Tag GST

Anti-profiteering is, essentially, about fairness. If a company experiences tax savings, the customers should likewise experience savings.

There are two clear instances where this applies:

1. Reduction in Tax Rates – When GST is reduced on a good or service, the price should be reduced accordingly.

Example: If the GST charged on shampoos is reduced from 28% to 18%, the manufacturer needs to reduce the MRP.

2. Benefit of Input Tax Credit (ITC) – Under GST, more items qualify for ITC than before, and businesses should lower costs, which should be passed on to customers through lower prices.

Example: A real estate builder saving on input costs related to construction should pass on those savings to the buyers.

If companies do not do this, it is deemed “profiteering”.

How NAA Worked and Its Role

To ensure compliance, the National Anti-Profiteering Authority (NAA) was established with wide powers. The process typically involved:

1. Complaint Filing – Consumers or stakeholders could approach the State Screening Committees or Standing Committee with evidence.
2. Investigation – The Director General of Anti-Profiteering (DGAP) examined invoices, pricing, ITC records, and profit margins.
3. Rulings by NAA – If profiteering was established, the authority could:
4. Order reduction in prices.
5. Refund overcharged amounts with 18% interest.
6. Direct deposit into the Consumer Welfare Fund if consumer identification was not possible.
7. Impose penalties or even cancel GST registration in extreme cases.

This structure made NAA one of the most powerful enforcement mechanisms under GST.

Key NAA Rulings That Shaped Compliance

Over the years, several rulings clarified how anti-profiteering provisions would be applied:

• FMCG Sector: Hindustan Unilever was asked to deposit over Rs. 230 crores in the Consumer Welfare Fund after investigations revealed that benefits of GST rate cuts weren’t fully passed to consumers.
• Real Estate: Builders were pulled up for failing to reduce property prices despite availing ITC benefits. NAA directed them to adjust base prices for homebuyers.
• Restaurants: After GST on restaurant services was reduced from 18% to 5% (without ITC), many eateries did not reduce menu prices. NAA ordered them to refund or deposit excess collections.
• E-commerce and Services: App-based cab services and online platforms faced scrutiny when GST rate cuts were not reflected in customer pricing.

These cases sent a clear signal: profiteering would not be tolerated, and businesses had to be meticulous in implementing tax benefits.

Impact on Businesses

While the law’s intent was consumer welfare, businesses faced both challenges and lessons.

• Compliance Burden: Calculating “commensurate” price reduction was not always simple. Different cost structures, product mixes, and pricing models made it complex.
• Fear of Litigation: Even genuine business decisions were sometimes questioned. Investigations were lengthy and reputationally damaging.
• Constant Price Adjustments: Companies had to frequently revise MRPs and system configurations with every GST rate change.
• Deterrence Effect: On the positive side, businesses became more transparent in pricing and cautious about unjustified markups.

From 1st October 2024, all cases shifted to the GST Appellate Tribunal (GSTAT), and with the sunset clause effective 1st April 2025, no new complaints will be accepted. This marks the end of a regulatory-heavy phase and a transition to market-driven pricing.

Conclusion

Anti-profiteering under GST was a unique experiment in consumer protection. By enforcing Section 171 of the CGST Act and related rules, the NAA made sure that businesses couldn’t pocket tax benefits meant for customers.

Yes, it added compliance pressure and at times created friction between regulators and businesses. But it also built a culture of accountability, forcing companies to think twice before ignoring consumer interests.

With the sunset clause in force, the chapter of strict anti-profiteering oversight is closing. Yet, its legacy will shape pricing strategies, business ethics, and consumer expectations in the GST regime for years to come.

The Goods and Services Tax (GST) has streamlined India’s indirect tax structure, making it easier for businesses to operate across states. One key aspect of GST compliance is claiming refunds when the tax paid exceeds the liability.

Timely and accurate refund claims help businesses maintain liquidity and ensure smooth cash flow. To make the process easier, the government has laid down a systematic approach for claiming GST refunds.

Read the article here to know about ALL ABOUT GST REFUND

All about GST REFUND

Step 1: Determine the Refund Type and Eligibility

Before initiating the refund process, you must first identify the reason for claiming a refund. Common situations include:

• Excess tax paid due to clerical errors.
• Export of goods or services under Letter of Undertaking (LUT) or payment of Integrated GST (IGST).
• Accumulated Input Tax Credit (ITC) due to inverted duty structure.
• Tax paid on deemed exports or supplies to SEZ units.

Each refund category requires specific documents and conditions. Ensure you fall under an eligible category as per GST law.

