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Goods and Service Tax (GST) is the first significant step towards indirect tax reform in the last thirty years. It replaces all indirect taxes levied on goods and services by the Indian Central and State governments. Hence, it is considered as the biggest tax reform in India.
However, there are always two sides of a coin. Similarly, Goods and Service Tax (GST) also has its fair share of advantages and disadvantages.
Advantages of Goods and Service Tax (GST)
- After GST, India has transformed into One Nation One Market and One Tax. Now with the unified tax regime, the country waved a good bye to a big pile of indirect taxes.
- GST simplifies the tax system by reducing the number of indirect taxes such as Value Added Tax (VAT), Excise Duty, Entertainment Tax, Luxury Tax etc. and makes it a more transparent tax system. It is easy to understand and cheaper to implement at various levels.
- There will be no hidden taxes under GST and the cost of doing business will be lower which will encourage more economic growth in the country.
- After GST it will be cheaper to buy input goods and services for production from other states.
- GST helps to remove the “cascading effect” or “tax on tax” i.e. everyone is liable to pay tax from purchaser to the end consumer. This taxation is known as “Cascading effect of taxation”. And GST avoids this taxation system as under GST tax is calculated only on the Value Added.
- GST helps in avoiding conflict of dominion as it has Central GST and State GST the tax applicable on goods and services being exported and imported between states in India would fall under an Integrated GST (GST) system.
- Under GST prices will come down which in turn will help companies as consumption will increase.
- GST will also help to curb the flow of black money in the country. As GST is the single tax on goods and services right from manufacturer to the consumer. Credits of input tax on each level are available in a subsequent stage of value addition. To get the previously paid taxes everyone will insist on the invoice (pakka bill) and it will have a paper trail and income tax department can access. Also, PAN and Aadhaar are required to file GST return.
- Ease of doing business –As in the new tax system of India GST, there is single registration, single return, and less paper work unlike in the previous taxation system where business men had to get various tax authorities for the registration, maintain many papers and file different tax returns to different tax authorities.
- Logistic industry plays an important role in supplying goods from one territory to the other which helps grow in manufacturing and consumption. Under GST goods can move freely from one state to another.
Disadvantages of Goods and Service Tax
- There are certain sectors which are exempted from Goods and Service Tax (GST). Though it has a minimal exemption list. For example, GST is not applicable on alcohol for human consumption. Hence, alcohol rates will not get any advantage of GST.
- According to a source, GST has a negative impact on the real estate sector. It would increase the cost up to 8 percent to the new homes and reduce demand by about 12 percent.
- Some retail products used to stand in 4 percent of the tax on them. However, after GST, the garments and clothes became more expensive.
- Stamp duties are still inflicted on States; it has not come under Goods and Services Tax (GST).
- In the earlier taxation system, service taxes on air fares used to range from six to nine percent. But under GST, the rate will exceed fifteen percent and effectively double the tax rate.
- GST has shifted from pen to paper, as it is an online taxation system. Hence, it is difficult for small businesses to adopt it quickly.
In every tax system, there are certain actions which need to be taken to validate the statutory provisions like filing timely returns and maintaining prescribed records, periodic payment of taxes. However, the small business enterprises (SMEs) constantly combat while dealing with such requirements due to lack of knowledge and expertise. Hence, to reduce the burden of compliance for small businesses, a composition scheme has been introduced where the enterprises can pay tax at a minimum rate based on their turnover. Composition scheme is an extension of current Value Added Tax (VAT) law scheme where taxpayers are mandated to file summarized returns on a quarterly basis, instead of three months returns.
Key Features of GST Composition Scheme
- A tax rate under GST composition scheme is expected to be 1% to 3%.
- Enterprises come under GST composition scheme do not qualify for Input Tax Credit under section 16.
- Local suppliers, who supply goods within the state, are eligible for GST Composition Scheme. Enterprises dealing in interstate supply of goods will fall under the regular tax scheme.
- Getting registered under GST composition scheme is voluntary and optional.
- Under GST composition scheme, taxpayers need to submit a bill of supply instead of invoice of the tax to the tax authorities.
