Goods and Services Tax Network

Goods and Services Tax Network

Goods and Services Tax Network (GSTN) was set up as a private company in 2013 by the Government under Section 25 of the Companies Act, 1956. GSTN is expected to offer the front-end services of registration, payment, and returns to taxpayers. It would also develop back-end technical modules that will be utilised by 25 states that have opted in.

GSTN has also identified 34 IT and financial technology companies and tagged them as GST Suvidha Providers (GSPs). These organisations will develop applications that will be used by taxpayers when they interact with GSTN.

Key features of the GST regime

The GST system is characterized by the following features:

• GST is applicable on the “supply” of services or goods as opposed to the earlier concept of taxation on goods manufacture, sale of goods, or service provision.
• GST is a destination-based tax structure unlike the origin-based structure that existed previously.
• CGST, IGST, and SGST/UTGST are levied at rates that would be mutually agreed upon by the states and Centre.
• GST will replace the central taxes mentioned below:
  • Duties of Excise (medicinal and toilet needs)
  • Central Excise Duty
  • Additional Duties of Excise (Goods of Special Importance)
  • Additional Duties of Customs (CVD)
  • Service Tax
  • Special Additional Duty of Customs(SAD)
  • Additional Duties of Excise (Textiles and Textile Products)
  • Cesses and surcharges
• GST will subsume the following state taxes:
  • Central Sales Tax
  • Entry Tax
  • State VAT
  • Luxury Tax
  • Purchase Tax
  • Entertainment Tax, except that levied by local entities
  • Taxes on lotteries and gambling
  • Taxes on advertisements
  • State cesses and surcharges
• Taxpayers with annual turnover of Rs.20 lakh is exempt from GST. For special category states, this cut-off is Rs.10 lakh. An option of compounding is available to small-scale taxpayers with annual turnover of Rs.50 lakh or below. The choice of threshold exemption and the compounding scheme are optional.
• Input credit of CGST shall be used only for paying CGST on the output. Similarly, input credit of SGST/UTGST will be used only for the payment of SGST/UTGST. Therefore, the two channels of input tax credit cannot be cross-utilised, except for the payment of IGST for inter-state supplies.

Benefits of GST Implementation

Key benefits of the GST announcement are detailed below:

1. As mentioned above, the GST system will create a common national market that boosts foreign investment.
2. The cascading effect of taxation will be mitigated.
3. There will be uniformity in laws, rates of tax, and procedures across states.
4. The GST regime is expected to boost manufacturing activities and exports. This would, in turn, generate more employment and lead to the growth of the economy.
5. Indian products would be more competitive in the international markets.
6. The GST system is likely to improve the overall investment climate in India.
7. Uniformity in the rates of SGST and IGST will reduce tax evasion to a large extent.
8. The average sales burden experienced by companies is expected to come down, thereby increasing consumption and boosting subsequent production of goods.
9. GST is a simpler system of taxation with smaller number of exemptions.
10. There are automated and simplified methods for processes such as registration, refunds, returns, tax payments, etc.
11. All interactions will be handled by the common GSTN website.
12. The input tax credit process will be more accurate and transparent, as electronic matching will be performed.
13. The final price of most goods will be lower when taxation is at the new GST rates. There will also be a seamless input tax credit flow between the manufacturer, retailer, and supplier of service.
14. A huge segment of small-scale retailers may be either exempt from tax or may benefit from low tax rates based on the compounding scheme. Consumers will further benefit if purchases are made from these small retailers.