Step 2: File Refund Application on GST Portal

Refund claims must be filed online using Form GST RFD-01, available on the GST portal. Here’s what you need to do:

• Log in to the GST portal with your credentials.
• Navigate to Services → Refunds → Application for Refund.
• Select the relevant refund type from the drop-down list.

Filing must be done within two years from the relevant date as prescribed under GST rules. Missing this deadline can lead to the rejection of the claim.

Step 3: Upload Required Documents

Each refund category requires supporting documents. For example:

• Export refunds need shipping bills and bank realization certificates.
• Inverted duty refunds require details of inward and outward supplies.

You must also upload a declaration that the incidence of tax has not been passed on to another person (to avoid unjust enrichment). For claims above ₹2 lakh, a CA/cost accountant certificate may be required.

Step 4: Submit the Application and ARN Generation

Once all details and documents are provided, submit the application online. After submission, the system generates an Acknowledgement Reference Number (ARN). This ARN is essential for tracking the status of your refund claim.

Step 5: Verification by Tax Officer

The refund application is processed by the jurisdictional tax officer, who verifies the details and documents. The officer may seek additional information or clarification via a notice in Form GST RFD-03. You must respond promptly in Form GST RFD-04 to avoid delays.

Step 6: Provisional Refund (for Certain Cases)

For refund claims related to zero-rated supplies (exports or supplies to SEZ), the law allows for a 90% provisional refund to be issued within seven days of acknowledgement, subject to verification of documents. This ensures exporters maintain liquidity.

Step 7: Final Refund Order and Payment

After thorough verification, the tax officer issues a final refund order in Form GST RFD-06. The sanctioned amount is credited to your bank account registered on the GST portal.

If any amount is withheld, the officer provides reasons for the same. In case of rejection, the order will detail the grounds, and you may appeal against it.

Step 8: Track Refund Status

You can track the status of your refund using the ARN on the GST portal under the “Track Application Status” option. Timely monitoring ensures you respond to any additional queries without delay.

Tips for Quicker Refund Processing

• Ensure all invoices and returns (GSTR-1, GSTR-3B) are filed accurately.
• Maintain proper documentation and reconcile ITC regularly.
• Avoid errors in bank details to prevent payment failures.

Conclusion

Claiming a GST refund can seem complex, but following the prescribed steps and ensuring compliance with documentation requirements makes the process hassle-free. Businesses should also maintain proper records and file claims within the stipulated time frame to avoid rejection. A smooth refund process not only improves cash flow but also enhances trust in the GST system.

The Goods and Services Tax (GST) framework in India provides a mechanism for taxpayers to claim refunds under specific circumstances. Refund eligibility is a crucial aspect of GST compliance, as it ensures that businesses do not suffer financial hardship due to excess tax payments. Understanding the eligibility conditions for claiming a GST refund is essential for every registered taxpayer.

WHAT IS A TAX REFUND?

A GST refund refers to the process through which the excess amount of tax paid by a taxpayer is returned by the government. This can occur due to multiple reasons, such as excess tax payment, zero-rated supplies, or inverted duty structure. The GST law aims to make this process transparent and time-bound, thereby maintaining the cash flow of businesses.

ELIGIBILITY CRITERIA FOR GST REFUND

Under the GST Act, the following categories of taxpayers and transactions are eligible to claim a refund:

1. Excess Tax Paid

If a taxpayer has mistakenly paid more tax than the actual liability, they are entitled to claim a refund. This situation often arises due to errors while filing GST returns or incorrect tax calculation.

2. Exports and Zero-Rated Supplies

Supplies that are zero-rated, such as exports of goods and services or supplies to Special Economic Zones (SEZs), qualify for a refund. Exporters can claim a refund of the Integrated GST (IGST) paid on exports or the unutilized Input Tax Credit (ITC) when exports are made under a Letter of Undertaking (LUT) without payment of IGST.

3. Inverted Duty Structure

An inverted duty structure occurs when the tax rate on inputs is higher than the tax rate on output supplies. In such cases, businesses accumulate excess ITC that cannot be utilized and are eligible to claim a refund of this unutilized credit.

4. Tax Paid on Supplies Not Provided

If tax has been paid on goods or services that were not supplied, or where the agreement was cancelled and a credit note has been issued, the taxpayer is eligible to claim a refund of the tax amount.

5. International Tourists

Foreign tourists visiting India are eligible to claim a refund of GST paid on goods purchased during their stay in the country, subject to prescribed conditions.

