Unit-4

An Overview of Indirect Taxes and GST

An Overview of Indirect Taxes in India

Tax is a mandatory fee imposed upon individuals or corporations by the Central and the
State Government to help build the economy of a country by meeting various public
expenses. Taxes are broadly divided into two categories- Direct and Indirect taxes.

1. What is Direct Tax?

It is a tax levied directly on a taxpayer who pays it to the Government and cannot pass it
on to someone else.

2. What are the direct taxes imposed in India?

Some of the important direct taxes imposed in India are mentioned below:

 Income Tax- It is imposed on an individual who falls under the different tax
brackets based on their earning or revenue and they have to file an income tax
return every year after which they will either need to pay the tax or be eligible for
a tax refund.

 Estate Tax– Also known as Inheritance tax, it is raised on an estate or the total
value of money and property that an individual has left behind after their death.

 Wealth Tax– Wealth tax is imposed on the value of the property that a person
possesses.

However, both Estate and Wealth taxes are now abolished.

3. What are the advantages of direct taxes?

Direct taxes do have a certain advantage for a country‟s social and economic growth.
To name a few,
  It curbs inflation: The Government often increases the tax rate when there is a
monetary inflation which in turn reduces the demand for goods and services and
as a result of descending demand, the inflation is bound to condense.

 Social and economic balance: Based on every individual‟s earnings and overall
economic situation, the Government has well-defined tax slabs and exemptions
in place so that the income inequalities can be balanced out.

What is the most common disadvantage of direct taxes?

Direct taxes come with a handful of disadvantages. But, the very time-consuming
procedures of filing tax returns is a taxing task itself.

5. What is Indirect Tax?

It is a tax levied by the Government on goods and services and not on the income, profit
or revenue of an individual and it can be shifted from one taxpayer to another.
Earlier, an indirect tax meant paying more than the actual price of a product bought or a
service acquired. And there was a myriad of indirect taxes imposed on taxpayers.
Let‟s discuss a few indirect taxes that were earlier imposed in India:

 Customs Duty- It is an Import duty levied on goods coming from outside the
country, ultimately paid for by consumers and retailers in India.

 Central Excise Duty– This tax was payable by the manufacturers who would
then shift the tax burden to retailers and wholesalers.

 Service Tax– It was imposed on the gross or aggregate amount charged by the
service provider on the recipient.

 Sales Tax– This tax was paid by the retailer, who would then shifts the tax
burden to customers by charging sales tax on goods and service.

 Value Added Tax (VAT)– It was collected on the value of goods or services that
were added at each stage of their manufacture or distribution and then finally
passed on to the customer.

6. GST as Indirect Tax

With the implementation of GST, we have already witnessed a number of positive
changes in the fiscal domain of India. The various taxes that were mandatory earlier are
now obsolete, thanks to this new reformed indirect tax. Not just that, GST is making
sure the slogan “One Nation, One Tax, One Market” becomes the reality of our country
and not just a dream.
That said, with the dawning of the „Goods & Services Tax (GST), the biggest relief so
far is clearly the elimination of the „cascading effect of tax‟ or the „tax on tax‟ quandary.
Cascading effect of tax is a situation wherein the end-consumer of any goods or service
has to bear the burden of the tax to be paid on the previously calculated tax and as a
result would suffer an increased or inflated price.
Under the GST regime, however, the customer is exempted from the tax they would
otherwise pay as a result of the cascading effect.
Definition: Indirect tax is a type of tax where the incidence and impact of taxation does
not fall on the same entity.

Description: In the case of indirect tax, the burden of tax can be shifted by the taxpayer
to someone else. Indirect tax has the effect to raising the price of the products on which
they are imposed. Customs duty, central excise, service tax and value added tax are
examples of indirect tax.
 Difference between Direct Taxes and Indirect Taxes

Features of Indirect Taxes

The indirect taxes are the levies made by central and state government on the
expenditure, consumption, services, rights, and privileges yet not n the property or
income.

