Top 10 Features of GST in India

Amaey Anand

Senior Writer

Features Of GST guide

In taxation, the Goods and Services Tax (GST) has emerged as a transformative and unifying force. Since its inception, it has significantly altered the indirect tax landscape, bringing about a One Nation, One Tax system. This blog aims to delve into the intricacies of GST and its features and sheds light on its impact on the Indian economy.

Looking for the best GST Software Check out SoftwareSuggest’s list of the Best GST Software

What is GST?

Goods and Services Tax, commonly known as GST, is a comprehensive indirect tax levied on the supply of goods and services in India. Implemented on July 1, 2017, it replaced a complex structure of multiple indirect taxes imposed by the central and state governments. GST is designed to streamline the taxation system, reduce cascading effects, and create a more uniform and transparent tax structure.

Top 10 Important Key Features of GST

Here are the most essential GST characteristics and objectives that you should be aware of –

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Pro-tip

When choosing accounting and GST compliance tools like TallyPrime, Zoho Books, or myBillBook, it's essential to align the selection with your business's specific needs and scalability requirements. Consider factors such as the complexity of your financial operations, the learning curve for users, integration capabilities, and your budget constraints to make an informed decision that maximizes efficiency and meets compliance standards.

1. One Nation, One Tax

The foundational principle of “One Nation, One Tax” under GST represents a visionary approach to unifying India’s diverse tax landscape. Historically, individual state tax systems created a patchwork of regulations that impeded the seamless flow of goods and services across state borders.

one nation, one tax by softwaresuggest

This fragmentation posed significant challenges for businesses engaged in interstate trade, leading to inefficiencies and increased compliance burdens. With the implementation of GST, the aim is to dismantle these barriers by establishing a common tax base.

By doing so, GST creates a level playing field for businesses nationwide, fostering a cohesive and integrated market. This not only simplifies compliance for businesses but also promotes a more efficient allocation of resources, ultimately contributing to the economic growth of the entire nation.

2. Single Indirect Tax in GST

GST’s transformation lies in its ability to simplify the labyrinth of indirect taxes that businesses previously navigated. The amalgamation of Central Excise Duty, Service Tax, and State VAT into a singular tax structure is a strategic move to streamline the taxation system. This consolidation translates into a more straightforward compliance process, sparing businesses the complexities associated with juggling multiple taxes.

By unifying these taxes, GST reduces redundancies and administrative overheads. It also ensures that the tax burden is distributed more equitably, benefiting businesses of all sizes. The single indirect tax framework not only facilitates ease of doing business but also enhances transparency, making it easier for both businesses and regulatory authorities to track and manage the tax flow throughout the supply chain.

3. Input Tax Credit (ITC)

The introduction of the Input Tax Credit (ITC) is a cornerstone of GST, revolutionizing the way businesses manage their tax liabilities. Under this mechanism, businesses can offset the taxes paid on inputs against the taxes levied on the final output. This groundbreaking feature mitigates the cascading effect of taxes, where taxes are levied on top of already taxed components, leading to increased costs.

input tax credit by softwaresuggest

With ITC, businesses can claim credit for the taxes paid at each stage of the supply chain, fostering efficiency and cost-effectiveness. This not only encourages businesses to invest in quality inputs but also promotes a more competitive market environment. ITC serves as a powerful incentive for businesses to align with GST compliance, ultimately contributing to improved productivity and competitiveness across various industries.

4. Four-Tier Tax Structure in GST

GST’s four-tier tax structure, comprising slabs of 5%, 12%, 18%, and 28%, represents a nuanced approach to taxation. Essential commodities and items of public interest are generally placed in the lower slabs, while luxury items and services attract higher rates. This tiered structure aims to strike a balance in the tax burden across different sectors and ensures an equitable distribution of tax liabilities.

GST rate structure by softwaresuggest

The lower slabs provide relief to essential goods, making them more affordable for the common man, while the higher slabs generate revenue from luxury items. This approach not only considers the economic realities of different sectors but also promotes social equity. Moreover, the tiered structure facilitates targeted fiscal policies, allowing the government to influence consumer behavior and support specific industries based on their strategic importance to the economy.

5. Unified Market

The concept of a “Unified Market” is at the heart of GST’s transformative impact on India’s economic landscape. Prior to GST, the country grappled with a fragmented market due to varying tax structures across states. This fragmentation hindered the seamless flow of goods and services, impeding interstate trade. With the implementation of GST, the vision is to create a single, integrated market by breaking down barriers posed by different state tax systems.

This not only facilitates easier movement of goods across state borders but also promotes a more efficient allocation of resources. Businesses now operate in a nationally consistent tax environment, reducing complexities and fostering a level playing field. The unified market concept is instrumental in boosting overall economic growth by encouraging businesses to expand their reach and operate seamlessly across different regions of the country.