6. Deemed Exports

Supplies notified as deemed exports under GST, such as supplies made to Export Oriented Units (EOUs), are eligible for refunds. Either the supplier or the recipient can apply for a refund, based on the agreed terms.

7. Tax Paid under Wrong Head

If tax is paid under the wrong head (e.g., IGST instead of CGST/SGST or vice versa), the taxpayer can claim a refund of the amount paid incorrectly.

8. Refund for Advance Tax Deposits

In certain cases, businesses may deposit advance tax but do not go ahead with the planned supply. In such situations, the tax deposited can be claimed back through a refund application.

CONDITIONS TO KEEP IN MIND

While the above categories qualify for a GST refund, certain conditions must be fulfilled:

• The taxpayer must be registered under GST.
• The claim should be filed within two years from the relevant date as per GST law.
• Proper documentation, such as tax invoices, shipping bills, and proof of payment, is mandatory.
• The refund amount should not include any unjust enrichment, i.e., the tax burden should not have been passed on to the consumer.

CONCLUSION

GST refund eligibility is designed to reduce the financial burden on businesses and promote ease of doing business in India. By understanding the categories and conditions for refund eligibility, taxpayers can ensure timely claims and maintain healthy cash flow. However, it is equally important to maintain accurate records and comply with timelines to avoid rejection of refund claims.

Under the Goods and Services Tax (GST), e-invoicing is a major reform intended to automate and standardize how companies generate and report invoices. Implemented in stages from October 2020, this innovation guarantees real-time GST Network (GSTN) invoice authentication, enhancing compliance and transparency while lowering tax evasion.

WHAT IS E‑INVOICING UNDER GST?

Through a specific Invoice Registration Portal (IRP), the GSTN electronically authenticates business-to-business (B2B) invoices and some other documents. This process is known as e-invoicing, or electronic invoicing.

E-invoicing is not the same as creating invoices directly on the GST system, despite what many people think. Rather, companies use their own accounting or ERP software to create invoices, which are subsequently uploaded to the IRP for verification. A unique Invoice Reference Number (IRN) and QR code are issued by the IRP, and the information is automatically shared with the e-way bill system and the GST portal (for GSTR-1 filing).

APPLICABILITY OF E‑INVOICING

E‑invoicing applies to GST‑registered businesses that exceed specific turnover limits. The applicability has been extended gradually through multiple phases:

Phase	Turnover Threshold (AATO)	Effective Date
I	Above ₹500 crore	1 October 2020
II	Above ₹100 crore	1 January 2021
III	Above ₹50 crore	1 April 2021
IV	Above ₹20 crore	1 April 2022
V	Above ₹10 crore	1 October 2022
VI	Above ₹5 crore	1 August 2023

Note:

At the Indian level, the total turnover is determined by adding up all of the GSTINs under the same PAN.

Any business that crosses the threshold in any of the 2017–18 financial years will be subject to e-invoicing as of the beginning of the subsequent financial year.

Right now, all B2B transactions involving companies with yearly revenue over ₹5 crore must be done electronically.

EXEMPTIONS FOR E‑INVOICING

Some firms, irrespective of turnover, are exempt. These consist of:

• Banking companies, insurers, and NBFCs

• Goods Transport Agencies (GTA)

• Suppliers of passenger transport services

• Multiplex operators exhibiting cinematographic films

• Government departments and local authorities

• SEZ units (but not SEZ developers)

LATEST UPDATES ON E‑INVOICING (2025)

Rules related to e-invoicing are constantly changing. Among the most recent updates are

30 Day Upload Rule: Businesses with an AATO of ₹10 crore or more are required to upload invoices to the IRP within 30 days of the invoice being issued as of April 1, 2025. Invoices will become noncompliant due to delays.

Invoice numbers that are not case-sensitive: Invoice numbers are treated as case-insensitive by the IRP, which automatically converts them to uppercase prior to IRN formation, as of June 1, 2025.

Two-Factor Authentication (2FA): Businesses with a revenue of more than ₹20 crore have to adopt 2FA in order to access NIC services as of January 1, 2025. It applies to companies having a turnover of ₹5–20 crore as of February 1, 2025, and it becomes mandatory for all taxpayers on April 1, 2025.

Other Changes:

With effect from January 1, 2025, the e-way bill generation period is limited to 180 days from the invoice date.

E-way bills have a 360-day maximum validity extension.

BENEFITS OF E‑INVOICING

E-invoicing has several benefits for both tax authorities and businesses.

Standardization: Reporting is made easier and errors minimized with a consistent format.

