GST is one of the biggest economic reforms ever in India, which came into existence on July 1, 2017. Basically, it was introduced with the aim of streamlining the tax structure, eliminating every aspect of the cascading effect of taxes and making indirect taxes in India less complex.
Several taxes under the central government as well as various state governments were replaced by GST, making it a more streamlined system for businesses and even consumers.
This blog post contains some great information about the top 17 features of GST, which explains its importance and its use in real life in a very good way.
We want to tell you all in advance that the information given in this blog post is being delivered to you only after doing a good and accurate research, so you can trust the information given in this blog post blindly without any worry.
What is the Goods and Services Tax (GST)?
Goods and Services Tax is an all-inclusive indirect tax levied on the supply of goods and services in India. It has replaced several indirect taxes such as VAT, service tax and excise duty.
GST is applied at every stage of the supply chain, although the final burden falls on the consumer. The idea of GST is to bring all states under a uniform tax structure with significantly simplified tax processing.
What are the Top 17 Salient Features of GST?
We have explained to you all about the top 17 salient features of GST in great detail below:
- Single Indirect Tax
- Registration exemptions for small businesses
- Four-Tier Tax Structure
- GST Composition Scheme
- Input Tax Credit System
- Invoice Matching
- Consumption-Based Tax
- Anti-Profiteering Measures
- Competitive Advantage
- Digital compliance and payments
- Comprehensive Multi-Stage Taxation
- Destination-Based Tax
- Elimination of Cascading Effect
- Composition Scheme for Small Businesses
- Simplified Compliance and Filing Process
- Harmonized System of Nomenclature (HSN) Code
- Reverse Charge Mechanism (RCM)
- Threshold Exemption Limit
Single Indirect Tax
GST has streamlined the tax structure by bringing together several indirect taxes under one umbrella tax whereas before GST, there were several indirect taxes levied at different stages such as VAT, excise duty, service tax, and other similar taxes.
Now all these have been subsumed into a single indirect tax across the country, bringing uniformity and transparency in the taxation system.
Registration Exemptions for Small Businesses
GST also provides a threshold limit to small businesses, which means they are exempted from registration and filing taxes. Businesses with an annual turnover of ₹20 lakh (₹10 lakh for certain special category states) are not required to compulsorily register, thus greatly reducing the compliance burden of small and micro enterprises so that they can focus on business growth without the hassle of frequent tax filing.
Four-Tier Tax Structure
The Government of India has a four-slab tax structure for GST: 5%, 12%, 18% and 28%. Basic goods and services fall under the lower tax scale, while luxury items or goods that are not in demand are placed under higher rates.
It is a multi-tier system that equalizes taxes; which in itself keeps basic goods within reach of everyone but imposes higher rates on luxury items.
GST Composition Scheme
A composition system has been introduced by the Government of India to help all types of small taxpayers in GST. Under this, companies having a turnover of less than Rs 1.5 crore or Rs 75 lakh for certain states can choose to pay a fixed rate of tax on their turnover instead of the entire standard GST rates. This makes filing of returns easier for small enterprises and makes compliance easier.
How to File GST…Read More
Input Tax Credit System
The next important features of GST is the ITC mechanism. It allows a business to set off the input tax paid on purchases against the output tax payable on sales.
There will be no cascading effect of taxes (tax on tax), reducing the overall tax burden on goods and services which will be passed on to consumers in the form of savings.
Invoice Matching
Invoice matching is one of the processes in which GST promotes transparency. Businesses are required to match invoices issued by suppliers with invoices received from customers for input tax credit claims.
This prevents abuse in income tax, as mismatched invoices may attract penalties or lead to disallowance of tax credit.
Consumption-Based Tax
GST is a destination-based, consumption tax, where it is levied in the state where the goods or services are to be consumed, not at their place of production. This will ensure that there is a fairer distribution of taxes as tax revenues are usually higher in states with higher levels of consumption.
Anti-Profiteering Measures
Under GST, provisions are available to pass on the benefit of lower tax rates to consumers. Profit-taking measures are provided to ensure that the reduction in GST rates or other benefits accruing from input tax credits lead to a decline in the price of goods and services. In other words, businesses cannot make increased profits at the expense of the consumer.
Competitive Advantage
GST has made Indian business units more competitive nationally and internationally. By eliminating the cascading effects of tax and unifying tax rates across states, it reduces barriers to trade and also reduces the cost of compliance, making India’s products more price-competitive globally.