The rate of Tax under Composition Scheme
There are 3 different rates under GST Composition Scheme:
|Category||Rate of Tax|
|Manufacturer, other than the manufacturer of the goods as notified by the Govt.||One percent|
|Suppliers of Goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption)||Two & a half percent|
|Any other eligible supplier||Half percent|
Eligibility Criteria for GST Composition Scheme
There are limitations of GST composition scheme. Not everyone can enroll under this scheme. Any enterprise which has a turnover less than 50 Lakh can opt for this scheme, crossing the limit, will be disentitled from the scheme and will register them in a regular scheme.
- This provision is for suppliers dealing in goods. Service providers are exempted from this scheme. However, restaurant service providers are excluded.
- The scheme is only for the intrastate supply of goods.
- Dealer supplying goods through e-commerce sites are not eligible for the scheme such as (Flipkart, Amazon, e – bay etc)
- In case the registered person under GST found ineligible for the scheme, then the tax authority can impose a penalty equal to the amount of tax on such person along with his tax liability.
Registration under Composition Scheme
Any desirable taxpayer can enroll themselves under GST Composition Scheme from the beginning of the financial year. The application will have to be filed on or before 31st March of the Previous Year so that returns can be filed accordingly.
Dealers under composition scheme can switch to the regular scheme during the year. However, they cannot switch to the composition scheme again during the same financial year.
Returns under Composition Scheme
Under the composition scheme, a registered taxable person shall furnish a return for each quarter in a prescribed form in the prescribed manner within eighteen days after the end of a relevant quarter.
The registered taxpayer under GST composition scheme should adhere to the GSTR 4, which is a tax return form prescribed by the Government.
Benefits under Composition Scheme
Under GST, a normal taxpayer is required to file at least 3 returns monthly and 1 return annually. Whereas, in the composition scheme, only a quarterly return will be uploaded under GSTR – 4.
Reduced Tax Liability
Under GST composition scheme, the rates are very low from 1% for manufacturers to 2.5% for restaurant service providers and 0.5% for other suppliers of turnover.
|Particulars||Description||Registered as a normal taxpayer||Description||Registered as a taxpayer under composition scheme|
|A||Total Sales Value||118000||Total Sales Value||118000|
|B||Sales Value exclusive of taxes||100000||Sales Value exclusive of taxes||115686|
|C||GST @ 18% on sales value||18000||GST @ 18% on sales value||2314*|
|D||Input Purchases||65000||Input Purchases||65000|
|E||GST @ 18%||11700||GST @ 18%||11700|
|F||Total Purchase Value (D+E)||76700||Total Purchase Value (D+E)||76700|
|G||Net GST Liability (C–E)||6300||Net GST Liability (C–E)||2314|
Restrictions under Composition Dealer
Following are the restrictions on the composite dealer:
- He is neither a causal dealer nor a Non-resident taxable person
- He belongs to a place outside India
- Goods have not been purchased from an unregistered supplier and where purchased he pays tax as per the provisions of the act.
- He is required to pay central tax under reverse charge for the inward supplies of goods or services or both.
- He shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him.
- He shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place of business and at every additional place or places of business.
Income tax refers to a tax levied on the income or profits. Income tax levied on business is also called a corporate tax. All the major tax in India are imposed by the central government and a few small ones by local authorities like the Municipality. There are two types of taxes-direct and indirect tax. Direct tax refers to the tax directly levied on a person’s income while indirect tax can be of various forms like service tax, Value Added Tax, Restaurant bill etc.
The income tax act is under the mandate of Income Tax Act 1961. The IRS which is the acronym for Indian Revenue Service deals with the collection and administration of various taxes. The logo of the income tax department “Kush Mulo Dand” is a verse taken from Kautilya’s “Arthashashtra” which means that as citizens of India we should understand the importance of paying taxes and any person not doing so is punishable by law.
Importance of Paying Tax
Regular payment of tax fall under civic duty and not paying taxes is punishable by law and might lead to fine or imprisonment.
The importance of paying taxes are
- The taxes that we pay goes to a number of places. They are paid for the manufacturing and maintenance of roads, infrastructure, the establishment of libraries and public parks etc.