Features of indirect tax

 The service provider makes payment of indirect taxes and this is transferred to
a final consumer.
 Here service provider makes payments on indirect taxes which are transferred
to the final consumer.
 Indirect taxes used to have a regressive nature. now they become quite
progressive.
 Indirect tax is hard to evade due to direct implementation through goods and
services.
 Indirect taxes are large growth-oriented since they demotivate the consumer.
 Concept of GST and Its related procedures

1. What is GST?
GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods
and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came
into effect on 1st July 2017; Goods & Services Tax Law in India is
a comprehensive, multi-stage, destination-based tax that is levied on every value
addition.
In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of
goods and services. This law has replaced many indirect tax laws that previously
existed in India.
GST is one indirect tax for the entire country.
So, before Goods and Service Tax, the pattern of tax levy was as follows

Under the GST regime, the tax is levied at every point of sale. In the case of
intra-state sales, Central GST and State GST are charged. Inter-state sales are
chargeable to Integrated GST.
Now let us try to understand the definition of Goods and Service Tax – “GST is
a comprehensive, multi-stage, destination-based tax that is levied on every value
addition.”
Multi-stage

There are multiple change-of-hands an item goes through along its supply chain: from
manufacture to final sale to the consumer.
Let us consider the following case:

 Purchase of raw materials

 Production or manufacture
 Warehousing of finished goods
 Sale to wholesaler
 Sale of the product to the retailer
 Sale to the end consumer

 Sale to the end consumer

Goods and Services Tax is levied on each of these stages which makes it a multi-stage tax.

Value Addition
The manufacturer who makes biscuits buys flour, sugar and other material. The value of the
inputs increases when the sugar and flour are mixed and baked into biscuits.

The manufacturer then sells the biscuits to the warehousing agent who packs large
quantities of biscuits and labels it. That is another addition of value after which the
warehouse sells it to the retailer.
The retailer packages the biscuits in smaller quantities and invests in the marketing of
the biscuits thus increasing its value.
GST is levied on these value additions i.e. the monetary value added at each stage to
achieve the final sale to the end customer.

Destination-Based
Consider goods manufactured in Maharashtra and are sold to the final consumer in
Karnataka. Since Goods & Service Tax is levied at the point of consumption. So, the
entire tax revenue will go to Karnataka and not Maharashtra.

2. Journey of GST in India

The GST journey began in the year 2000 when a committee was set up to draft law. It took 17
years from then for the Law to evolve. In 2017 the GST Bill was passed in the Lok Sabha and
Rajya Sabha. On 1st July 2017 the GST Law came into force.

3. Advantages Of GST
GST has mainly removed the Cascading effect on the sale of goods and services. Removal of
cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on
tax, the cost of goods decreases. GST is also mainly technologically driven. All activities like
registration, return filing, application for refund and response to notice needs to be done online
on the GST Portal; this accelerates the processes.

4. What are the components of GST?

There are 3 taxes applicable under this system: CGST, SGST & IGST.

 CGST: Collected by the Central Government on an intra-state sale (Eg: transaction

happening within Maharashtra)
 SGST: Collected by the State Government on an intra-state sale (Eg: transaction
happening within Maharashtra)
 IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to
Tamil Nadu)

In most cases, the tax structure under the new regime will be as follows:

Transaction New Old Regime

Regime
Sale within CGST + VAT + Central Revenue will be shared equally between the
the State SGST Excise/Service tax Centre and the State

Sale to IGST Central Sales Tax + There will only be one type of tax (central) in case
another State Excise/Service Tax of inter-state sales. The Centre will then share the
IGST revenue based on the destination of goods.

Illustration:
 Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth
Rs. 50,000. The tax rate is 18% comprising of only IGST.

In such case, the dealer has to charge Rs. 9,000 as IGST. This revenue will go to the Central
Government.

