Historical background of Current GST

The Goods and Services Tax (GST) is a comprehensive indirect tax that replaced multiple
indirect taxes in India. It was implemented on July 1, 2017, and is governed by the Goods
and Services Tax Act, 2017. The journey toward GST has a long historical background,
which can be traced through the following key developments:

1. Pre-GST Era: Multiple Indirect Taxes

Before GST, India had a complex tax structure with multiple indirect taxes levied at the
central and state levels. These included:

 Central Taxes: Excise Duty, Service Tax, Central Sales Tax, Customs Duty, etc.
 State Taxes: Value Added Tax (VAT), Entry Tax, Luxury Tax, Entertainment Tax,
etc.
 These taxes often led to a cascading effect (tax on tax), increasing the overall tax
burden.

2. Initial Discussions (2000-2006)

 In 2000, Prime Minister Atal Bihari Vajpayee set up a committee to design a GST
model.
 The Kelkar Task Force (2003) recommended a unified GST to replace existing
indirect taxes.
 In 2006, Finance Minister P. Chidambaram announced the plan to implement GST
by 2010 in the Union Budget.

3. Constitution Amendment and Drafting (2011-2016)

 The 115th Constitutional Amendment Bill was introduced in 2011, but it did not
pass.
 A revised 122nd Constitutional Amendment Bill was introduced in 2014 and passed
in 2016, becoming the 101st Constitutional Amendment Act.
 It empowered the central and state governments to levy GST and created the GST
Council (a decision-making body with representatives from both levels of
government).

4. GST Implementation (2017)

 The GST Act was passed in 2017, and GST was officially launched on July 1, 2017,
by Prime Minister Narendra Modi.
 It introduced a four-tier tax structure (5%, 12%, 18%, 28%) and removed many pre-
existing indirect taxes.

5. Post-Implementation Reforms (2018-Present)

 Several rate revisions and compliance relaxations have been made to simplify GST.
 E-invoicing and E-way Bills were introduced to improve tax collection.
  Small businesses benefited from the Composition Scheme (lower tax rates with
fewer compliances).

Conclusion

The GST system has evolved significantly since its introduction, making India's tax system
more transparent, efficient, and business-friendly. It replaced a fragmented tax system with a
unified structure, reducing tax complexities and improving ease of doing business.

Meaning ,Aims, Advantages Disadvantages of GST

Goods and Services Tax (GST) - Meaning, Aims, Advantages, and

Disadvantages

Meaning of GST

The Goods and Services Tax (GST) is a comprehensive, indirect tax levied on the supply
of goods and services in India. It replaces multiple indirect taxes such as Excise Duty, VAT,
Service Tax, etc., creating a unified tax system. GST follows a destination-based taxation
system, meaning tax is collected at the place of consumption rather than production.

GST is divided into:

 CGST (Central GST) – Collected by the Central Government.

 SGST (State GST) – Collected by State Governments.
 IGST (Integrated GST) – Collected on interstate transactions and imports.

Aims of GST

The primary objectives of GST include:

1. Simplifying the Tax Structure – Replacing multiple indirect taxes with a single tax.
2. Eliminating the Cascading Effect – Ensuring tax is levied only on value addition,
preventing "tax on tax."
3. Enhancing Ease of Doing Business – Creating a uniform tax structure across states.
4. Increasing Tax Compliance – Encouraging more businesses to register under GST.
5. Boosting Economic Growth – Reducing tax burden and increasing competitiveness.
6. Enhancing Government Revenue – By widening the tax base and reducing tax
evasion.
7. Promoting a Common National Market – Removing barriers between states for
smoother trade.

Advantages of GST
✅ Simplified Taxation – Merges multiple taxes into one, making compliance easier.
✅ Elimination of Cascading Effect – Taxes are charged only on the final value addition,
reducing overall tax burden.
✅ Uniform Tax Rates Across India – Ensures a single tax structure for businesses across
states.
✅ Boost to the Economy – Increases GDP growth by improving trade efficiency.
✅ Better Transparency & Compliance – Automated processes reduce corruption and tax
evasion.
✅ Encouragement for Small Businesses – The Composition Scheme offers lower tax rates
for SMEs.
✅ Ease of Online Filing – Businesses can file GST returns digitally, reducing paperwork.

Disadvantages of GST

❌ Complex Compliance for Small Businesses – Multiple returns and compliance

requirements can be burdensome.
❌ Higher Tax Rates on Some Goods/Services – Certain items became more expensive after
GST.
❌ Technical Challenges – Issues with GST portal and digital filing in the initial years.
❌ Increased Operational Costs – Businesses need to invest in GST software and training.
❌ Frequent Changes in Rules & Rates – Continuous updates create confusion for
businesses.
❌ Exclusion of Some Key Sectors – Petroleum, alcohol, and electricity are still outside
GST, leading to partial reform.

