GST (Goods and Services Tax) in India

Jun 5, 2025

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✅ What is GST in India?

GST (Goods and Services Tax) is a comprehensive indirect tax levied on the supply of goods and services. It replaces multiple taxes previously levied by the central and state governments, such as VAT, service tax, excise, etc.

📅 Implemented On: 1st July 2017
🧾 GST is a destination-based tax – it is collected at the place where consumption occurs.

🔍 Why GST Was Introduced?

Before GST, there were:

Multiple taxes (VAT, CST, Service Tax, Excise, Entertainment Tax, etc.)
Tax cascading (tax on tax)
Complex compliance for businesses

👉 GST unified all these into a single tax, improving transparency and reducing the burden on businesses.

🧱 Components of GST

Type	Levied By	Applies On
CGST	Central Government	Intra-state supply of goods/services
SGST	State Government	Intra-state supply of goods/services
IGST	Central Government	Inter-state supply or imports/exports
UTGST	Union Territory Govt	Supply in Union Territories without legislature

📌 Intra-State Supply Example:

If goods are sold within Maharashtra, then both CGST and SGST apply.

📌 Inter-State Supply Example:

If goods are sold from Maharashtra to Gujarat, IGST is levied.

🧮 GST Rate Structure in India

Slab	Items Covered
0%	Basic items (milk, fruits, vegetables)
5%	Essentials (food, medicines)
12%	Processed food, mobiles, etc.
18%	Most goods/services (ACs, electronics)
28%	Luxury items (cars, tobacco, etc.)

📊 GST Working with a Practical Example

Scenario:

You manufacture a product in Delhi and sell it in Punjab.
The product cost is ₹1,000, and the GST rate is 18%.

👇 Here’s how GST works:

Activity	Amount	GST Type	GST %	GST Amt	Final Amt
You buy raw material	₹500	IGST	18%	₹90	₹590
You sell product @₹1000	₹1,000	IGST	18%	₹180	₹1,180

Input Tax Credit:

You paid ₹90 on raw material and collected ₹180 from your customer.
So, you will pay ₹180 – ₹90 = ₹90 to the government.

📌 Only the value-added portion is taxed. This eliminates cascading tax.

📥 What is Input Tax Credit (ITC)?

ITC means you can claim credit for GST paid on purchases and set it off against the GST collected on sales.

Example:
GST on purchases = ₹1,000
GST on sales = ₹1,500
Net GST payable = ₹1,500 – ₹1,000 = ₹500

🧾 GST Registration

Mandatory if:

Annual turnover > ₹40 lakh (₹20 lakh for services)
Inter-state supply
E-commerce seller
Casual taxable person or non-resident taxable person

Documents Needed:

PAN card
Aadhaar
Business address proof
Bank details
Photographs

📂 GST Returns to File

Return Form	Description	Frequency
GSTR-1	Outward sales	Monthly/Quarterly
GSTR-3B	Summary return (tax payment)	Monthly
GSTR-9	Annual return	Annually
GSTR-2B	Auto-drafted ITC statement	Monthly

🧮 How GST is Calculated (In Excel Example)

Product	Rate	GST Rate	GST Amt	Final Amt
TV	₹20,000	18%	₹3,600	₹23,600

Formula:
GST Amount = (Price × GST Rate) / 100
Final Amount = Price + GST Amount

🏢 Impact of GST on Businesses

✅ Simplified taxation
✅ Input Tax Credit reduces cost
✅ Encourages formal economy
✅ Easier compliance via GST portal

🧠 Common FAQs on GST

1. Is GST applicable on services?

Yes. GST is applicable on both goods and services.

2. Can I claim GST paid on laptop purchase?

If you are registered under GST and the laptop is used for business, you can claim ITC.

3. What is GSTIN?

GSTIN = Goods and Services Tax Identification Number (15 digits)

💡 Real-Life Practical Scenarios

🛒 Retailer:

Buys items from wholesaler @₹500 + 18% GST
Sells to customer @₹800 + 18% GST
Can claim ITC on ₹90 and pay only ₹54

📱 Freelancer:

Provides service for ₹50,000
Charges 18% = ₹9,000
Files GSTR-1 and GSTR-3B, pays tax

🌐 GST Portal Services

Website: www.gst.gov.in

You can:

Register
File returns
Check status
Download forms
Pay tax

🎯 Conclusion

GST has brought transparency, uniformity, and efficiency to India’s indirect tax system. Though it had initial challenges, it has simplified taxation, eliminated tax cascading, and made India a unified market.