 The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate
on the good is 12%. This rate comprises of CGST at 6% and SGST at 6%.

The dealer has to collect Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will go to the
Central Government and Rs. 3,000 will go to the Gujarat government as the sale is
within the state.

5. Tax Laws before GST

In the earlier indirect tax regime, there were many indirect taxes levied by both state and centre.
States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different
set of rules and regulations. Interstate sale of goods was taxed by the Centre. CST (Central
State Tax) was applicable in case of interstate sale of goods. Other than above there were
many indirect taxes like entertainment tax, octroi and local tax that was levied by state and
centre. This led to a lot of overlapping of taxes levied by both state and centre. For example,
when goods were manufactured and sold, excise duty was charged by the centre. Over and
above Excise Duty, VAT was also charged by the State. This lead to a tax on tax also known as
the cascading effect of taxes. The following is the list of indirect taxes in the pre-GST regime:

 Central Excise Duty

 Duties of Excise
 Additional Duties of Excise
 Additional Duties of Customs
 Special Additional Duty of Customs
 Cess
 State VAT
  Central Sales Tax
 Purchase Tax
 Luxury Tax
 Entertainment Tax
 Entry Tax
 Taxes on advertisements
 Taxes on lotteries, betting, and gambling

CGST, SGST, and IGST has replaced all the above taxes. However, the chargeability of CST
for Inter-state purchase at a concessional rate of 2%, by issue and utilisation of c-Form is still
prevalent for certain Non-GST goods such as: (i) Petroleum crude; (ii) High-speed diesel; (iii)
Motor spirit (commonly known as petrol); (iv) Natural gas; (v) Aviation turbine fuel; and (vi)
Alcoholic liquor for human consumption. in respect of following transactions only:

 Resale
 Use in manufacturing or processing
 Use in the telecommunication network or in mining or in the generation or distribution of
electricity or any other power

6. What changes has GST brought in?

In the pre-GST regime, every purchaser including the final consumer paid tax on
tax. This tax on tax is called Cascading Effect of Taxes.
GST has removed this cascading effect as the tax is calculated only on the value-
addition at each stage of the transfer of ownership. Understand what the cascading
effect is and how GST helps by watching this simple video:
This indirect tax system under GST has improved the collection of taxes as well as
boosted the development of Indian economy by removing the indirect tax barriers
between states and integrating the country through a uniform tax rate.

Illustration:
Based on the above example of biscuit manufacturer along with some numbers, let‟s see what
happens to the cost of goods and the taxes in the earlier and GST regimes. Tax
calculations in earlier regime:

Action Cost 10% Tax Total

Manufacturer 1,000 100 1,100

Warehouse adds a label and repacks @ 300 1,400 140 1,540

Retailer advertises @ 500 2,040 204 2,244

Total 1,800 444 2,244

Along the way, the tax liability was passed on at every stage of the transaction and the final
liability comes to rest with the customer. This is called the Cascading Effect of Taxes where a
tax is paid on tax and the value of the item keeps increasing every time this happens. Tax
calculations in current regime:

Action Cost 10% Tax Actual Total

Liability

Manufacturer 1,000 100 100 1,100

Warehouse adds label and repacks @ 300 1,300 130 30 1,430

Retailer advertises @ 500 1,800 180 50 1,980

Total 1,800 180 1,980

In the case of Goods and Services Tax, there is a way to claim credit for tax paid in acquiring
input. What happens in this case is, the individual who has paid a tax already can claim credit
for this tax when he submits his taxes. In the end, every time an individual is able to claim the
input tax credit, the sale price is reduced and the cost price for the buyer is reduced because of
lower tax liability. The final value of the biscuits is therefore reduced from Rs. 2,244 to Rs.
1,980, thus reducing the tax burden on the final customer. GST regime also brought a
centralised system of waybills by the introduction of “E-way bills”. This system was launched on
1st April 2018 for Inter-state movement of goods and on 15th April 2018 for intra-state
movement of goods in a staggered manner. Under the e-way bill system, manufacturers, traders
& transporters are now able to generate e-way bills for the goods transported from the place of
its origin to its destination on a common portal with ease. Tax authorities are also benefitted as
this system has reduced time at check -posts and help reduce tax evasion.
 Features of GST

