A Comprehensive Guide to Understanding GST and Different Types of GST in India

GST (Goods and Services Tax) is a centralised tax regulated by the Centre and State Governments in their respective areas. It is generally levied on the different taxpayers who indulge in the consumption and transportation of goods and services. In India, first time, GST was introduced in 2000 to improve the tax structure and administration. Later on, the Union Ministry of Finance prepared a bill outlining the scope, functioning, and provisions of GST in 2006. In Types of GST in India There were several shortcomings, and it was sent to the Ministry for correction. Finally, on 1st July 2017, GST came into force in India to simplify tax management, subsumption of all indirect taxes, and increase the effectiveness and compliance of tax.

On 1st July 2017, four new acts were also passed to categorize GST into IGST, SGST, CGST, and UTGST. Let’s explore each type of GST in detail to understand the tax structure in better way.

Types of GST

1. IGST (Integrated Goods and Services Tax)

IGST is a tax slab applicable in transactions between two states, i.e., interstate transactions. It is usually levied on goods or services transported from one state to another, and on a country’s import and export transactions. It is regulated as per the provisions and sections of IGST act by the Central Government. It states that the Centre has the authority to levy tax on all inter-state transactions.

2. SGST (State Goods and Services Tax)

SGST is a tax levied on transactions within the state i.e, intrastate transactions. It is levied by the State Government and governed by the SGST Act. The revenue generated by the SGST is utilised by the State Government only to carry out its functions.

3. CGST (Central Goods and Services Tax)

CGST is the tax levied by the Central Government on the movement, consumption, or transaction of goods and services. Governed by the CGST Act, it is a major source of income for the Central Government. The tax slabs of CGST are similar to SGST.

4. UTGST (Union Territory Goods and Services Tax)

As the name suggests, UTGST is a tax levied on the union territories of India, namely Andaman and Nicobar Islands, Chandigarh, Ladakh, Lakshadweep, Puducherry, Daman and Diu, Delhi, Jammu and Kashmir, and Dadra and Nagar Haveli. Union Territory Government levies and regulates this tax according to the provisions specified in the UTSGT Act. This Act replaces the SGST in UTs and is charged along with CGST in the specified areas.

Why There are Different Types of GST?

The Indian Constitution divides the administrative powers between the Centre and the State. It provides that both the State Government and Central Government will work in their respective spheres and neither shall, in any case, encroach upon the power of the other. Both governments have different responsibilities and functions.

To ensure harmony and peace in the functioning of both governments, the GST is divided into different types to allow each government to levy and collect its own tax for smooth functioning.

Difference Between Types of GST

The taxes: IGST, CGST, SGST, and UGST are different from each other in their applicability, nature, purpose, function, and jurisdiction. Here is a comprehensive overview of the difference between these:

Key Benefits of GST for Businesses

GST offers numerous advantages to businesses. It simplifies the process of transporting goods from one place to another and eliminates the cascading effect of tax. Here are the key benefits of GST for businesses:

1. It eliminates the key provision under VAT, which states that any business with more than 5 lakhs of turnover has to pay tax. Now, the threshold limit has been set at 20 lakhs, exempting small businesses or enterprises from paying tax.
2. Drastic reduction in taxes, allowing businesses to save more. It further allows businesses to expand and grow.
3. It streamlines tax registration, filing, and payment, saving more time and offering a user-friendly interface to navigate complex procedures easily.

Criteria for GST Registration

For some entities, businesses, and individuals, it is compulsory to obtain a GST number. The compulsory registration is for:

1. Individuals who have earlier registered under the indirect taxes, whether it is Excise duty, VAT, or Service Tax.
2. Businesses that have an annual turnover of more than 40 lakh or 20 lakh, or 10 lakh, depending on the size and goods/services offered.
3. Persons who are involved in any activity related to the interstate supplies of goods.
4. Agents or suppliers of goods.
5. Those individuals or enterprises who fall within the purview of tax under the reverse charge mechanism.
6. E-commerce aggregator, suppliers, or agents, and every e-commerce aggregator under CGST Section 52.
7. Departments or offices of the Government that are allowed to deduct TDS under CGST Section 51.
8. Persons supplying money, information, or database from a place located outside the boundaries of the country to a person residing in the country.

Documents Required for GST Registration

Here is a list of the documents you need to apply for GST registration:

• Proof of address
• Company PAN card
• Proof of business registration
• MOA and AOA of the business
• Aadhar card, PAN card, and photograph of all directors or authorised signatories
• Taxpayer’s photograph, address proof, and PAN card
• Director’s or authorised signatories’ appointment proof
• Digital signature and bank account details

Process to Apply for GST

To apply for GST, you can visit the online GST Seva Portal or visit a nearby GST Seva Kendra. To apply online, you need to follow these simple steps:

1. Visit GST Seva Portal
2. Go to “Services” and select “Registration”
3. Among the various categories, select “Taxpayer”
4. A GST REG-01 form will appear; fill in all the necessary details in the form like business, state, PAN number, mobile number, address, etc.
5. Verify all these numbers by entering the OTP you receive on the mobile number you submitted in the form.
6. After registering yourself successfully, you will receive a Temporary Reference Number.
7. In the next step, you need to visit the portal again, then on the “Service” option, select “Register”
8. Among the various options given, locate Temporary Reference Number and enter your TRN. To go ahead with your application, correctly enter the captcha code.
9. Within a few minutes, you will receive an OTP, which you have to enter in the given space to proceed. 
10. Shortly afterwards, on the screen, you will see that your application form is open. On the bottom, you will find an option to “Complete” the application, and you just need to click it, fill in the details, and submit the required documents.
11. After submitting all the information correctly, a verification page will open.
12. On the verification page, go through the declaration carefully and submit the application using your mobile number or digital signature.

How to File GST?

Here is a step-by-step guide on how to file GST return:

1. Go to the online portal designed for this specific purpose, i.e., GST Seva Portal and log in using your username and password.
2. Select “Services.” There you will find the option of “Returns Dashboard.” Choose it and proceed further by entering the financial year for filing GST.
3. Select the GST return and click on “Prepare Online.”
4. Enter all the required information correctly, save it, recheck everything, and submit.
5. Once your GST return is successfully submitted, view the status of your application. It will show “Submitted.”
6. Afterwards, select “Payment of Tax” and you will be able to see an option for “Check Balance.”
7. It will reflect the amount you need to pay. To pay it, select the “Offset Liability” option. The gateway to pay online will be open in a few minutes; after that, you can pay your GST return.

Understanding the Important Dates to File GST Return

Final Thoughts

GST is a comprehensive tax that reflects the vision: “One Nation, One Tax.” It is a well-structured, well-framed, and Central tax that is regulated by the State and Central Government. To simplify administration and tax management, there are different types of GST. All these taxes are levied on goods and services with some exemptions. The main objective behind introducing these taxes is to modify the revenue collection system and ensure the continuous functioning of the State and Central Government. These taxes are deducted from the savings and expenses of the taxpayer. So, a taxpayer should know about these taxes, how to file GST, the registration process, and the eligibility criteria.

FAQs about Understanding GST and types of GST in India