Top 10 Salient Features of GST in India

Top 10 Features of GST

The introduction of GST fostered economic growth by simplifying the taxation system and creating a unified single tax system collected at the point of consumption rather than the point of origin. Given below are the salient features of GST -

Single Indirect tax

GST is a single unified tax system. It is one of the top 10 features of GST. After the introduction of GST, you don’t have to pay a hoard of other taxes anymore, such as VAT, excise duty, service tax and others. The implementation of GST and the subsumption of multiple taxes into one has made tax compliance easier for businesses and also reduced the overall cost of goods and services by eliminating the cascading effect of taxes.

Under the GST system, the goods and services are taxed at a single tax rate based on their classification under Harmonized System of Nomenclature (HSN). However, the GST rates can range from 0% to 28%, depending on the nature of goods and services.

Exemptions from registration for small businesses

Businesses having a turnover of more than Rs.40 lakhs during a financial year are required to register under GST. In the case of special category states, this threshold stands at Rs.20 lakhs. Similarly, for service providers, the threshold is Rs.20 lakhs (for normal states) and Rs.10 lakhs (for special category states).

Four-tier tax structure

The GST tax structure has four different tax rates. The goods and services are classified into different categories based on their nature and levied different tax rates. The GST tax structure is as follows -

• 5% - Essential goods such as food items and life-saving drugs fall under this category.
• 12% - Goods like packaged foods, certain apparel items, medicines, and nuts, etc fall under this category.
• 18% - Goods such as consumer durables, electronic items, and most services are included in the 18% tax category of GST.
• 28% - Luxury and sin goods such as tobacco, cars, and aerated drinks.

In addition to these tax rates, some essential goods and services are also taxed at a nil rate. These include essential goods like food grains. Similarly, special tax rates of 0.25% and 3% are imposed on luxury goods like jewelry and precious stones. Taxpayers under the composition scheme also enjoy special tax rates.

GST composition scheme

Under the GST composition scheme, eligible businesses can pay GST at a lower tax rate on their taxable turnover. It also reduces the overall number of compliances to be adhered to. Manufacturers with a turnover of Rs.1.5 crore can opt for the composition scheme. In the northeastern states and Himachal Pradesh, this limit stands at Rs.75 lakhs. For service providers, there is a special composition scheme where the threshold for turnover is Rs.50 lakhs. However, a business paying tax under the composition scheme is not eligible to claim the ITC.

Input tax credit system

ITC or input tax credit is a tax refund that the taxpayer can claim the GST paid on inputs that are used in the production or supply of goods and services. Under the GST system, tax is levied at different stages of the supply chain. The GST is ultimately borne by the final consumer. The tax paid at different stages can be claimed as input tax credit later, except for businesses opting for the composition scheme.

Invoice Matching

The GST system checks whether the invoice details filed by the supplier match with those filed by the recipient. Suppose the supplier files their GSTR-1 return, which is the return of outward supplies. These details can be found in the recipient’s GSTR-2B statement, containing the details of the purchases made and the input tax credit available. This information can further be used as a reference while filing GSTR-3B.

Consumption-based tax

GST is a destination-based consumption tax. The GST collected on goods and services is received by the state of consumption instead of the state of the manufacturer. Even though GST is charged at each stage, the supplier offsets this GST by claiming input tax credit for the GST paid in previous stages. Ultimately, GST is passed on to the final consumer of goods or services.

Anti-profiteering measures

Under the GST system, businesses are required to pass the benefits of lower tax rates or ITC to consumers by reducing the prices of their goods or services. The GST law includes anti-profiteering measures that provide a framework to check if these benefits have been passed on to consumers.

Competitive advantage

Eliminating the cascading effect and introducing ITC has helped Indian businesses lower their compliance and production costs. This has given them a competitive edge in the international market, making them more appealing to foreign buyers and investors.

Digital compliance and payments

GST compliance is now almost entirely digital. Taxpayers can complete everything online through the common GST portal, from registration and return filing to making payments. GST payments can be made online using internet banking, NEFT, RTGS, or debit and credit cards.

GST has not only simplified the country's tax structure but has various other salient features. It has brought about transparency in the tax system and boosted economic growth. However, ensuring accurate compliance with GST laws can be complicated and time-consuming. Moreover, as a business owner, taking care of your taxes on your own can disrupt your business operations. Therefore, it is a great idea to get professional help from tax professionals who can handle your taxes for you.

Tax2win’s tax experts have more than a decade of industry experience and are ready to guide you every step of the way. From helping with GST registration to taking care of filing your GST returns, our experts can make sure you always stay compliant with the tax laws.

So, don’t let taxes take away your peace of mind. Book an expert now!