, which is filed on a monthly basis.

For instance, if the tax payable on purchase (input) is Rs. 600 and the tax payable on sales (output) is Rs 750. We can claim an input tax credit of Rs. 600, and will only have to deposit Rs. 150 as tax liability.

Eligibility to Claim ITC

ITC can be claimed by the following people registered under GST if they fulfill certain conditions. These conditions are as follows:

• The person dealing in the goods or services concerned must be have the tax invoice,
• The goods or services of the concerned transaction must have been received by the party,
• Returns should have been initiated,
• The person must have paid the tax charged to the government,
• In the cases where goods are received in installments, ITC can be claimed only after the last installment is received,
• Depreciation and ITC cannot be claimed together in the case of capital goods.

Monthly versus Quarterly GST Returns^[7]

Businesses having an aggregate turnover of not more than Five Crore Rupees in the previous Financial Year have been given two options. They can either file a quarterly return or a monthly return. Whereas, for businesses having an average turnover of more than Five Crore Rupees in the previous Financial Year, it is mandatory to file monthly returns.

Quarterly returns are to be filed four times in one year and monthly returns have to be filed twelve times in a year. Based on the information required to be declared a business filing quarterly returns can choose amongst Sahaj, Sugam, and Normal Quarterly Return. For monthly filing only one type of return is available.

GST Sahaj^[8] (B2C only)

GST Sahaj was introduced in 2019. It is a type of simple tax return made for businesses with a turnover of not more than Rupees Five Crores in the previous Financial Year. This caters to those businesses that conduct Business 2 Consumer supplies. This has to be filed quarterly by the 10th of the month falling after the quarter.

GST Sugam^[9] (B2B & B2C)

Small businesses having a turnover of up to Rs 5 crores can file GST Sugam. It is meant for those businesses that conduct both Business 2 Business and Business 2 Consumer supplies. This has to be also filed quarterly, like GST Sahaj, by the 10th of the month falling after the quarter.

Normal Quarterly Return (All types of supplies)^[10]

A business indulging in any of the supplies like B2C, B2B, NIL rated supplies, RCM, Zero-rated supplies, supplies conducted through e-commerce operators, etc can file GST-RET- 1.

Businesses with a turnover of more than Five Crore Rupees need to file this GST-RET-1 monthly, whereas those with less than this turnover can take the option of a quarterly return.

Normal Monthly Return (All types of supplies)

The Normal Monthly Return has to be filed 10th of the next month. This return can be filed for all kinds of supplies and no restrictions exist on any kinds of activities.

Types of GST Returns and Due Dates

1. GSTR-1
   Aggregate turnover more than Five Crore Rupees and not opted for QRMP Scheme- Monthly, by the 11th day of every month.
   Opted for QRMP Scheme- Quarterly, by the 13th day of the month after the quarter.
2. GSTR-2A: Read-only Return.
3. GSTR-2B: Read-only Return.
4. GSTR-2: Currently suspended.
5. GSTR-3: Currently suspended.
6. GSTR-3B^[11]
   Aggregate turnover more than Five Crore Rupees and opted out of QRMP scheme- Monthly, by the 20th day of every month.
7. GSTR-4
   There are two-quarter categories of states, namely: X & Y.
   For X category- Quarterly, by the 22nd day of the month falling after the quarter month.
   For Y category- Quarterly, by the 24th day of the month falling after the quarter month.
8. GSTR-5
   Annual Return, filed by 30th April of the year following the FY.
9. GSTR-5A
   Summary Return- Monthly, by the 20th day of every month.
10. GSTR-6
    Filed by ISD- Monthly, by the 13th day of every month.
11. GSTR-7
    Filed by those who have to deduct TDS- Monthly, by the 10th day of every month.
12. GSTR-8
    Filed by e-commerce operators- Monthly, by the 10th day of every month.
13. GSTR-9
    Annual Return, filed by all taxpayers registered under GST Law. It is a compilation of all monthly and quarterly returns filed. Annually, by 31st December of the year falling after the FY.
14. GSTR-9A: Suspended Currently, Annual Return.
15. GSTR-9C
    Reconciliation statement– Yearly, by 31st December of the year falling after the financial year.
16. GSTR-10
    Final Return, to be filed within 3 months from date of cancellation of registration.
17. GSTR-11
    Filed by those who are issued a UIN for the purpose of refund under GST.