. DUAL GOODS AND SERVICE TAX

The GST shall have two components: one levied by the Centre (hereinafter referred to as
Central GST), and the other levied by the States (hereinafter referred to as State GST). Rates
for Central GST and State GST would be prescribed appropriately, reflecting revenue
considerations and acceptability. This dual GST model would be implemented through multiple
statutes (one for CGST and SGST statute for every State). However, the basic features of law
such as chargeability, definition of taxable event and taxable person, measure of levy including
valuation provisions, basis of classification etc. would be uniform across these statutes as far as
practicable.

2. APPLICABILITY OF GST TO ALL TRANSACTIONS

The Central GST and the State GST would be applicable to all transactions of goods and
services made for a consideration except the exempted goods and services, goods which are
outside the purview of GST and the transactions which are below the prescribed threshold
limits. The Central GST and State GST should be levied on common and identical tax base. The
tax base should comprehensively extend over all goods and services ( with no distinction being
made between treatment of goods and services) up to the final consumer point.

3. DESTINATION BASED MULTI POINT LEVY

It is recommended that the Centre and States should adopt a consumption based GST with no
distinction being made between raw materials and capital goods , in avaliment of Input tax
credit. GST is based on destination principle, thus tax base will shift from production to
consumption of goods. The taxable event is Consumption of goods or services. As a result,
revenue will accrue to the state in which consumption takes place or deemed to take place.

4. COMPUTATION OF GST ON THE BASIS OF INVOICE CREDIT METHOD

The liability of CGST and SGST is computed the basis of Invoice Credit method i.e. allow credit
for tax paid on all intermediate purchases of goods and services on the basis of invoice issued
by the supplier. As a result, all different stages of production and distribution can be interpreted
as a mere tax pass-through, and the tax will effectively stick on final consumption within the
taxing jurisdiction. This will facilitate elimination of the cascading effect at various stages of
production and distribution. In an Invoice based VAT system, the issue of invoices in the proper
form is an essential part of the procedure for imposing and enforcing the VAT. Therefore, it
should be mandatory for a supplier making a taxable supply to another taxable entity to provide
a VAT invoice.
5. PAYMENT OF GST

The Central GST and State GST are to be paid to the accounts of the Centre and the States
separately. It would have to be ensured that account-heads for all services and goods would
have indication whether it relates to Central GST or State GST (with identification of the State to
whom the tax is to be credited).

6. UNIFORM PROCEDURE FOR COLLECTION OF GST

To the extent feasible, uniform procedure for collection of both Central GST and State GST
would be prescribed in the respective legislation for Central GST and State GST.

7. THRESHOLD LIMIT

The present threshold limits prescribed in different State VAT Acts below which VAT is not
applicable varies from State to State. A uniform State GST threshold across States is desirable
and, therefore, it is considered that a threshold of gross annual turnover of Rs.10 lakh both for
goods and services for all the States and Union Territories may be adopted with adequate
compensation for the States (particularly, the States in North-Eastern Region and Special
Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the
interest of small traders and small scale industries and to avoid dual control, the States also
considered that the threshold for Central GST for goods may be kept at Rs.1.5 crore and the
threshold for Central GST for services may also be appropriately high. It may be mentioned that
even now there is a separate threshold of services (Rs. 10 lakh) and goods (Rs. 1.5 crore) in
the Service Tax and CENVAT.