- Taxes are also a major source of revenue for various government schemes and scholarship meant for the weaker section of the society.
- Further, part of our income tax also goes to the defense sector of the country including police and firefighters.
Eligibility for Income Tax
Salaried people are required to pay a part of their income as income tax. To pay income tax a person should fill form 16. It is basically a certificate by the employer stating the deduction of TDS on the salary. The form is issued at the end of each financial year. However, not everyone is required to file for income tax. In case a person is not eligible then he or she is not required to fill form 16. In such a case, the employer does not provide this form to the employee. The eligibility for taxation for people who are less than 60 years for the financial year 2017-18 are for both men and women are
|ANNUAL INCOME||TAX RATES|
|Salary up to 250000||NIL|
|Salary between 250001 to 500000||5% tax levied on the income|
|Salary between 500001 to 1000000||Rs 12500 and 20% of income|
|Above 1000000||Rs 112500 and 30%of income|
Taxation for people (both men and women) above 60 years and less than 80 years
|ANNUAL INCOME||TAX RATES|
|Salary up to 300000||NIL|
|Salary between 300000 to 500000||5% tax levied|
|Salary between 500001 to 1000000||Rs 1000 and 20% tax is levied|
|Above 1000000||Rs 110000 and 30% is levied|
Taxation for people above 80 years (both men and women)
|ANNUAL INCOME||TAX RATES|
|Salary upto Rs 500000||NIL|
|Salary between Rs 500001 to 1000000||20% of tax is levied|
|Above 1000000||100000 and 30% of tax is levied|
Income tax for business or corporate tax criteria are
|INCOME SLABS||TAX RATES|
|If income is less than 10,000||10% of the income|
|Between 10,000 and 20,000||20% of the income which exceeds 10,000|
|More than 30,000||30% of the income which exceeds 20,000|
The list of documents required for tax deduction should be collected beforehand so as to avoid last minute haste.
The list of documents required are
- ID Proof: PAN card, passport, Aadhaar card
- Salary proof: Form 16 (part A and part B and 12 BA)
- Proof of income in the form of interest
- Bank passbook or interest certificate on saving account
- Interest certificate for all fixed deposits
- Income from other sources like commission, dividend etc.
- Proof of tax saving investments like NSC, life insurance, PPF etc
- Proof of income from property
- Certificate of possession of the property
- Receipts of municipal taxes
- House loan certificates
- Form 16A on rent
- Proof of capital gain
- sale of property sale deed
- sale related expenses
- expenses relating to purchase
- reinvested property’s sale deed
- Other claims from employers
- Rent Receipt
- Travel cost
Form 26AS: it deals with all the incomes earned during the year and the tax deducted on the spot.
Income Tax Returns
Tax returns are basically the various income and refund to be earned by a person from the Government like tax liability, details of tax paid etc. Income tax returns basically form that every salaried person is required to file every year to the Income Tax Department. If excess tax has been paid in a year then the person is liable for refund depending upon the interpretations and calculation of the income tax department. Income Tax returns require the correct form to be filled.
ITR 1: This is a very easy and simple form. Here the details regarding salary/pension or income from property and other sources must be mentioned. However, this form need not be filled by a person whose income is more than 50 Lakhs, have a taxable capital gain, foreign assets, income from business or other professions, income from more than one house property and if income from agriculture exceeds Rs 5000.
ITR 2: This form is to fill if a person gets income from salary or pension, income from capital gains, income from house properties, income from foreign assets and other sources of income and if agricultural income is more than Rs 5000. This form should not be filled if a person gets income from business or profession.
ITR 3: This form is to be filled by an individual or Hindu Undivided Family when the source of income is from a business or profession, house property, pension/salary or other sources. This form should not be filled if a person has opted for resumption taxes.
Things to be kept in mind while filing IT returns
- A person should mention in their tax returns regarding deposits which have been more than 2 lakhs after demonetization.
- The cash deposited should match with the information provided while filing an ITR. In case of a mismatch, a person can face a penalty.
- Income from interest should also be mentioned like income from interest on tax saving schemes and deposits.