Conclusion

GST has been a major tax reform in India, simplifying the taxation system and promoting
economic growth. While it has many advantages, some challenges remain, especially for
small businesses. Continuous improvements and policy refinements are necessary to make
GST more effective.

Registration of GST- Compulsory and Voluntary

GST Registration: Compulsory vs. Voluntary

1. Compulsory GST Registration

Certain businesses and individuals are mandatorily required to register under GST, regardless of
turnover. The following categories must obtain compulsory GST registration:

(A) Based on Turnover

 Businesses with an annual turnover exceeding:

o ₹40 lakh (for goods) in most states.
 o ₹20 lakh (for services) in most states.
o ₹10 lakh (for both goods & services) in special category states (e.g., North-Eastern
states).

(B) Based on Business Type

 Interstate Suppliers – Businesses supplying goods/services across states.

 E-Commerce Operators – Platforms like Amazon, Flipkart, Zomato, etc.
 Casual Taxable Person – Businesses operating temporarily in a state (e.g., trade fairs,
exhibitions).
 Non-Resident Taxable Person – Foreign entities providing goods/services in India.
 Agents & Input Service Distributors – Businesses distributing input tax credit among
branches.
 Businesses Under Reverse Charge Mechanism (RCM) – Those required to pay tax on
purchases instead of sellers.
 TDS/TCS Deductors – Government departments & e-commerce platforms deducting tax at
source.

2. Voluntary GST Registration

Businesses that do not meet the compulsory registration criteria can still opt for voluntary GST
registration.

Why Opt for Voluntary Registration?

✅ Claim Input Tax Credit (ITC) – Registered businesses can claim tax paid on purchases.
✅ Enhance Business Credibility – Having a GST number improves business reputation.
✅ Expand Market Reach – Allows interstate trade and B2B transactions.
✅ Avoid Reverse Charge Burden – If unregistered, large buyers may have to pay GST under RCM.
✅ Simplify Compliance – Future-proofing business operations as growth may cross the turnover
limit.

Conclusion

 Compulsory registration is required for businesses meeting turnover limits or specific

business categories.
 Voluntary registration benefits businesses wanting to claim ITC, expand market reach, and
improve credibility.

Case Study-Based Numerical Problems on GST Registration

Case Study 1: Turnover-Based GST Registration

Problem:
Ravi runs a garment business in Maharashtra. His annual turnover for the last financial year was ₹38
lakh. He supplies goods only within Maharashtra. Should he register for GST? What if he expands to
Karnataka and his total turnover remains the same?

Solution:

 Within Maharashtra: The turnover threshold for GST registration in Maharashtra is ₹40 lakh
for goods. Since Ravi’s turnover is ₹38 lakh, he is not required to register compulsorily but
can opt for voluntary registration.
 Expanding to Karnataka: Since Ravi will now be making interstate supplies, GST registration
becomes mandatory, regardless of turnover. Even though his turnover is below ₹40 lakh, he
must register as per interstate supply rules.

Case Study 2: Service Provider Threshold

Problem:
Ananya provides graphic design services in Delhi. Her total revenue in the current financial year is
₹18 lakh. Is she required to register for GST?

Solution:

 The GST registration threshold for service providers is ₹20 lakh in most states.
 Since Ananya’s turnover is ₹18 lakh, she is not required to register compulsorily. However,
she can opt for voluntary registration if she wants to claim Input Tax Credit (ITC) on her
business expenses.

Case Study 3: E-Commerce Seller

Problem:
Amit sells mobile accessories through Amazon and Flipkart. His annual sales revenue is ₹5 lakh.
Does he need GST registration?

Solution:

 E-commerce sellers must register for GST, regardless of turnover.

 Even though Amit’s turnover is below ₹40 lakh (goods threshold), since he is selling through
an e-commerce platform, he must register for GST.
Case Study 4: Composition Scheme Eligibility

Problem:
Priya runs a bakery in Uttar Pradesh with an annual turnover of ₹1.2 crore. She wants to opt for the
GST Composition Scheme. Can she do so?

Solution:

 The GST Composition Scheme is available for manufacturers and traders with a turnover of
up to ₹1.5 crore.
 Since Priya’s turnover is ₹1.2 crore, she can opt for the Composition Scheme and pay GST at
a lower rate (1% for traders, 5% for restaurants).
 However, she cannot claim Input Tax Credit (ITC) under this scheme.

Case Study-Based Numerical Problems on GST Registration (With Detailed

Calculations)

Problem 1: Turnover-Based GST Registration & Tax Liability

Problem Statement:

Amit owns a stationery shop in Gujarat. His annual turnover is ₹45 lakh. He sells goods only within
Gujarat.