8. COMPOSITION SCHEME UNDER GST

The States are also of the view that Composition/ Compounding Scheme for the purpose of
GST should have an upper ceiling on gross annual turnover and a floor tax rate with respect to
gross annual turnover. The first discussion paper suggests that there would be a compounding
cut-off at Rs. 50 lakh of gross annual turnover and a floor rate of 0.5% across the States. The
scheme would also allow option for GST registration for dealers with turnover below the
compounding cut-off.

In reference to Composition scheme, the task force has recommended rate of 1% each on
account of CGST and SGST for dealers with the turnover between Rs 10 lacs to Rs 40 lacs.No
credit for the same will be available if the dealer opts for the compounding scheme.

9. REGISTRATION & TAX PAYER IDENTIFICATION NUMBER

All the taxable entities with turnover above the threshold limit will be required to register and
obtain GST registration number. The taxable entities with lower turnover will also have the
option to register.

As per First Discussion paper, each taxpayer would be allotted a PAN-linked taxpayer
identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in
line with the prevailing PAN-based system for Income tax, facilitating data exchange and
taxpayer compliance.

However, the Task force report has recommended that the GST Registration number should be
twelve digit alphanumeric numbers. The first ten digits should be the alpha-numeric Permanent
Account Number (PAN) followed by a space and two more digits indicating the state code. This
number scheme should be publicised widely and should be self-generated after obtaining a
PAN . There will be single GST registration number for all branches in a State. Therefore, a
dealer having branches across States will have as many GST registration numbers as the
number of States in which he operates. The registrant dealer should be required to furnish a
form, only by way of information, indicating the registration number for every State in which he
operates. He should not be allowed to use the registration number, though self-generated,
unless he has furnished the form.

Since the number is PAN based, it is not necessary to have any pre- registration verification.
However, the states may, if necessary, undertake post-registration verification to eliminate any
potential abuse. To begin with, on the eve of the introduction of GST, the dealer must furnish a
consolidated form for all States in which he operates. If, at a later stage, the dealer extends his
operation to a new State, he should be required to furnish a form for extension of activities and
register the self- generated number for the new State.

10. INPUT TAX CREDIT (ITC) SET OFF

Since the Central GST and State GST are to be treated separately, taxes paid against the
Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and could
be utilized only against the payment of Central GST. The same principle will be applicable for
the State GST. Further, the rules for taking and utilization of credit for the Central GST and the
State GST would be aligned.

11. CROSS UTILIZATION OF ITC

Cross utilization of ITC between the Central GST and the State GST would not be allowed
except in the case of inter-State supply of goods and services under the integrated goods and
service tax (IGST) model.

12. CREDIT ACCUMULATION ON ACCOUNT OF REFUND

Ideally, the problem related to credit accumulation on account of refund of GST should be
avoided by both the Centre and the States except in the cases such as exports, purchase of
capital goods, input tax at higher rate than output tax etc. where, again refund/adjustment
should be completed in a time bound manner.
 Types of taxes under GST

India is currently going through major reforms in its overall economic sectors. The growth
trajectory of India is so high that it is poised to become the third-largest economy of the world by
2030. Government is taking significant initiatives to boost the overall economic growth of the
country. Introduction to GST and its 3 types- CGST, SGST, IGST AND UTGST are effectively
supporting such major economic development programs.

GST stands for Goods and Services Tax. It is considered as the biggest taxation reform in the
history of Indian economy. It will subsume multiple taxes like VAT, Service Tax, CST, excise
and additional excise duty, entertainment and luxury tax, etc. It is a single uniform taxation
system which will help in eliminating time, cost and effort.

GST is introduced in the parliament as The Constitution Amendment Act 2016 and it is
regulated by the Union Finance Ministry of India. It is a consumption based tax levied on the
supply of goods and services which mean that it will be imposed at each stage of sale or
purchase of goods or services based on the input tax credit method.

GST will transform Indian economy turning it into one common market based on a uniform
taxation system. It will enhance the ease of doing business in India. Industries will make
substantial savings in terms of logistics and supply chain due to GST. Some companies will
benefit more as the GST rate will be lower than the current taxation. On the other hand, few
sectors will have to pay more tax as GST will replace the old taxes uniformly, which may
increase the rate respectively.