Smooth Data Flow: GSTR-1 and e-way bill auto-population saves time and avoids inconsistencies.

Faster Input Tax Credit (ITC): Real-time invoice delivery to buyers facilitates faster ITC applications.

Reduced Tax Evasion: The possibility of fraudulent invoicing is decreased by real-time authentication.

Improved Financial Management: Automated billing raises company reputation and compliance.

CONCLUSION

One of the most important steps to digital tax compliance is e-invoicing under GST. In addition to being required by law, it offers companies the chance to increase accuracy, speed up processes, and gain the trust of customers and tax authorities. Companies need to remain active in order to avoid penalties in regard to the new updates, particularly the April 2025 30-day reporting rule.

Businesses will be able to maintain seamless operations and improve their tax governance in the changing GST framework by making sure that e-invoicing laws are followed on time.

One aspect of managing a small or medium-sized business in India involves dealing with taxes. Furthermore, a single missed deadline or thoughtless error could cost you more than you expected when it comes to GST (Goods and Services Tax). In addition to being irritating, late filing penalties can reduce your profits and perhaps prevent you from receiving your input tax credit.

The good news? In reality, avoiding GST fines is rather simple. You can prevent needless spending and stay within the law with a little preparation, a few habits, and knowledge of the rules.

1. Know the GST schemes available for small businesses

GST Law provides various benefits to small businesses such as exemption from registration within limit, special concession rates for composition dealers, QRMP Scheme, etc.

Small businesses can avail such schemes only when they know about such schemes. Many times, business turnover limit exceed the basic exemption from registration, but the small business owners avoid the registration initially due to negligence, no knowledge about limit, etc.

It results into the heavy penalty and interest demand at one go, which is quite disturbing to the small businesses. Ask the expert to avail such benefits.

2. Know the Penalties You May Face

You have to first understand what penalties are involved to avoid them. There are two typical penalties under the GST law:

• When returns are filed after the deadline, there is a per-day late fee.
• The other is interest; you will be assessed 18% annual interest if you fail to pay your taxes on time.

If you file your GSTR-3B ten days after the due date, you may be fined a late fee of ₹500 (50 per day) for a standard return. It is ₹200 (₹20 each day) if it is a NIL return. You will also have to pay interest if you owe taxes.

For instance, you pay ₹500 as a late fee and around ₹1,000 in interest if you miss a ₹1 lakh tax payment by ten days.

3. Avoid Ignoring NIL Returns

You must still file a NIL return even if your business has no sales or purchases during the month. Many entrepreneurs believe there is no need, yet it is an expensive error. Skipping a NIL return carries a penalty of ₹20 per day. That quickly builds up over time.

4. File early and keep due dates at touch

What is the main cause of penalties for the majority of businesses? Holding off until the very last moment. Due to high traffic, the GST portal frequently lags or even fails close to deadlines. You can avoid technical issues and the anxiety of delays by filing merely two or three days early.

Put the dates of the GST payable in your calendar:

GSTR-1: For sales reporting

GSTR-3B: For payment and tax summary

GSTR-9: Annual Report

GSTR-4: If the composition scheme applies to you

5. Before filing GSTR-3B, use GSTR-1A to fix any errors

GSTR-3B will be automatically filled by using GSTR-1 as of July 2025. Direct editing of GSTR-3B will no longer be possible. Therefore, before reporting GSTR-3B, correct any errors in your sales data using the updated GSTR-1A.

Important: every time you are only allowed to make one change. Therefore, review your entries one more time before submitting them.

6. Monthly Invoice Balancing

A minor discrepancy between your invoices could eventually cause a major issue. Your ITC may be disallowed if your purchase information differs from the filings made by suppliers.

Every month, set aside enough time to:

• Compare purchase and sales records.
• Check GSTINs and invoice numbers.
• Verify the quantities and tax rates.

You can avoid mistakes during audits or annual returns by keeping everything organised month after month.

7. Don’t Depend on Your Accountant Excessively.

It’s great if you’ve involved a certified public accountant or a GST expert to submit your returns, but don’t check out entirely. Eventually your filings are your responsibility.

What you can do:

• Request summaries of the returns.
• A copy of the filing acknowledgement should be kept.
• Consult your consultant to confirm deadlines.

8. Automation, if possible

These days, there are numerous helpful GST filing ideas available:

• Set alerts for deadlines.
• Track return status
• Auto-reconcile invoices.
• Calculate late fees and interest if you’re delayed.

Automation takes the pressure off and reduces chances of manual mistakes.