6. Anti-Profiteering Measures

In its commitment to fair trade practices, GST incorporates anti-profiteering measures to ensure that the benefits of reduced taxes are passed on to the end consumer. These measures aim to prevent businesses from unjustly increasing their profit margins by not adequately reducing prices post-GST implementation.

A dedicated anti-profiteering authority is established to scrutinize business practices and pricing strategies. This authority plays a crucial role in safeguarding consumer interests by monitoring price adjustments and ensuring that the intended benefits of GST, such as lower tax rates and input tax credits, are effectively translated into reduced prices for goods and services.

The anti-profiteering measures not only contribute to consumer welfare but also maintain the integrity of the GST framework by promoting transparency and fairness in the business ecosystem.

7. Online System and Compliance

GST introduces a paradigm shift in taxation with its emphasis on an “Online System and Compliance,” one of the main features of GST. The transition to a digital platform for tax-related processes is a key feature that enhances efficiency, transparency, and ease of compliance. Businesses are required to file returns, claim credits, and fulfill other tax obligations through an online portal, reducing the need for cumbersome paperwork.

This not only streamlines the entire taxation process but also minimizes the scope for manual errors and tax evasion. The online system enables real-time tracking of transactions, ensuring a more responsive and proactive approach to tax administration. This digital transformation not only aligns with the broader push towards a digital economy but also positions India’s taxation system as modern, adaptable, and capable of meeting the evolving needs of businesses.

The emphasis on an online system and compliance is a testament to GST’s commitment to leveraging technology for the benefit of businesses and the economy as a whole.

8. GST Composition Scheme

The GST Composition Scheme is a tailored solution designed to simplify compliance for small businesses and ease their tax burden. Businesses with an annual turnover below a specified threshold can opt for the composition scheme, allowing them to pay a fixed percentage of their turnover as tax instead of dealing with the intricacies of regular GST compliance.

GST composition scheme by softwaresuggest

This scheme is particularly beneficial for small traders and service providers, enabling them to focus on their business operations without being weighed down by complex tax procedures. While the composition scheme offers a simplified approach, it’s essential to evaluate its suitability for each business, considering factors such as turnover, the nature of transactions, and the desire for reduced compliance obligations.

9. Tax Slabs

The tax slabs in GST, categorized at 5%, 12%, 18%, and 28%, form a pivotal aspect of the taxation framework. This tiered structure allows for a nuanced approach, catering to the diverse needs of different sectors. Essential goods and services typically fall under the lower slabs, ensuring affordability for the general populace.

Meanwhile, luxury items and services attract higher rates, generating revenue and discouraging excessive consumption. The tax slabs not only provide flexibility for fiscal policy but also contribute to social equity by considering the impact on various income groups. This structured approach facilitates effective tax planning for businesses and allows the government to strategically manage the economy while ensuring a fair distribution of the tax burden.

10. Registration Exemptions for Small Businesses

Recognizing the unique challenges faced by small businesses, GST offers registration exemptions based on turnover thresholds. Small businesses with an annual turnover below the prescribed limit are exempt from mandatory GST registration.

This exemption not only alleviates the compliance burden on micro-enterprises but also acknowledges the limited scale of their operations. While this exemption fosters ease of doing business for small enterprises, businesses must monitor their turnover to ensure compliance with changing thresholds.

This measure encourages the growth of small businesses, allowing them to focus on expansion without the immediate burden of GST compliance, contributing to a more inclusive and supportive business environment.

What Are the Different Types of GST?  

Goods and Services Tax (GST) in India comprises four distinct types, each serving a specific purpose. Here are 4 types of GST that you can learn about –

types of GST by softwaresuggest

  • State Goods and Services Tax (SGST): State Goods and Services Tax, or SGST, is a tax levied by individual states on transactions that occur within their respective borders. This component of GST is crucial for state governments as it contributes directly to their revenue. SGST allows states to maintain financial autonomy by independently collecting taxes on the supply of goods and services within their jurisdiction.
  • Central Goods and Services Tax (CGST): Central Goods and Services Tax, known as CGST, is the counterpart to SGST, collected by the central government on intra-state transactions. This component ensures that the central government has its share of revenue to meet national fiscal responsibilities and fund various central programs. 
  • Integrated Goods and Services Tax (IGST): Integrated Goods and Services Tax, or IGST, comes into play for transactions that involve the movement of goods and services across state borders. Collected by the central government, IGST ensures a seamless flow of goods between states by avoiding the complexities associated with multiple state taxes. The collected IGST is later distributed among the respective states, promoting a unified and integrated tax system.
  • Union Territory Goods and Services Tax (UTGST): Union Territory Goods and Services Tax, or UTGST, is akin to SGST but is applicable to Union Territories. This component grants Union Territories the authority to levy and collect taxes on transactions occurring within their boundaries, offering them financial autonomy. UTGST contributes to the fiscal management of Union Territories, allowing them to cater to local needs and initiatives.