- Aadhaar must not only be linked with PAN but an individual should also mention Aadhaar details while filing tax returns. Not doing so might invite prosecution or fine under section 277
- Income from the previous employer should also be mentioned
- If a person is working abroad then he or she is required to give details of the foreign bank account, date of opening, interest incurred and field number.
- The Tax department also asks for information about financial assets if the earning is more than 50 lakhs
- Lastly, a person should keep in mind the last date of filing tax returns.
Income Tax Refund
If a person pays more taxes then he or she is liable for income tax refunds based on the calculations and interpretation of the Income Tax Department. The refund can be filed both online as well as physically. Normally the refund takes place within 2 to 6 months. The status of the refund can also be checked online. It will be paid either directly to the bank account or via cheque. The following steps should be taken while filing for a refund
For the online filing, the following steps should be taken
- Visit the official website of the Income Tax Department
- Enter your user id and password
- After logging in select the “my account”tab and then select “refund reissue request” option in the drop down menu
- After this, a form will appear on the screen. The tax payer is required to fill the form and then click on”validate” for the successful submission of the claim.
The procedure of Paying Income Tax
Income Tax can be paid both offline as well online. If a person wants to pay offline these steps should be taken.
- Download the ITR-V document. To download one should visit the income tax department official website.
- After downloading the form, PAN number and date of birth must be used as a password to open the form. It must be noted that the password should be written in the appropriate box, should not have any space in between and should be written in small letters.
- The ITR-V comprises of one page and it should be signed with blue ink by the taxpayer
- The form should be sent via post to the following address:
Post Bag No 1, Electronic City Post Office,
For online tax submission, the following steps should be taken
- Visit the official website of Income tax department for income tax e-filing
- Click on “register yourself” in the top right-hand side corner of the page
- After this, a registration form will appear, select the user type as either “individual” or “HUF” and then click on “continue”
- After selecting the user type, a basic details form will appear. It is mandatory to fill all the boxes where the asterisk is provided and then click on “continue”
- After filling in the basic details, a registration form will appear on the screen. All the asterisk marked boxes are mandatory and the user should provide the current mobile number and e-mail id.
- After filling up the registration form click on “submit”. After successful registration, a mail will be sent to the registered email id confirming the registration and an OTP will be sent to the registered mobile number.
- The mail sent by the Income Tax department will consist of an activation link.
- When the activation link is clicked it will get redirected to the activation page where the user is required to provide the OTP received in his or her registered mobile number and then hit the “submit” button
- The registration process gets completed after submitting the OTP.
Another way of online tax payment
- Visit the e-filing website of the income tax department
- Go to e-file and click on “prepare and submit ITR online”.(user can fill only ITRs1 or 4s online)
- Select the ITR form and the assessment year
- After filling the ITR form click on “submit”
- The digital signature certificate must be uploaded if applicable and then click on “submit”
- If the Digital signature certificate is not uploaded then the ITR-V link will be displayed. After clicking on the link the user is redirected to the ITR-V form. The form will be sent to his or her email id. If the digital signature certificate is uploaded then the return filing process is complete.
Tax Saving Instruments
There are a number of tax saving schemes and deposits like PPF, NPS, NSC, ELSS, Fixed deposit etc. that can be used for reducing the income tax burden. Some of the major tax saving schemes and deposits in India are:
Public Provident Fund: It is also commonly known as PPF. It is a tax saving cum pension scheme. It acquires maturity after completing 15 years. The minimum deposit per year is Rs500 and the maximum deposit is Rs 1.5 lakhs per annum.
Fixed Deposit: It does not have a fixed maturity period. The deposit can be opened after 10 years or even after 7 days. There is no upper limit on the maximum investment
Mutual fund/ELSS: The minimum maturity period of mutual funds is three years. The minimum investment is Rs 500 and there is no upper limit on the maximum investment. However, the tax is deductible only on a maximum of 1.5 lakhs per annum.
NSC: The NSC can be bought with the denomination of Rs100, Rs500, Rs1000, Rs5000 and Rs10000. There is no limit on the maximum amount of investment that a person can invest. However it the tax is deductible only till 1.5 lakh rupees per year. There are maturity period, one for 5 years and one for 10 years.
