Goods and Services Tax (GST) was introduced in India on 1st July 2017, in order to eliminate the multiple cascading taxes and levies prevailing earlier. This tax aims at making tax compliance easier while making tax evasion equally difficult.

The GST Rate Slabs of India are pegged at 5%, 12%, 18% and 28%. These rates are not fixed, it may change in future. Additional cesses or duties may apply to certain goods, which may be an exception.

The tax structure for common-use goods and services is provided towards the end.

TYPES OF GST

The country has adopted a dual GST model, meaning taxation is administered by both the Union/Central and State Governments.

With regards to this, any transaction made within a single state is levied with CGST (Central Government GST) and SGST (State Government GST). The distribution between the two is not complicated at all. It follows a simple rule, of equal division.

For example, the sale of an insulin cartridge manufactured in Pune region to a customer in Mumbai Metropolitan Region will attract a GST of 5%, which will be split into 2.5% for the Central Government and 2.5% for the respective State Government (in this case, Maharashtra). Similarly, the tax charge of 18% paid at a pub in Mumbai will be split into 9% for the Central Government and 9% for the State Government. So, essentially there are two GSTs, CGST and SGST, that should be found in any bill. If the transaction takes place in a Union Territory, the SGST is replaced by a UTGST.

In case of inter-state supply of goods and services, and in case of all imports, IGST (Integrated GST) is to be collected and paid to the Central Government.

INVOICE MATCHING IN CASE OF GST

I.T. is the backbone of this taxation structure, and GSTN (GST Network) is a not-for-profit set up exclusively to handle GST tax collection, recordings, and credit input and output calculations at a

national level. Algorithmic automation is being developed and deployed at a rapid pace so that this process becomes fully automated.

Invoice matching is extremely relevant because input tax credit of purchase of goods and/or services will be available only if the details of inward supply filed under GSTR-2 return of buyer is matching with the details of outward supplies filed in GSTR-1 of the seller. Unless this matching is reconciled, the buyer will not be able to claim the input tax credit of taxes paid on purchasing input goods and/or services. Thus, timely return filing has become a compliance measure for every firm, whether small or large.

REVISING AN INVOICE

Though the system has been mostly automated, and monthly invoices are filed on the GSTN, there may be certain errors or changes required, and these situations call for a rectification of invoices.

Revision of tax invoices can be carried out in several ways. There can be a downward or upward revision in prices of goods or services being supplied, or there can be a change in the rate of GST, etc. A revised invoice needs to be issued for these purposes. A revised or supplementary invoice makes good all deficiencies related to an original tax invoice under GST. The particulars of such an invoice needs to have the following details,

  • Name and address of the seller
  • GSTIN of seller
  • Nature of invoice – Debit note, Credit note, Revised invoice, Supplementary invoice
  • Alpha-numeric serial number for the invoice, specific to the accounting year
  • Invoice date
  • Name and address of buyer
  • GSTIN of buyer
  • Where recipient is an unregistered person, then name and address of place of delivery
  • Original invoice serial number against which this invoice is being issued
  • Differential amount of tax, taxable value of goods or services, or rate of tax.
  • Signature of authorised person

FILING OF GSTR 1, GSTR 2 and GSTR 3

GSTR-1

This is the most important document upon which the entire GST tax structure and its compliance is based. Details that need to be filled in GSTR-1:

  • GSTIN of seller (auto-populated)
  • Name and address of seller (auto-populated)
  • Total turnover of last Financial Year (one-time action, otherwise auto-populated with closing balance of sales in the years ahead)
  • Period for which the tax return is being filed (Drop-down selection of Month and Year)
  • Details of taxable sales (CGST, SGST and IGST as applicable). Details of exempted sales also to be mentioned.
  • Details of sales made to end customer, where the value exceeds INR 2.5 lakhs (Optional, if not mentioned)
  • Total of all sales made to end customer, where value does not exceed INR 2.5 lakhs
  • Details of Debit note or Credit note
  • Amendments to sales of previous periods (Any changes made to a GST invoice)
  • Exempted, nil-rated, and non-GST sales, if not mentioned in any of the sections earlier
  • Details of Export Sales – Sales amount, HSN codes of goods
  • Tax liability arising out of advance receipts
  • Tax Paid during the reporting period

GSTR-2

Once the seller has filed the details of the sale and the recipient in GSTR-1, these are auto-populated and communicated to the recipient in GSTR-2A. If the buyer agrees to the transaction details, these details are frozen, and GSTR-2 is prepared.

However, if the recipient disagrees, then these disagreements can be filed by the buyer, and they will be communicated to the seller in the form of GSTR-1A. The seller will now have the option to modify details in GSTR-1 as per the request of the buyer or keep it unchanged.

Majority of the details filled in the GSTR-2 form would be auto-populated from the user data and mostly from the corresponding GSTR-1 filed by the seller. Major other exceptions that may need to

be entered include,

  • Details of imported goods/services availed, and corresponding taxes paid.
  • Changes made – inclusive of changes made during previous periods.
  • Details of materials received from unregistered people during the tax month.
  • Details of input tax credit received from an Input Service Distributor (Transaction between head office and branches) (GSTR-5).
  • Details of credits arising from tax deducted at source (GSTR-7).
  • Details of credits arising from tax credited at source (GSTR-8).
  • Details of input tax credit which is received against an invoice.
  • Details of output tax liability arising due to reverse charge, even though no invoice was received.

GSTR-3

This would be consolidated monthly tax statement and will contain details of tax liability along with tax collected on sales and tax paid on inward supplies. This statement would be auto-populated through GSTR-1 and GSTR-2 of the registered entity. It would involve minimal manual intervention, with the system being able to update records in real time.

COMMON MISTAKES WHILE FILING GST

Common mistakes while filing GSTR-1 include errors occurring majorly out of lack of attention. Treating an intra-state transaction as inter-state, incorrect HSN codes, charging incorrect rates tax, repetition of a tax invoice, etc.

Similarly, GSTR-2 will be prone to similar errors, but mainly errors of mismatch, and the GSTR-1A and GSTR-2A form, help communicate the mismatch and help the parties reconcile their mistakes.

GSTR-3 is mostly an auto-populated monthly state and hence less prone to mistakes as such. Any and every mistake can be found and corrected mostly by confirmation of GSTR-1 and GSTR-2.

GST TAX SLABS FOR COMMON-USE GOODS & SERVICES

GST Tax Slabs

Besides the above, certain items in the category of 28% tax slab under GST, are classified as luxury products, including but not limited to cigarettes, alcohol, luxury cars, SUVs, etc. These products will attract additional cesses and ad-valorem duties accordingly, on a case by case basis.

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