Decoding GST: nature, benefits, tax recovery, filing returns

There is an excitement across the country with Goods and Services Tax (GST). People want to understand why GST is the biggest tax reform after independence? Through this article, I will pre­sent some points about the nature of GST, some benefits of GST and the recovery of tax and the process of filing returns in GST.

Today, the central and state governments levy taxes at different levels. Apart from this, various types of cesses or surcharges are also levied by Centre and the states. Now in GST regime, all these will be subsumed and only one tax — GST — will be levied on all goods and services. The GST tax rate applicable on any goods will be the same in any part of the country.

Due to the merger of large number of taxes by the Centre and the states, and making them into one tax, the problem of various taxes and multi-taxation will be solved and the path for integrated national market will be cleared.  From the view of the consumer, the biggest benefit will be that the tax burden on goods will be reduced. Today, the tax burden is about 25% to 30%.  With the implementation of GST, the Indian producers will be able to compete in domestic and as well as in the international markets. Studies have shown that this will have a very encouraging effect on economic development also.

The GST Council has been given full authority to make decisions over all issues of importance (including the rate).  One of the main decisions taken in the Council’s meetings so far is that all items will be levied tax at any one of the four rates — 5%, 12%, 18%, 28%. Apart from this, there will be nil tax on some goods and services. That means, these items figure in the discounted list.
 
There will be a special rate on gold, silver and jewellery made of them, which is yet to be decided.

On export items, the entire input taxes paid will be refunded.  In addition to the customs duty on imported items, GST will also be levied as per the prevailing GST rate for such items within the country. After the implementation of GST, traders and manufacturers will now have to follow single tax procedure. 

The biggest advantage has been given to small traders. In most of the states, tra­ders with turnover above Rs 10 lakh are paying VAT. However, in GST, except for the states falling under the special category of hill stations, for all others, this limit has been raised to Rs 20 lakh. This means that if a trader’s turnover is between Rs 10 lakh and Rs 20 lakh, now he will not be required to pay tax and also need not obtain registration. Most of them who are registered with VAT, Service Tax and Central Excise are now registered under the GST process.

Every trader in GST will have to file a major return once a month and is supposed to pay his tax. Whatever tax is to be paid on any goods or services, all taxes paid on the purchase of inputs would be available as input tax credit automatically. The entire process of filing returns is online. If you keep your account in the Excel Sheet given by GSTN, then the same account will automatically be converted into returns with the help of offline tool every month.

If a trader sells all his goods only to retail customers (Business-to-Customers), then the returns of such a trader will be very simple, in which the rate-wise turnover to be reflected. If a trader leverages the composition scheme and whose turnover is less than Rs 50 lakh, such traders need not file return every month, but is supposed to file returns only once in three months, in which he is supposed to reflect his total turnover.

The traders who are selling business-to-business (B-to-B) merchandise have to reflect full sales details for each invoice in the returns.  If every trader, enters his sales detail in the form of return on the GST website by the 10th of the month, then the complete details of the purchases made by him will be automatically shown to buyers in their GSTR-2 (GST Online Account), that is, it will be autopilot. If the buyer trader feels okay after viewing it, then by clicking on it he can see the entire return on his computer itself. 

Tax liability
By clicking to approve the same, the complete details of tax liability and input-tax-credit of the trader along with the Net Tax Liability will be automatically prepared and displayed by the GST system. The trader must pay the difference, between tax liability and input tax credit. Taxes can be deposited online or in the bank. Thereafter, the trader will have to submit the final return by clicking GSTR-3 prepared by the computer, by 20th of every month.

There is a provision in Business-to-Business transaction which is called as the input-tax-credit reversal, that is, input-tax-credit received by you.  Lots of people have expressed their concern about this, but if you can understand the whole process, then you will fully support this. Like I have explained further, if you bought goods from anyone, and they have reflected the transaction in their return by 10th of the month, then you will get an input-tax-credit. 

Think that person selling the goods does not reflect the invoice of his returns. Even then, you will get an opportunity to reflect them in your GSTR-2 by the 15th of the month, and by doing so, if you want, you will be given entire input-tax-credit in the month. After that, you have to contact that supplier and explain to him that he should reflect the transaction in his return so that the input-tax-credit received by you need not be reversed in the next month.

You will get a full 30-day time for this and even after which if the trader who sells the merchandise does not accept this transaction and does not reflects it in his returns, then in the next tax returns, input-tax-credit received by you would be reversed. It is the duty of each and every trader to deal with such traders who, after recovering the tax from you, have deposited it in the government exchequer. 

Depending on the default of each trader, they will also be given a compliance rating which can be viewed by other traders so that you can be vigilant of such frequent defaulters with whom you are doing business.

(The writer is Revenue Secretary, Union Ministry of Finance)