Decoding GST: From Slab Rates to Return Filing in India

What is GST?

Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. It is a destination-based tax, which means the tax revenue goes to the state where the goods or services are consumed, not where they are produced.

GST was introduced on 1st July 2017 to simplify India’s complex indirect tax structure by replacing multiple taxes like VAT, service tax, and excise duty. The law is governed primarily by the Central Goods and Services Tax (CGST) Act, 2017.

GST Slab Rates in India:

There are five major GST rate slabs in India:

• 0% – Essentials like fresh vegetables, milk

• 5% – Sugar, spices, edible oil

• 12% – Processed food, computers, footwear

• 18% – Soaps, hair oil, toothpaste

• 28% – Air conditioners, luxury goods, automobiles

The rate applicable depends on the nature and classification of the goods or services.

Types of GST:

GST in India is categorized into four types depending on the nature of the transaction:

1. State Goods and Services Tax (SGST): Collected by the State Government on intra-state supplies.

2. Central Goods and Services Tax (CGST): Collected by the Central Government on intra-state supplies (within the same state).

3. Integrated Goods and Services Tax (IGST): Collected by the Central Government on inter-state supplies (between different states). The revenue is later divided between the Centre and the States.

4. Union Territory Goods and Services Tax (UGST): Applied on supplies in Union Territories, collected by the Central Government.

How GST Works: The Flow of Taxation.

GST is levied at every stage of value addition. At each step of the supply chain, a business can claim credit for the tax paid on purchases (input tax), and pay tax only on the value added.

Example:

A manufacturer buys iron ore for ₹100 and converts it into iron pins worth ₹200. Under GST:

• Tax is levied only on the value added (₹200 - ₹100 = ₹100)

• Manufacturer pays GST on ₹100, not on the entire sale value of ₹200

• This eliminates the cascading effect of taxes that existed earlier

GST filling:

Under the CGST Act, all registered businesses are required to file GST returns regularly. These returns contain details of outward and inward supplies, tax liability, ITC claimed, and more.

Understanding key terms:

1. Input tax credit:

Input Tax Credit (ITC) is one of the core features of the GST framework, allowing registered businesses to claim credit for the GST paid on purchases used in the course of business. This means that when a taxpayer purchases raw materials or services, the tax paid on those purchases can be offset against the tax liability on their sales. For instance, if the output tax on sales is ₹200 and the input tax paid is ₹150, the business only needs to deposit ₹50 to the government. To claim ITC, certain conditions must be met: the person must be registered under GST, must possess a valid tax invoice, must have received the goods or services, and the supplier must have paid the tax to the government and filed their returns. ITC can only be claimed for business-related purposes and not for personal consumption, exempt supplies, or non-taxable items.

2. Blocked Credit under GST:

Despite the broad availability of ITC, the GST law specifically restricts credit on certain goods and services, known as blocked credits, under Section 17(5) of the CGST Act. These are expenses where businesses are not allowed to claim ITC even if the items are used for business purposes. Common examples include motor vehicles for passenger transport (unless used for specific purposes), food and beverages, health insurance, club memberships, and construction of immovable property (except for plant and machinery). Additionally, ITC is not available on goods lost, stolen, destroyed, written off, or given away as gifts or free samples. These restrictions are put in place to avoid misuse of the credit system and to ensure that only legitimate business inputs are rewarded with tax credit benefits.

3. Nature of supply

Under the GST regime, the concept of "supply" is fundamental, as GST is levied on the supply of goods and services. A transaction is considered a supply when it involves the transfer, sale, exchange, lease, or disposal of goods or services for a consideration and is carried out in the course or furtherance of business. Supplies are broadly categorized into inward supplies and outward supplies. Inward supply refers to the receipt or acquisition of goods and services by a business, whether by purchase or any other means, while outward supply denotes the provision or sale of goods or services by a business to another party. Understanding the nature of supply is essential for determining tax liability, place of supply, and applicable GST rates.

4. Most Common GST Returns for Small and Medium Businesses:

• GSTR-1      -    Monthly/Quarterly sales details

• GSTR-3B   -    Tax summary with ITC

• GSTR-9      -     Annual return

• CMP-08      -     For composition taxpayers

5. Types of GST filling:

There are 13 types of GST returns, each serving a different purpose. Filing depends on your business type and turnover.

Return	Purpose	Due Date
GSTR-1	Outward supplies	11th of next month
GSTR-3B	Monthly summary of sales, ITC	20th of next month
GSTR-4	Annual return for Composition scheme	30th April (Annually)
GSTR-5	Return for non-resident taxable person	13th of next month
GSTR-5A	Return for OIDAR services	20th of next month
GSTR-6	Input Service Distributor return	13th of next month
GSTR-7	Return for TDS deducted	10th of next month
GSTR-8	E-commerce operators (TCS)	10th of next month
GSTR-9	Annual return for regular taxpayers	31st Dec of next FY
GSTR-9C	Annual audit report	31st Dec of next FY
GSTR-10	Final return for cancelled registration	Within 3 months
GSTR-11	UIN holders for refund	28th of next month
CMP-08	Composition scheme quarterly return	18th of next month
ITC-04	Job work return	Half-yearly/quarterly

6. QRMP Scheme (Quarterly Return Monthly Payment):

The QRMP Scheme is designed to ease GST compliance for small businesses with an annual aggregate turnover of up to ₹5 crore. Under this scheme, eligible businesses can opt to file GST returns quarterly instead of monthly, significantly reducing the number of returns to be filed in a financial year. Taxpayers under the QRMP scheme are required to file only 9 returns annually - 4 GSTR-1 returns, 4 GSTR-3B returns (quarterly), and 1 annual return - compared to the 25 returns otherwise required. This not only reduces the compliance burden but also streamlines the return filing process for smaller businesses.

Conclusion:

GST has significantly transformed the Indian tax system by introducing uniformity, enhancing transparency, and eliminating the cascading effect of multiple indirect taxes. Although the structure may initially appear complex, a clear understanding of GST flow, Input Tax Credit (ITC) eligibility, and return filing procedures makes compliance more manageable for businesses.

Timely and accurate filing of GST returns is crucial to avoid penalties, interest, and the risk of losing valuable input credits. For growing businesses, staying GST-compliant can be challenging amidst changing rules and deadlines. At ProLead, we help your business stay compliant and ensure all your GST returns are filed accurately and on time, so you never miss a due date.