Before the introduction of GST or goods and services tax, India had multiple taxes such as excise duty, Value Added Tax, Service Tax, Sales Tax, and Customs Duty. While excise duty was imposed by the Center for goods produced within the country, customs duty was levied on imported goods by the Central government.
Service Tax was imposed on all services before GST and Sales Tax applied to inter-state trade as well as imports and exports. Value Added Tax was a multi-stage tax which was levied at every stage of the value chain.
When GST came into effect, all the previous indirect taxes were replaced. The suppliers in the goods and services value chain can now claim an input tax credit (ITC) at every stage.
5 Reasons Why Goods and Services Tax was Required
The top 5 reasons why goods and service tax was required in India are:
With the elimination of the cascading effect on taxes or tax on tax, the cost of the final product will be lower. This will ensure that the products are more competitive in terms of price, leading to greater demand for products from India.
Lower Logistical Costs
With one nation-one tax with GST, the flow of goods and services will take place smoothly. The time spent by transporters due to negotiations at check posts or toll plazas will come down. Before the GST, there were 11 categories of tax that the transport sector had to bear.
Ease of Doing Business
Before GST, a company had to deal with multiple indirect taxes like VAT, Excise Duty, and Service Tax. This made compliance a complicated issue. With GST, there is a single tax, and this has made doing business easier in India.
Higher Revenues for Government
Input tax credit works as an incentive for dealers who are part of the organized sector, and they will be able to set off the input credit against the taxes payable by them. With improved compliance, there will be a higher collection of GST, leading to higher revenues for the government.
Lower Administrative Cost
With more than one indirect tax before GST, there were different departments for each such tax. This led to higher administrative costs for both the Central and State governments. With a single indirect tax like GST, the administrative costs are much lower for the government.
Verification of GST
To verify the authenticity of your vendor or customer, you just need to search gst number. This is known as the GSTIN or GST Identification Number. If you register under GST, you will be allotted a unique 15-digit identification number that is linked to your PAN.
If you have a business in more than one state or union territory, then you will have a GSTIN for each such state or union territory. You will need to register for GST when you cross the threshold limit of Rs. 40 lacs in terms of turnover. However, you need to register just once for GST.
The first 2 digits of GSTIN refer to the state code, the next 10 relates to the PAN, followed by entity number, alphabet Z and last number would be an alpha or a digit.
To search for the GST, you need to go to the GST site. You need to click on Search Taxpayers followed by ‘Search by GSTIN/UIN.’
If you can check the GSTIN, you can determine Fake GSTIN as well as bogus inward invoices. The supplier can collect both CGST and SGST but not pay the government.
You can register a complaint against fake GSTIN to the government through the website.
Role of GST Network
Starting from registering your business for goods and service tax and then filing your returns annually, the entire process is supported by a very efficient and powerful network – the Goods and Services Tax Network.
This network ensures that the general public, taxpayers, State and Central governments face no hurdles with GST by assisting with implementation and providing the IT infrastructure.
The primary functions of the GSTN are facilitating registrations, computing and settling IGST, filing tax returns and submitting the same to the Central and State governments, to integrate banking network with details of tax paid, and submitting MIS reports to the government.
Power Your Business With GST
When you register with GST, you benefit from lower taxes with the ITC. It’s a one-time registration and a lifetime of benefits. Register for GST today for a better future.