9. Organise your digital records

Make folders for every month, either on your computer or in the cloud. Keep track of your invoices for purchases, sales, ITCs, and payments. Everything will be simple to reach when it’s time to file, and your work will be quicker and free of errors.

The Goods and Services Tax (GST) Composition scheme is a simpler tax structure for small businesses in India. The GST aims to reduce compliance burdens for small businesses. An eligible business can pay tax at a fixed, lower rate and have fewer returns than GST in the normal tax bracket.

If you own a small business, learning about the GST Composition Scheme can save paper and time and ease compliance.

What is the GST composition scheme?

The GST Composition Scheme is for small businesses that qualify based on their turnover to save them from complicated GST requirements, such as monthly returns, thorough records, and tax collection in respect of every sale.

Businesses are paying tax at a fixed percentage of the turnover; however, they cannot claim input tax credit (ITC) on purchases. The GST Composition Scheme would be dealt with in Section 10 of the CGST Act, 2017.

Who can access the composition scheme?

The scheme is for:

• Manufacturers and traders of goods
• Restaurants that do not serve alcohol.
• Service providers subject to certain conditions

Turnover limits (as of July 2025):

• Manufacturers, traders, and restaurants with a turnover of up to ₹1.5 crore (₹75 lakh for some northeastern and hill states).
• Service providers or mixed suppliers who have a turnover of up to ₹50 lakh.

If you have turnover in excess of the limits, you will not be allowed to opt into the scheme.

Who is not eligible for the scheme?

The following categories are excluded:

• Businesses supplying goods through e-commerce platforms such as Amazon or Flipkart
• Interstate suppliers, except eligible service providers
• Businesses dealing in non-taxable or exempt goods
• Casual taxable persons and non-resident taxpayers
• Manufacturers of ice cream, pan masala, tobacco, and related products

Tax rates under the composition scheme (FY 2025-26)

Type of Business	Tax Rate (FY 2025-26)
Manufacturers (other than restricted items)	1% of turnover (0.5% CGST + 0.5% SGST)
Traders and other suppliers of goods	1% of turnover (0.5% CGST + 0.5% SGST)
Restaurants not serving liquor	5% of turnover (2.5% CGST + 2.5% SGST)
Service providers (specified)	6% of turnover (3% CGST + 3% SGST)

Note: No input tax credits can be claimed under this scheme.

Benefits of the GST composition scheme

• Lower tax rates than the full GST rates allow for an easier tax burden for small businesses.
• Less compliance, as a small business entity only has to file quarterly instead of monthly.
• Less recordkeeping for a small business owner and fewer invoices a small business owner has to issue
• Improved cash flow, as a business does not have to separately collect tax from their customers.
• A small business owner can spend more time running their business rather than getting an understanding of complicated tax rules.

Process to register under the GST composition scheme

• New Businesses

New businesses can apply for the Composition Scheme during their initial GST registration on the GST Portal.

• Existing GST-Registered Businesses

Existing businesses can apply for the scheme by submitting Form GST CMP-02 on the GST Portal before the start of the financial year.

Step-wise process:

Step 1: Visit the website www.gst.gov.in

Step 2: Log in and authenticate your order with the GST credentials.

Step 3: Navigate to ‘Services’ → ‘Registration’ → ‘Application to Opt for Composition Scheme’

Step 4: Submit Form CMP-02 with the required details.

Step 5: Complete Form ITC-03 to reverse the input tax on your existing stock of goods.

Compliance requirements under the scheme

You have to do the following under the scheme:

• File your quarterly returns with GSTR-4.
• File your annual return with GSTR-9A.
• Pay tax in quarterly installments with the return.
• Raise a bill of supply (not a tax invoice, as you cannot charge GST separately from clients).
• Indicate “Composition Taxpayer” on your business premises and invoices (optional).

Conclusion

The GST Composition Scheme provides a reasonable, easy-to-follow tax option for India’s small businesses. It provides lower tax rates, reduced compliance requirements, and simplified processes so that businesses can focus on growth.

Disclaimer

This article is for idea and understanding regarding the GST Composition Scheme. In order to get full insights about the said scheme and to know the applicability on your business, connect with us through +919267970588 or taxacumen.consultancy@gmail.com

Goods and Services Tax (GST) is a form of indirect tax levied on the supply of goods and services in India. This multi-stage tax is at every stage of the supply chain, with the advantage of Input Tax Credit (ITC) at every stage. The current structure is transparent and uniform in taxation across states and avoids the cascading effect of taxes.

The central aim of GST is to support the concept of “One Nation, One Tax” through simplification and streamlining of India’s indirect taxation system.