Digital compliance and payments
The GST system is being driven by digital sources while businesses continue to comply with tax policies and pay their taxes online. Under the GST Network (GSTN), filing of returns, e-way bills and payment of taxes are simplified to ensure a hassle-free process. This digital-first approach has streamlined compliance, reduced paperwork and increased efficiency in tax administration.
Comprehensive Multi-Stage Taxation
GST is a uniform tax levied on goods and services at various stages of production and distribution. It actually covers the supply chain in three dimensions that include manufacturing, sales and consumption.
In this way, the tax is levied at all stages of the production and distribution chain, although the burden ultimately falls on the final consumer.
Destination-Based Tax
It is a destination-based tax system, i.e., the collection of tax will take place at the point of consumption, while in indirect taxation the tax is collected at the point of origin. The state will collect the tax and thus, distribute it fairly among the states in terms of collection.
Elimination of Cascading Effect
The current GST system does not have a cascading effect or in other words, tax on tax, as businesses can claim input tax credit; i.e., taxes previously levied on value-added goods and services will not be recovered.
The implementation of GST has made the tax system more efficient, and the cost of goods and services has also reduced substantially.
Composition Scheme for Small Businesses
GST offers a composition scheme that will ease the burden on small taxpayers. A business whose turnover is less than ₹1.5 crore or ₹75 lakh for some states can pay a fixed rate of tax on its turnover instead of the normal GST rates. This simplifies compliance for small businesses and also makes filing returns easier.
Simplified Compliance and Filing Process
The GST system has been integrated with modern technology, thereby facilitating the tax filing process. The GSTN portal has also been set up, through which various businesses automatically submit their returns online, making tax compliance relatively easy.
Returns under GST must be filed at least monthly or quarterly depending on the turnover of the business and an annual return consolidating all transactions.
Harmonized System of Nomenclature (HSN) Code
This helps in classifying goods and services as GST uses Harmonized System of Nomenclature (HSN) codes. Such a system, accepted worldwide, ensures uniformity of taxation across different regions and countries. The appropriate GST rate applicable on any product or service will be determined using the HSN code.
Reverse Charge Mechanism (RCM)
Under the reverse charge mechanism, GST will be paid by the recipient of the goods or service instead of the supplier. This applies when the supply is made by an unregistered supplier or a notified service. The reverse charge mechanism generates an expansion in the tax base and induces tax.
In Conclusion
The Goods and Services Tax has effectively transformed the indirect tax landscape in India with a unified tax that highlights the ease of doing business.
As we have already explained quite clearly above, all the features of GST demonstrate how GST has improved all-round compliance, streamlined the overall tax process, and contributed to a more transparent economy to a great extent.
The elimination of cascading taxes and uniformity in the taxation environment has boosted economic growth tremendously and made India an absolute leader in global businesses.
This blog post of Top 17 Features of GST is vital for businesses to better understand the complexity of GST, ensure compliance and benefit from it. Additional system improvements will greatly enhance economic efficiency and tax equity as GST continues to make significant improvements to the system.
In the end, we want to tell all of you that you will not face any kind of complexity without understanding the blog post about the features of GST because we have presented this blog post in front of you in very simple words. features of GST because we have presented this blog post in front of you in very simple words.
FAQs
1. What is the function and features of GST network?
The GST Network (GSTN) provides the IT infrastructure for the implementation of GST. It allows businesses to register, file returns, pay taxes and claim input tax credit online. This system ensures transparency and simplifies tax compliance.
2. What are the features of consideration in GST?
Under GST, “consideration” includes any payment made in money or kind for the supply of goods or services. It also includes monetary and non-monetary benefits, and payments made before, during or after the supply.
3. What are the main features of tax?
A tax is a compulsory contribution levied by the government for public services. Its main characteristics include being imposed by law, being based on the income or consumption of an individual or business, and not providing a direct benefit in return.
4. What are the main features of tax shifting?
Tax shifting occurs when the burden of a tax is shifted from the person legally liable to pay the tax to someone else. This is common with indirect taxes, where businesses shift the tax burden to consumers through higher prices.
5. What are the functions of GST?
GST simplifies tax administration by combining several indirect taxes into one. It promotes transparency, reduces tax evasion, eliminates the cascading effect of taxes, and promotes a unified market across India.
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