Understand GST in India: Meaning, Types, Rates & Registration Process

The Goods and Services Tax (GST) is a centralized tax imposed by the central government and state governments in their territories. The tax is imposed on different taxpayers in connection with the use of goods and services. In India, the GST was first introduced in 2000 to enhance the tax system and administration. Subsequently, in 2006, the Union Ministry of Finance formulated a bill that set out the architecture of GST and its provisions. The first drafts on the types of GST in India had many shortcomings, which led to the subsequent amendments made by the Ministry. Finally, GST was enforced on 1st July, 2017 for simplifying taxation, merging all indirect taxes, and enhancing tax compliance.
Four different laws were enacted on 1st July, 2017 to classify GST into IGST, SGST, CGST, and UTGST. Let’s take a look at different types of GST for improved understanding of the taxation system.

Types of GST in India:

1. IGST (Integrated Goods and Services Tax)

IGST is a tax slab applicable to 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 the 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.

Different Types of GST in India

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 the 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 that fall within the purview of tax under the reverse charge mechanism.
6. E-commerce aggregators, 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 a 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 a 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 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 the 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 a 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 an all-inclusive tax that signifies the slogan: “One Nation, One Tax.” It is a properly organized taxpayer and Central tax that falls under the jurisdiction of the Central and State Government. To make taxation and administration easy, there are various types of GST. All the taxes imposed are on the products and services with certain exceptions. The main reason for introducing GST India is to alter the collection of revenue for the operations of the Central and State Government. These taxes are charged from the expenditure and the bank account of the taxpayer. Therefore, the taxpayer is required to understand these taxes and the process of filing GST.

Trading Also Comes With Its Own Costs — Practice Before You Pay Them

Just like GST is applicable in the case of several goods and services, it is also applicable in the case of the brokerage and transaction fees paid while trading in stocks and derivatives which go on piling up every time you trade. Before you think of including GST, brokerage and other charges in your current trading budget, you should know how trades work through the paper trading app and practice with virtual currency free of cost. If you are looking for the options, you should look for the best paper trading app available in the market that would be able to follow the NSE/BSE prices accurately, making you familiar with the market activities before you start investing your real money.

FAQs about Understanding GST and Types of GST in India