Central Goods and Services Tax (CGST)

Central Goods and Services Tax (CGST) is imposed by the central government through the CGST Act, 2017. It is payable on all intrastate supplies of goods and services—i.e., where both the supplier and recipient are within the same state or union territory.

CGST is levied with SGST or UTGST on the very same taxable supply. The overall GST rate is divided evenly between the State and the Centre. For instance, if a commodity is taxed at 18%, then 9% is CGST and 9% is SGST. The CGST amount goes into the account of the central government and is utilised for national-level spending such as infrastructure, defence, and centrally sponsored schemes.

The central government allows input tax credits of CGST on acquisitions, which can be utilised to offset CGST or IGST liability but not SGST.

State Goods and Services Tax (SGST)

State Goods and Services Tax (SGST) is charged by the state governments under their respective SGST Acts, which have been enacted in line with the central GST structure. SGST is also charged in intra-state transactions and is levied by the state on which consumption takes place.

The state government involved receives the revenue from SGST. Similar to CGST, the SGST share of a transaction typically accounts for 50% of the overall GST. These revenues are utilised to fund state-level development like education, healthcare, infrastructure, and welfare schemes.

SGST paid as input tax can be utilised to set off SGST or IGST (in certain situations), but not CGST, which assists in keeping the revenues of states and the centre free from mutual dependence.

Illustration: A restaurant business in West Bengal offers services amounting to ₹10,000. If GST is 18%, ₹900 is CGST and ₹900 is SGST.

Union Territory Goods and Services Tax (UTGST)

Union Territory Goods and Services Tax (UTGST) is charged on intra-state supplies made within Union Territories (UTs) that lack legislatures. It is administered under the UTGST Act, 2017, and is payable in the following UTs:

• Andaman and Nicobar Islands
• Lakshadweep
• Chandigarh
• Dadra and Nagar Haveli and Daman and Diu
• Ladakh

In such regions, UTGST substitutes for SGST and is charged together with CGST. Both might be collected by the central government, but UTGST is separately credited to an account from CGST.

Similar to what occurs in SGST, the total GST is divided equally—e.g., CGST 9% and UTGST 9% for an 18% GST rate.

Note: UTs having their own legislature, i.e., Delhi, Jammu & Kashmir, and Puducherry, are not covered under UTGST. In such cases, SGST is charged in lieu.

Integrated Goods and Services Tax (IGST)

Integrated Goods and Services Tax (IGST) is charged by the Central Government under the IGST Act, 2017, and is levied on:

• Inter-state transactions (from one state or UT to another state or UT)
• Import of goods or services into India
• Export of Indian goods or services
• Supply to or by Special Economic Zones (SEZs)

IGST replaces the previous Central Sales Tax (CST) and follows a destination-based taxation system. That is, tax is levied and paid in the state where the goods or services are consumed, rather than where they are manufactured.

In interstate transactions, the seller levies IGST, which is paid to the central government. The Centre then remits the due share to the destination state where the services or goods are ultimately consumed.

Illustration:

A supplier in Maharashtra supplies goods to a customer in Haryana for ₹1,00,000 at 18% GST. The supplier collects ₹18,000 as IGST and remits the same to the Centre. The Centre subsequently adjusts Haryana’s share accordingly.

Yet another advantage of IGST is the cross-utilisation of the credit of input tax. IGST credit may be utilised to discharge IGST, CGST, or SGST, hence being extremely flexible and important for the free flow of credit and to avoid tax cascading.

An indirect tax is one that is levied on the consumption of goods and services. It is not applied immediately to a person’s earnings. Instead, the seller must pay the tax in addition to the price of the goods or services they bought. An indirect tax is collected and paid to the government by an individual in the supply chain, such as a manufacturer or retailer.

However, when a customer buys a good or service, the producer or retailer incorporates the tax in the price. The buyer ultimately pays the tax by increasing the product’s price.

The indirect tax structure in India can be better understood by looking at the following list of indirect taxes:

Goods and Services Tax (GST)

One of the most significant reforms in India’s tax structure, GST, or Goods and Services Tax, has replaced many older levies that once fell under different types of indirect taxes. Introduced on July 1, 2017, GST consolidated multiple state and central taxes into a single tax applied to the supply of goods and services across the country.

