Decoding GST in Tally Prime: A Comprehensive Overview


What is GST?

  • GST, or Goods and Services Tax, is a comprehensive indirect tax levied on the supply of goods and services at each stage of the production and distribution chain.
  • It is designed to replace multiple indirect taxes that were previously imposed by the central and state governments.
  • The primary goal of GST is to create a more efficient and transparent taxation system

GST Implementation in India

  • The journey of GST started in the year 2003.
  • It has crossed many political and administrative hurdles.
  • In India, GST was implemented on 01 July 2017.

Why GST Introduced in India

  • The indirect taxation system had inefficiencies and limitations due to:
    • Multiple taxes (Central levies like Excise Duty, Service Tax, and other Cesses, state levies like VAT, Entry Taxes, Octroi, Luxury Tax, Entertainment Tax, Purchase tax).
    • Multiple tax rates.
    • Multiple points of taxation (during manufacture, trade, rendering services, and so on).

Structure of GST

  • Central Tax
  • State Tax
  • Integrated Tax
  • UT Tax

Registration

  • Only registered businesses are allowed to claim Input Tax Credit.
  • On registration, each business will be allocated a unique 15-digit PAN based registration number.
  • This is called the GST Identification Number (GSTIN).
company_creation

Business Liable to Register under GST

  • The annual aggregate turnover threshold beyond which a business becomes liable to be charged GST.
company_creation

  • On the day, a dealer crosses the Rs. 10 lakh/20 lakh turnover threshold, he should register under GST.

Process of Registration under GST

  • Existing Dealers
    • Existing dealers who have already registered under the existing indirect taxes system, like VAT, Central Excise, and Service Tax, will be auto-migrated to GST.
  • New Dealers
    • As we know, when a dealer crosses the Rs. 10 lakh/20 lakh aggregate turnover threshold, he is liable to apply for GST registration.

Composition Taxpayer

  • Is required to pay tax at a certain percentage of turnover.
  • Need not maintain detailed records and documents nor follow the rules and procedures of issuing a tax invoice, maintaining stock, filing invoice-wise sales and purchases, and so on.
  • Only needs to file periodic returns, usually on a quarterly basis.
  • Will not be allowed to avail Input Tax Credit (ITC).
  • Is not allowed to collect tax on sales.

Supply of Goods and Services

  • Scope of supply: The term Supply includes all forms of supply of goods or services, supplied or to be supplied, for a consideration, during or for the furtherance of business.
  • Place of supply: In the GST taxation system, the place of supply will play a vital role in determining which tax to be charged.

Two Key Aspects

  • Location of the Supplier
  • Location of Supply
  • Time of Supply
    • Point of Taxation (POT) refers to the point in time when tax is required to be paid.
    • This is a mechanism used to determine the point in time when the tax liability will arise.

Time of Supply under Two Heads

  • Time of Supply of Goods
  • Time of Supply of Service

Value of Supply

  • The taxable value of all the goods and services consumed in an economy is arrived at based on various metrics.

Registration Types

  • Regular
    • This is the most common type of GST registration and is applicable to businesses whose turnover exceeds the prescribed threshold limit set by the GST authorities.
    • For example, as of my last knowledge update in January 2022, in India, businesses with an annual aggregate turnover exceeding a certain amount are required to register for GST.
    • In India, for instance, businesses with an aggregate turnover exceeding INR 20 lakhs (INR 10 lakhs for special category states) are required to register under GST.
  • Composition
    • This is the most common type of GST registration and is applicable to businesses whose turnover exceeds the prescribed threshold limit set by the GST authorities.
    • For example, as of my last knowledge update in January 2022, in India, businesses with an annual aggregate turnover exceeding a certain amount are required to register for GST.
    • In India, for instance, businesses with an aggregate turnover exceeding INR 20 lakhs (INR 10 lakhs for special category states) are required to register under GST.
  • Unregistered/Consumer
    • A Special Economic Zone is a designated area within a country that is subject to specific economic regulations and policies that differ from the rest of the country.
    • SEZs are created to promote economic activities, exports, and employment.
    • The term "Regular - SEZ" suggests that the business, even though it operates within an SEZ, has opted for the regular GST registration instead of any special scheme or composition scheme specific to SEZs.

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