Top 3 Tools for GST

There are many tools available in the market to manage GST. To make an informed decision, below are the 3 best software for GST:

Software NameFree Trail PeriodPricing
14 daysCustom pricing
15 daysStandard: $15 per organization
14 daysCustom pricing

1. TallyPrime

tallyprime GST software dashboard

TallyPrime is a versatile business accounting software that has become a prominent choice for managing Goods and Services Tax (GST) compliance. It offers robust features to streamline financial processes, making it a popular tool for businesses of all sizes. TallyPrime facilitates efficient GST filing and compliance by providing comprehensive reporting and invoicing capabilities. Users can generate GST-compliant invoices, manage ledgers, and automate the calculation of GST liabilities.

Key features

  • In-depth GST compliance
  • Invoicing
  • Real-time reporting
  • Automated bank reconciliation
  • Multi-user access

Pricing

Custom pricing.

Pros
  • TallyPrime excels in comprehensive GST compliance, offering features like GSTR filing and automated calculations.
  • The software provides real-time financial insights, aiding businesses in making informed and strategic decisions.
  • Its user-friendly interface ensures that businesses of all sizes can easily navigate and utilize its functionalities.
  • TallyPrime supports multi-user access, facilitating collaboration and teamwork within the organization.
Cons
  • TallyPrime might have a steeper learning curve for new users, especially those unfamiliar with accounting software.
  • While feature-rich, TallyPrime may be considered relatively expensive for smaller businesses with limited budgets.
  • The software's cloud capabilities could be more robust, as some users may prefer more advanced cloud-based functionalities.

2. Zoho Books

zohobook dashboard

Zoho Books is a cloud-based accounting software that offers a comprehensive set of features for businesses to manage their financial operations, including GST compliance. It provides tools for invoicing, expense tracking, and financial reporting, making it suitable for businesses across various industries. Zoho Books simplifies GST compliance by automating the calculation of GST liabilities and generating GST-compliant invoices. The software’s intuitive interface and integration capabilities with other Zoho applications contribute to a seamless user experience.

Key features

  • Automated GST calculations
  • GST-compliant invoicing
  • Expense tracking
  • Bank reconciliation

Pricing

  • Free: $0 For companies less than $50K revenue.
  • Standard: $15 per organization, per month (billed annually)
  • Professional: $40 per organization, per month (billed annually)
  • Premium: $60 per organization, per month (billed annually)
  • Elite: $120 per organization, per month (billed annually)
  • Ultimate: $240 per organization, per month (billed annually)
Pros
  • Zoho Books automates GST calculations, making it easier for businesses to adhere to GST compliance requirements.
  • The software seamlessly integrates with other Zoho applications, creating a unified ecosystem for business operations.
  • Zoho Books provides user-friendly collaboration features, allowing multiple users to work on financial data concurrently.
  • Its mobile accessibility ensures that users can manage their financial operations on the go.
Cons
  • Zoho Books may lack some advanced features found in more complex accounting software solutions.
  • While affordable, the pricing structure could be more flexible to accommodate businesses of all sizes.
  • The learning curve for advanced functionalities may be steeper for users who are new to accounting software.

3. myBillBook

billbook dashboard

myBillBook is an invoicing and accounting software designed to simplify billing and compliance for small businesses and freelancers. While it may not be as feature-rich as some larger accounting software, it caters to the specific needs of smaller entities, including GST compliance. myBillBook enables users to create and send GST-compliant invoices, track expenses, and generate basic financial reports. It is user-friendly and serves as an affordable solution for businesses with simpler accounting requirements.

Key features

  • Simplified invoicing
  • Expense tracking
  • GST reports
  • Mobile accessibility

Pricing

Custom pricing.

Pros
  • myBillBook excels in simplicity, providing an easy-to-use platform for small businesses and freelancers.
  • The software offers basic features for GST-compliant invoicing, catering to the specific needs of smaller entities.
  • Its mobile accessibility allows users to manage billing and expenses conveniently on their mobile devices.
  • myBillBook is an affordable solution, making it accessible to businesses with limited budgets.
Cons
  • The software may lack some advanced accounting features present in more comprehensive solutions.
  • Limited scalability might be a constraint for businesses with plans for significant expansion.
  • While suitable for basic accounting needs, myBillBook may not meet the requirements of larger or more complex businesses.

Conclusion

While each tool has its strengths, the choice among them ultimately depends on the specific requirements, scale, and preferences of the business. Businesses can select the software by comparing the above 3 tools and comparing the salient features of GST software, pros and cons, and pricing.

Frequently Asked Questions

The process involves collecting and updating business transactions, reconciling input and output taxes, and submitting periodic GST returns through the online GST portal.

GST was introduced to simplify the tax structure, eliminate cascading effects, promote a unified market, and enhance the ease of doing business by subsuming various indirect taxes under a single system.

GST rates vary based on the type of goods or services. The basic rates include 5%, 12%, 18%, and 28%, with some items attracting a 0% rate (tax-exempt) or placed under special rates.

Yes, GST is a destination-based consumption tax applicable within the territorial boundaries of India. It does not apply to transactions outside the country.

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