GST is structured to promote transparency and remove the cascading effect of tax-on-tax. It is applicable at every stage of the supply chain, right from the manufacturer to the end consumer. The tax you pay is divided among different authorities based on the nature of the transaction:

• Central Goods and Services Tax (CGST): Collected by the central government on intra-state sales (within the same state).
• State Goods and Services Tax (SGST): Collected by the state government on intra-state sales.
• Integrated Goods and Services Tax (IGST): Collected by the central government on inter-state transactions (between different states).
• Union Territory Goods and Services Tax (UTGST): Applied in Union Territories where SGST does not apply.

Different slabs of GST rates—0%, 5%, 12%, 18%, and 28%—are distinguished based on the goods or services being offered. The majority of consumer products and services are between 5% and 28%, apart from certain requirements.

GST has made it easier for businesses to comply with the tax system and guaranteed that you, as a consumer, pay a more efficient and transparent tax.

Customs Duty

According to the Customs Act of 1962, customs duty is a tax levied on the import and export of commodities. Basic customs duty, countervailing duty, and anti-dumping duty are some of its constituent parts. In addition of generating money, customs taxes also aid in controlling international trade and safeguarding local businesses.

Excise duty

Previously a significant indirect tax on Indian manufacturing, excise duty is now only applied to specific goods including alcohol, tobacco, and petroleum products. Other products are now subject to the GST system. The central government and state governments in these exempted categories still rely heavily on excise duty as a source of funding.

Value Added Tax (VAT) and Sales Tax

Value Added Tax (VAT) and Sales Tax were the two main state-level taxes on the sale of products prior to the introduction of the Goods and Services Tax (GST). VAT still applies to petroleum items and alcoholic drinks, which are exempt from the GST structure because of constitutional requirements, even though the GST has replaced them for the majority of goods.

Stamp Duty

State governments impose stamp duty, a tax, on a variety of legal documents, including agreements, sale transactions, and property transfers. Stamp duty is a separate fee on transactions involving immovable property and is not included in the GST. It is governed by the Indian Stamp Act, 1899, and the legislation of the respective states.

Entertainment Tax

Now mostly incorporated into GST, the entertainment tax was previously imposed by state governments on services including cable TV, amusement parks, and movie tickets. It may still be applied to certain entertainment services that are not included by the GST system, however, by certain states and local governments.

Taxation is an essential resource for governance and revenue collection, and it is a sovereign right. The Constitution of India establishes the basis for taxation and divides authority between the central government and state governments.

In India, taxes are imposed in accordance with laws passed by the state and central governments. Direct and indirect taxes are the two main categories of taxes, and several acts and constitutional clauses regulate how they are implemented.

Constitutional Framework

The power to levy taxes in India is derived from:

Article 265: “No tax shall be levied or collected except by the authority of law.”

Article 246: Distribution of legislative powers under three lists:

• Article 246(1): Union List
• Article 246(3):  State List
• Article 246(2): Concurrent List

Seventh Schedule: Subjects on which central, state, or both can levy taxes.

Classification of Taxes

Direct Tax: One cannot transfer direct taxes to another party; they are imposed directly on people or organisations. Examples are corporation tax and income tax. They are progressive, which means that those with higher incomes pay more, so advancing income equality.

Indirect Tax: Imposed on products and services and have the possibility to be transferred from producers to consumers. Customs duty, excise duty, and GST are a few examples. Regardless of income, all consumers pay the same rate, making these regressive in general.

Criteria	Direct Tax	Indirect Tax
Nature	Progressive	Regressive
Example	Income Tax, Corporate Tax	GST, Customs Duty
Burden	On the taxpayer	Passed on to the consumer
Administered by	CBDT	CBIC
Compliance	Complex and documentation-heavy	Easy to collect at point of sale

Cess and Surcharge

The terms “cess” and “surcharge” are frequently confused. Article 270 of the Constitution refers to a cess, which is a form of tax collected for a particular purpose, such as infrastructure or education. However, as stated in Article 271, a surcharge is an additional tax that is imposed on top of already-existing taxes, typically to generate money for certain purposes.

The Consolidated Fund of India, which the government uses for public spending, receives the sums from both cess and surcharge. In the M/s. SRD Nutrients Pvt. Ltd. vs. Commissioner of Central Excise, Guwahati [SC 2017] case, the Supreme Court made it clear that the higher education and education cess should be regarded as a surcharge.