Recurring deposit: the term period varies from 1 year to 10 years. The minimum deposit should be 1000 but tax will be exempted if the interest earned is more than 10000.
Linking Pan with Aadhaar
The government of India has made it mandatory for all taxpayer to link their PAN cards with their Aadhaar cards. This step is taken to prevent fake PAN cards. Infant in a recent report it has been stated that the government has deactivated multiple PAN cards due to there multiple presences so as prevent tax circumvention. As many as 11.44 lakhs PAN cards have been deactivated. This has been done to prevent fake identities and illegal purchase of properties. The PAN and the Aadhaar can be linked with the following steps:
- Visit the official e-filing website of Income Tax department
- Click on “link Aadhaar” in the left-hand side of the page
- After this a form will appear whereby the user is required to fill in the details of his PAN number, Aadhaar number, Name as per Aadhaar, date birth. The user can verify either by entering the captcha code or request for an OTP.
- The OTP will be sent to the registered mobile number.
- After verifying, click on link Aadhaar.
The Government has decided to mandate linking Aadhaar with PAN for income tax filing and also the deadline for linkage has been extended to 31 Aug 2017.
Check out the procedure to link Aadhaar with Pan using this Link.
The country is currently going through a taxation reconstruction phase which is Goods and Service Tax (GST), the largest indirect taxation reform of the country since 1947. GST is a single tax levied on the supply of goods and services from the manufacturer to the end consumer. It has replaced all the major indirect taxes such as Value Added Tax (VAT), Excise Duty, Service Tax, Central Sales Tax (CST), Custom Duty etc. This step towards making India ‘One Nation One Market’ will make the economy of the country more transparent, systematic and organized.
What are GST Returns
Goods and Service Tax (GST) returns are the documents which contains all the information of income filed by the taxpayers with the tax administrative authorities. Every person who has registered themselves on the GST portal is supposed to share their business information by filing GST returns online. Business information that includes:
- Tax paid
- Tax collected
- Output GST (On sales)
- Input Tax Credit (GST paid on purchase)
Eligibility to Get Registered Under GST
Below is the list of some of the eligibility criteria who are required to register themselves under GST:
- Any business with a turnover of Rs. 20 lakhs in a financial year (1st April to end of March). For north eastern or hilly states, the turnover has to be more than Rs. 10 lakhs.
- Any business person who is registered under earlier law of Value Added Tax (VAT), Excise Duty, Service Tax etc. are required to register under GST.
- Anyone who drives inter – state supply of goods
- Casual taxable person
- Non-Resident taxable person
- Agents of a supplier
- Input Service Distributor
- E – Commerce Distributor or Aggregator
- Person who supplies via e-commerce aggregator
Different Types of GST Returns
GST returns to be Filed by ‘Normal Tax Payer’ / ‘Casual Tax Payer’
Normal Tax Payer / Casual Tax Payer – A Casual or a Normal Taxable person are those who supply goods and services in a territory where GST is applicable but does not have any fixed place of business.
- GSTR 1 – GSTR 1 contains information of all the outward supplies i.e. sales. Any registered dealer is supposed to pay a monthly return i.e. GSTR 1. “The GSTR 1 filed by a registered dealer is used by the government to auto populate GSTR 3 for the dealer”.
Note the following registered person is exempted from filing GSTR 1:
(a) Input Service Distributor
(b) Composition Dealer
(c) Non – resident taxable person
(d) Taxpayer liable to collect Tax Collected at Source (TCS)
(e) Taxpayer liable to deduct Tax Deducted at Source (TDS)
- GSTR 1A – GSTR 1A contains the details of auto drafted supplies of goods or services.
- GSTR 2 – Under GSTR 2, registered taxable recipient should file details of inward supplies of taxable goods and services claiming input tax credit. Due date of filing GSTR 2 is 15th of the subsequent month.
- GSTR 3 – Under GSTR 3, the monthly return has to be paid on the basis of finalization of details of outward supplies and inward supplies along with the payment of amount of tax. Due date of filing GSTR 3 is 20th of the subsequent month.
