What is GST?
The Goods and Services Tax (GST) Act passed in March 2017 is in simple terms an indirect tax which will be used across India to replace the multitudes of indirect taxes on the supply of goods and services. Comprehensive in nature, this GST Law is levied on every value addition. Essentially this means that the consumer has to pay only the GST levied by the last person in the supply chain.
This Act was passed to weed out all the different state and central government’s complex indirect taxation structure. And now GST is the one and only indirect tax for the entire nation.
History of GST
The concept of GST was first introduced back in the year 2000, by the then Prime Minister who also decided to set up a committee to prepare a GST model for India. In the following years, the central government followed up by recommending GST as a replacement for the existing tax regime including Central and state level VATs. Again in 2006, the Union finance minister spoke about the shift towards GST in his budget speech. After much deliberation it was decided to be introduced in 2010. And in 2009, the Empowered Committee of State Finance Ministers (EC) released its First Discussion Paper on GST which summarised and explained the GST model. And this document formed the basis for many discussions between the Centre and state since.
Benefits of GST
The GST is considered one of the biggest tax reforms in the country has an array of advantages:
- GST brought numerous indirect taxes under one bracket making the entire taxation system of services and businesses rather simple.
- Many experts strongly believe that the introduction of GST will reduce the cost of products and services in the long run.
- The act aims to reduce sales without receipts and also corruption at various levels.
- Many unorganised sectors like textile industry now are accountable and have regulation.
- The tax collected via GST is to be used across the country towards development.
- Certain goods now have reduced tax ranging from 2 – 7.5% including cars and smartphones.
Types of GST
There are four different types of levies which come under GST:
- Central Goods & Service Tax (CGST) – CGST is an integral part of the GST which subsumes the present central taxations and levies including Central Excise Duty, Services Tax, Additional Custom Duty and others. The revenue collected via the CGST goes straight to the central government.
- State Goods & Service Tax (SGST) – Now, SGST likewise is another important aspect of the GST where various taxations from the state are subsumed under SGST as a uniform tax. This includes luxury tax, entertainment tax, Octroi and many others. Here too the money collected goes to the state government.
- Union Goods & Services Tax (UGST) – Just like CGST and SGST, UGST comes for Union Territories in India which have this specialised tax scheme. This too subsumes various taxes under one bracket and also goes towards the Union.
- Integrated Goods & Services Tax (IGST) – Unlike the other categories under GST, the IGST is levied on the supply of commodities and services from one state to another state. The revenue collected under IGST goes to the Government of India.
GST bill of entry
Now the next main aspect when it comes to GST is the Bill of Entry. This is a document to be filed with the Customs Department by customs clearance agents and importers. The bill of entry can be filled before the arrival of the goods or even on arrival. It is to be filled with the required documents to kick start the customs clearance formalities involved. Once the bill is filed, the customs officers will examine and assess the goods before the basic duty and GST is implied. These taxes must be cleared by the imported to obtain the cleared goods.
If this bill of entry is not filed within 30 days of the good’s arrival, then the items may be auctioned by the authorities.
Contents of bill of entry
Now this bill of entry has different content requirement right from the name and address of importer and exporter, import licence number, name of port where goods are to be cleared, description of goods, value of goods and lastly the rate and value of import duty payable.
HSN Code for GST
Harmonized System of Nomenclature (HSN) developed by the World Customs Organization (WCO) is a multipurpose international product nomenclature which helps uniform classifications in a systematic and logical manner. Now for the classification of the goods and levy of tax, the GST Act uses HSN code as the code is already in place by the Customs Department and more importantly is an internationally accepted method to track goods in international and national trade.