Advantages and Disadvantages

Aspect	Direct Taxes	Indirect Taxes
Nature	Progressive: determined by wealth or income	Regressive – same rate for everyone
Progress	Promotes income equality	The burden falls more on lower-income consumers
Transparency	Clearly specified and documented	Hidden in prices, consumers are unaware
Tax Burden	Cannot be shifted to others	Shifted to end consumers
Administration	Complicated filing and compliance procedures	Easily gathered at the moment of sale
Stability of Revenue	Predictable government revenue	Varies according to patterns in consumption
Impact on Inflation	Can aid in reducing inflation	Tends to cause inflation and price increases
Risk of Compliance	Increased chances of tax evasion	Integrated collection reduces evasion
Impact on Economy	Could discourage investment	Promotes saving; can be modified to meet policy objectives

This Article is here for educational purpose only. The Author here explains the very basic concept of Tax System in India.

Any person falling under the laws of GST must need to get registered under the GST and have the GSTN. Click the link here to know, whether you are falling within limit GST registration threshold limit, https://taxacumen.in/?p=978 and to understand the benefits of the same https://taxacumen.in/?p=986

Here, we will not discuss again whether you are required to have GST or not, but to know step-by-step registration process to apply for the same.

Step 1

Go to the Website https://www.gst.gov.in/ and to register, go to the “Register” tab on the Right side in Top location. If you are here for the first time go to “New Registration” and if you already have TRN, Click to TRN.

Step 2

You will get to watch the screen as mentioned here, fill the details asked here to proceed when you dont have TRN already

Select whether you are  Taxpayer, Input Service Distributor(ISD), Tax Deductor, Tax Collector (Ecommerce Operators), Non Resident Taxable Person, GST Practitioner, or else.

Also, mention your legal name as per Permanent Account Number (PAN) only, Business Name can be differ.

Mention your email Address and Mobile number for OTP and all future correspondence with the GST Department. Make sure to provide active email and mobile number.

And after filling all the details and information here, Click on Proceed to reach the next page.

Step 3

You will receive a page to enter a valid OTP, here Email and Mobile OTP will be the same. You can check and mention any of them to proceed.

Step 4

Once the OTP you entered above verified and approved, you will get this Screen, where TRN (Temporary Reference Number) will be mentioned for you. 

Save the TRN and write it down to your notepad for future correspondence. You will also get the said TRN through the text in messages and in your email mentioned in the application.

Step 5

Now, you have TRN with you to proceed for GST Registration. You must know that TRN will be available for 15 days to complete the process with the same TRN. Otherwise, a new TRN will be required.

Now you will login the Portal with your Received TRN and OTP to be received through your email and mobile both. After entering the OTP, you will be reached at a page where your Draft application is being shown.

Step 6

Here, you must complete this draft application within 15 days from generating the TRN. Till the date you didn’t get a GST Number from the GST Department, you can login with TRN for your registration.

Step 7

Here, you must provide Trade Name of business, Address details and proof of premise where the business is being operated, Personal details of Proprietor/Partners/Directors, Documentary proof of any additional premise for business to be attached, and all the details asked in the draft form must be provided. 

Here in the image, this is only first page of the draft form. The Applicant must complete the entire draft application, then Profile completion % mentioned in the right side of the image will be shown as 100%

Step 8

Aadhaar Authentication process

After the completion of the draft form, verification process is being done according to rules and provisions. There is an option to do Aadhaar Authentication with biometric verification of the primary authorized person. Where the mobile number of the primary responsible person used for registration is the same number with which Aadhaar has been linked, it is possible to authenticate the Aadhaar online with OTP. It cuts the time process of approval from the department within 7 days. 

Also, where a person opts to not to authenticate Aadhaar as described here before, he/she  can upload an Aadhaar copy to complete the KYC process. In such case, the GST Officer must verify the principal place of business physically and the time limit to approve the GST Registration Application is within 30 days.

It is advisable and beneficial to do Aadhaar authentication with biometric verification for GST Registration.

Step 9 

Approval of GST Application

Once the department is satisfied with all the details mentioned here and documents attached, the application will be approved. The applicant will receive an automatically sent mail having the login credentials in it.

Login path for First time users must be used, Here, Create the User Id ( not changeable) and change the system password given by the department through the mail.

Step 10 

Bank Account Update

Generally people thinks GSTN is received and work is done. But, this is untrue. The registered taxpayer must add their bank details with a cancel cheque or bank passbook first page mandatorily within 45 days from the date of registration granted.

In case of non compliance, the department can cancel the GST Registration after the deadline passed.

About Author – Deepa Kaintura

I am a lawyer by profession. I am a legal consultant in TaxAcumen providing services to corporates about GST, Income Tax, ROC Compliances, etc. My love for finance and law encouraged me to write and share the knowledge with the readers here. For any query, reach us at 

WhatsApp : +91-9267970588 Email I’d:taxacumen.consultancy@gmail.com