How GST work ? (GST Categories, Eligibility & Registration)

How GST work ? (GST Categories, Eligibility & Registration)


GST is a multi-level, all-inclusive tax system used to levy tax on the sale of both goods and services. This taxation scheme, which is used across India, is mainly aimed at reducing the cascading effect of other indirect taxes.

What is GST and how does it work (What is GST)?

Goods and Services Tax is called GST. It is an indirect tax that was introduced to replace several previous indirect taxes including value added tax, service tax, purchase tax, excise duty, and others. GST is a tax that India levies on the delivery of certain products and services. There is only one tax levied in India.

Here is how GST works:

  • Manufacturer: The manufacturer is responsible for paying GST on both the raw material used to make the product and the value added during production.
  • Service Provider: In this case, the service provider is responsible for paying GST on both the purchase price of the product and the value added. However, the tax paid by the manufacturer can be deducted from the total GST to be paid.
  • Retailer: The retailer is responsible for paying GST on both the goods received from the distributor and the margin added by them. However, the retailer’s tax payment can be deducted from the total amount of GST that should be paid.

Consumer: GST will have to be paid on the item purchased.

History of GST

  • The Goods and Services Tax in India came into effect from July 1, 2017. But the process of implementing the new tax system started much earlier. A committee was set up in 2000 by Atal Bihari Vajpayee, the Prime Minister of the country at that time, to develop the GST law. A working group determined in 2004 that a new tax structure should be implemented to reform the current tax system.
  • The Finance Minister had recommended the implementation of GST on 1 April 2010 and a Constitution Amendment Bill was made in 2011 to make this possible. The Standing Committee started the debate on GST in 2012 and presented its report on GST a year later. The then new Finance Minister of the country, Arun Jaitley re-introduced the GST Bill in 2014 and the Lok Sabha approved it in 2015. However, since the bill was not passed in the Rajya Sabha, its implementation was postponed.
  • In 2016, GST was implemented, and both houses of Congress approved the amended Model GST Law. Additionally, the President of India gave assent. Four more GST Bills were passed by the Lok Sabha in 2017 and later approved by the Cabinet. After the passage of four more GST Bills by the Rajya Sabha, the new tax system came into effect from July 1, 2017.

Tax laws before the introduction of GST

  • Taxes were collected separately by the Center and the State. The taxation system varies by state.
  • Despite the fact that import tax was imposed on one person, another person faced hardship. In direct tax cases, the taxpayer is responsible for paying the tax.
  • Direct and indirect taxes existed in India before the implementation of GST.

GST Categories

Following are the four different types of GST:

  • Intrastate supply of goods and services is subject to the Central Goods and Services Tax (CGST).
  • State Goods and Services Tax (SGST): Similar to CGST, SGST is levied on purchases made within a state.
  • Inter-state sale of goods and services is subject to Integrated Goods and Services Tax (IGST).
  • Union Territory Goods and Services Tax (UTGST): UTGST is levied on the supply of goods and services in any union territory of the country including Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep and Chandigarh. Is. Along with CGST, UTGST is assessed.

Who is eligible for GST?

The following organizations and individuals are required to register for the Goods and Services Tax:

  • Online sales aggregator.
  • Individuals participating in e-commerce aggregators as suppliers.
  • People who use reverse change technology to pay their taxes.
  • Agent for Input Service Providers and Distributors.
  • Those who pay tax but are not residents.
  • Businesses with annual income that exceeds the limit.
  • People who registered before the implementation of GST law.

GST Registration

  • Any business that qualifies for GST must be registered on the GST site set up by the Government of India. Each registered entity will be given a unique registration number called GSTIN.
  • GST registration is required for all service providers, buyers and sellers. A company whose total revenue is Rs 20 lakh or more within a financial year is required to register for GST. This process takes 2 to 6 working days.

Understand your GSTIN, or GST Identification Number.

  • GSTIN is a unique 15-digit number allotted to each taxpayer. Your residence status and PAN will be used to determine your GSTIN. Following are some of the primary applications of GSTIN:
  • The number can be used to apply for the loan.
  • With GSTIN, refund can be requested.
  • Facilitates and simplifies the GSTIN verification process.
  • To check your GST number online

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