- GSTR 9 – Under GSTR the return has to be paid annually. Due date of filing GSTR 9 is 31st December of next financial year.
- GSTR 3B – GSTR 3B is a simple return that businesses need to file in the first two months of GST (July and August, 2017).
GST returns to be Filed by Composition Tax Payers
In composition scheme under GST, a taxpayer is required to file summarized returns on a quarterly basis, instead of three monthly returns.
- GSTR 4 – Taxpayers with small business or a turnover of up to Rs.75 lakh can opt for the Composition Scheme. Taxpayers under composition scheme will not have input tax credit facility. Due date of filing GSTR 4 is 18th of the subsequent month.
- GSTR 9A – GSTR 9A is an annual return form for composition taxpayers. Due date of filing GSTR 9A is 31st December of next financial year.
GST Returns to be filed by Foreign Non-Resident Taxpayer
Non – resident taxable person is someone who does not have a fixed place of business in India. However, he occasionally sells goods and services in a territory of India where GST applies.
- GSTR 5 – This form contains details of imports, outward supplies, input tax credits and other related information. Due date of filing GSTR 5 is 20th of the subsequent month.
GST Returns to be filed by an Input Service Distributor
- GSTR 6 – GSTR 6 is generated when the Input Service Distributor confirms the details mentioned in GSTR 6A. Due date of filing GSTR 6 is 13th of the subsequent month.
- GSTR 6A – The details in GSTR 6A are auto-populated by the information provided by the inward suppliers. The due date of filing GSTR 6A is 10th of the subsequent month.
GST Returns to be filed by a Tax Deduction
- GSTR 7 – GSTR 7 contains the details of tax deductions made during the month. Due date of filing GSTR 7 is 10th of the subsequent month.
- GSTR 7A – GSTR 7A contains the details of the total tax deducted and amount paid in a month. Due date of filing GSTR 7A is 10th of the subsequent month.
GST Returns to be filed by an E-Commerce Portal
- GSTR 8 – This form contains the data of goods supplied by E-commerce portals as well as the amount of tax collected. The due date of filing GSTR 8 is 10th of the subsequent month.
How to File GST Returns Online?Follow the below steps to file GST Returns online
- Visit the GST official site https://www.gst.gov.in
- One will receive a 15 – digit identification number based on their State Code and PAN Number.
- Upload invoices such as outward return, inward return and cumulative monthly return. Note: [An invoice reference number will be issued against each invoice].
- In case of any error, one will have the option to correct it refile the return.
The GST Council on Saturday has cut down the GST Rates on 33 Items from 18% to 12% and 5%. This is done to simplify the indirect tax regime. Puducherry Chief Minister, V Narayanaswamy announced after 31st Meeting of the council. He also said that, 33 items will be cut down from 18% GST to 12% and 5%, except for the luxury items as these products are the most commonly used in day to day life.
The main motive of this plan is to rationalize the Highest Tax Bracket 28% and out of which 99% of over 1200 Goods and Services will attract 18% GST or less than that.
A total of seven items have been removed from 28% GST Slab. Six Items have been removed from 28% GST Bracket and placed in 18% GST Slab.
The Six Items are –
Pulleys, Transmission Shafts, Gear Boxes
Power Banks Made up of Lithium-Ion Batteries
TV (up to 32 Inches)
Video Game Consoles and other games and sports requisites
Whereas the Parts and Accessories for carriages for disabled people have been dropped down from 28% GST Slab to 5% GST Slab.
Other than that, the Movie Tickets up to Rs 100/- are brought under the 12% GST Slab which were earlier in 18% GST Bracket and the Movie Tickets costing above Rs 100/- are now in 18% GST Slab. The Director and the Producer Karan Johar expressed his happiness by tweeting our Prime Minister “Narendra Modi”
The Pilgrims traveling in the economy and business class has to pay the same tax, there are no changes in that tax bracket. The services supplied by the banks to the Basic Savings Account has been exempted from GST.
The 31st GST Council Meeting was held today in Vidhan Sabha under the chairmanship of the Finance Minister- Arun Jaitley. The GST Council has agreed to set up a Centralized Advance Ruling Authority said Arun Jaitley.