Penalty for Late Filing

In case someone is not able to complete the filing by the due dates, a penalty is levied on him. A fine of Rs. 200 which includes Rs. 100 for SGST and Rs. 100 for CGST is levied for every single day of failure to register. However, the maximum amount of fine for this is Rs. 5000.

No late fee exists in the case of IGST. An interest of 18%p.a. is charged. It is estimated on the outstanding tax liability amount^[12].

Conclusion

The impact of the introduction of GST in India is very positive. Before the introduction of GST, the taxation system in India was very complex. It had a major problem of cascading effect of taxes as the tax was imposed on two occasions/destinations. With the introduction of VAT in the taxation system of India, the building blocks of Goods and Services Tax were laid. GST is a good tax policy, within 4 years of its introduction itself, it has led to the country’s progress like never before. It has directly impacted the Indian economy when seen in terms of equity. GST is a great measure as it has also taken care of problems associated with scattered income distribution, and generated tax revenues essential for the purposes of the betterment of the country’s infrastructure, citizen’s safety facilities, public amenities, defense services, and exports, etc. The introduction of GST has brought about great transparency in the country’s tax system by reducing cases of tax theft and associated corruption. By subsuming all kinds of indirect taxes into one tax, India has only progressed towards betterment. It can be concluded that the GST registration process and filing is a very easy process to comply with, and every eligible taxpayer must do it within the due dates prescribed for it.

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References:

^[1] Anand Nayyar and Inderpal Singh, “A Comprehensive Analysis of Goods and Services Tax (GST) in India”, Indian Journal of Finance, February 2018 (5th August 2021, 8:30 AM.)

https://www.researchgate.net/publication/323007997_A_Comprehensive_Analysis_of_Goods_and_Services_Tax_GST_in_India .

^[2] Benefits of Goods and Services Tax, 51 GST Flyer Chapter 45 (5th August 2021, 8:50 AM) https://www.cbic.gov.in/resources//htdocs-cbec/gst/51_GST_Flyer_Chapter45.pdf;jsessionid=C0C76604A6E97FCF54B88CF9FCDA4E03 .

^[3] GST Registration, BankBazaar.com (5th August 2021, 11:01 AM) https://www.bankbazaar.com/tax/gst-registration.html .

^[4] Ibid.

^[5] Goods and Services Tax registration, Government Of India (5th August 2021, 11:15 AM) https://reg.gst.gov.in/registration/ .

^[6] Input Tax Credit- ITC, Cleartax (6th August 2021, 8:00 AM) https://cleartax.in/s/gst-input-tax-credit .

^[7] “Monthly vs. Quarterly GST Returns-A Comparison Analysis: What should small taxpayers opt for?”, Cleartax (6th August 2021, 1:01 PM) https://cleartax.in/s/monthly-vs-quarterly-gst-returns .

^[8] GST Sahaj Return, Cleartax (6th August 2021, 2:04 PM) https://cleartax.in/s/gst-sahaj-return .

^[9] GST Sugam Return, Cleartax (6th August 2021, 2:17 PM) https://cleartax.in/s/gst-sugam-return .

^[10] Form GST-RET-1: How to File a Detailed Return, Cleartax (6th August 2021, 3:30 PM) https://cleartax.in/s/form-gst-ret-1 .

^[11] Types of GST Returns, Cleartax (7th August 2021, 8:00 AM) https://cleartax.in/s/returns-under-the-gst-law .

^[12] Satish AR, “Types of GST Returns: Filing & Due Dates of Returns”, Quickbooks (7th August 2021, 8:30 AM) https://quickbooks.intuit.com/in/resources/gst-center/types-of-gst-returns/ .