1. Is Amit required to register for GST?

2. If his sales attract 18% GST, how much tax will he have to collect from customers annually?

Solution:

Step 1: Check if GST Registration is Required

 The GST threshold limit for goods in Gujarat is ₹40 lakh.

 Since Amit’s turnover is ₹45 lakh (above the threshold), he must register for GST
compulsorily.

Step 2: Calculate GST Liability

 GST rate applicable = 18%

 Taxable turnover = ₹45,00,000
 Total GST payable = (18% of ₹45,00,000)

GST=18100×45,00,000=8,10,000\text{GST} = \frac{18}{100} \times 45,00,000 = 8,10,000GST=10018

×45,00,000=8,10,000

 CGST (Central GST) = 9% of turnover

 SGST (State GST) = 9% of turnover
CGST=9100×45,00,000=4,05,000\text{CGST} = \frac{9}{100} \times 45,00,000 = 4,05,000CGST=1009
×45,00,000=4,05,000 SGST=9100×45,00,000=4,05,000\text{SGST} = \frac{9}{100} \times 45,00,000 =
4,05,000SGST=1009×45,00,000=4,05,000

Thus, Amit must collect ₹8,10,000 as GST annually and pay ₹4,05,000 each as CGST and SGST.

Problem 2: GST Registration for Service Provider

Problem Statement:

Neha, a freelance digital marketing consultant in Karnataka, earns ₹22 lakh annually.

1. Does she need GST registration?

2. If her GST rate is 18%, how much tax must she charge her clients monthly?

Solution:

Step 1: Check if GST Registration is Required

 The GST threshold for service providers is ₹20 lakh.

 Neha’s turnover is ₹22 lakh (above ₹20 lakh), so GST registration is mandatory.

Step 2: Calculate Monthly GST Liability

 GST rate = 18%

 Annual turnover = ₹22,00,000
 Monthly turnover = ₹22,00,000 ÷ 12

Monthly turnover=1,83,333\text{Monthly turnover} = 1,83,333Monthly turnover=1,83,333

 GST per month = 18% of ₹1,83,333

GST=18100×1,83,333=33,000\text{GST} = \frac{18}{100} \times 1,83,333 = 33,000GST=10018

×1,83,333=33,000

Thus, Neha must charge ₹33,000 as GST from clients every month and ₹3,96,000 annually.

Problem 3: E-Commerce Seller Registration & GST Calculation

Problem Statement:

Ravi sells mobile covers on Amazon and Flipkart from Mumbai. His annual sales revenue is ₹7 lakh.

1. Is GST registration required for him?

 2. If his GST rate is 12%, how much GST must he collect from customers?

Solution:

Step 1: Check GST Registration Requirement

 E-commerce sellers must register for GST, regardless of turnover.

 Even though Ravi’s turnover is below ₹40 lakh, GST registration is mandatory.

Step 2: Calculate GST Payable

 GST rate = 12%

 Turnover = ₹7,00,000
 Total GST payable = 12% of ₹7,00,000

GST=12100×7,00,000=84,000\text{GST} = \frac{12}{100} \times 7,00,000 = 84,000GST=10012

×7,00,000=84,000

Thus, Ravi must collect ₹84,000 as GST from customers annually and pay ₹42,000 each as CGST and
SGST.

Problem 4: Composition Scheme Eligibility & GST Calculation

Problem Statement:

Pooja owns a sweet shop in Delhi. Her annual turnover is ₹1.3 crore.

1. Can she opt for the GST Composition Scheme?

2. If the composition tax rate is 1%, how much tax must she pay annually?

Solution:

Step 1: Check Eligibility for Composition Scheme

 The Composition Scheme limit for manufacturers/traders is ₹1.5 crore.

 Since Pooja’s turnover is ₹1.3 crore (less than ₹1.5 crore), she can opt for the Composition
Scheme.

Step 2: Calculate Composition Tax Liability

 Composition tax rate = 1%

 Turnover = ₹1,30,00,000
 Total GST payable under Composition Scheme

GST=1100×1,30,00,000=1,30,000\text{GST} = \frac{1}{100} \times 1,30,00,000 = 1,30,000GST=1001

×1,30,00,000=1,30,000
Thus, Pooja must pay ₹1,30,000 as GST annually, but cannot claim Input Tax Credit (ITC).

Conclusion:

 Compulsory GST registration applies to businesses exceeding turnover limits, interstate

suppliers, and e-commerce sellers.
 Composition Scheme allows businesses to pay lower GST rates but restricts ITC claims.
 GST calculations depend on the applicable tax rate and turnover.