The overall impact of GST on India‟s economy is expected to be positive. As GST will be
applicable from July 2017, industries and business organizations have already started to create
future strategies. Both the central as well as the state government are focusing on regulating
GST and major changes are being made in the organized monetary framework.

Government has joined hands with the National Securities Depository Limited (NSDL) and
together they have created Goods and Services Tax Network (GSTN). It‟s a non-government
firm which will provide IT infrastructure services to the central and state governments,
stakeholders and taxpayers for proper implementation and regulation of GST.

Indian economy is highly diverse due to numerous industries operating in different sectors
having the different location, supply chain and target consumers. To understand the detailed
impact of GST, let‟s discuss its three types-

1. Central Goods & Service Tax (CGST)

As per the Central Goods & Services Tax Act 2016, CGST is the centralized part of GST that
subsumes the present central taxations and levies- Central Sales Tax, Central Excise Duty,
Services Tax, Excise Duty under Medical & Toiletries Preparation Act, Additional Excise Duties
Countervailing Duty (CVD), Additional Custom Duty and other centralized taxations.
CGST is applicable on the supply of goods and services of standard services and commodities
which can be amended periodically by a specialized body under the central government. The
revenue collected under CGST belongs to the central government. The input tax is given to the
state governments which they can utilize only against the payment of CGST.

2. State Goods & Services Tax (SGST)

SGST is an important part of GST. It stands for State Goods & Services Tax as per the 2016
GST bill. Various taxations and levies under the state authority are subsumed by SGST as one
uniform taxation. It includes the amalgamation of State Sales Tax, Luxury Tax, Entertainment
Tax, Levies on Lottery, Entry Tax, Octroi and other taxations related to the movement of
commodities and services under state authority through one uniform taxation- SGST.

Revenue collected under SGST belongs to the State Government. However, the mainstream
framework of the state governing body will be supervised by the central government. Each state
will be having their own State Authority to collect SGST.

3. Integrated Goods & Services Tax (IGST)

GST focuses on the concept of one tax, one nation. IGST stands for Integrated Goods and
Services Tax which is charged on the supply of commodities and services from one state to
another state. For example, if the supply of goods and services occurs between Gujarat and
Maharashtra, IGST will be applicable.

Under Article 269A of the Indian Constitution, the inter-state trade and commerce activities that
involve the movement of commodities and services shall be levied with an integrated tax (IGST)
under the GST regime. The Government of India will collect the revenue under IGST. Further
changes can be made by the Goods and Services Tax Council of India.

4. Union Territory Goods & Services Tax (UTGST)

As we have already learned about CGST and SGST which are intra-state taxations and IGST
which is inter-state, the union territories in India are accounted under a specialized taxation
called Union Territory Goods and Services Tax as per the GST regime 2016. It will subsume the
various taxations, levies and duties with one uniform taxation in Union Territories as well.

Delhi (India‟s Capital Territory), Chandigarh, Dadra & Nagar Haveli, Andaman & Nicobar
Islands, Daman & Diu, Lakshadweep and Puducherry are the prominent union territories in
India. UTGST will account for all the taxations under these union territories in India. The
parliament is looking forward to implement a separate act to impose and supervise GST in
Union Territories under the name of UTGST act. The bill will be presented in respective union
territories for further changes in the implementation of GST.
 Rates of GST

The GST council has fitted over 1300 goods and 500 services under four tax slabs of 5%, 12%,
18% and 28% under GST. This is aside the tax on gold that is kept at 3% and rough precious
and semi-precious stones that are placed at a special rate of 0.25% under GST.
What is GST Registration
In the GST Regime, businesses whose turnover exceeds Rs. 40 lakhs* (Rs 10 lakhs for
NE and hill states) is required to register as a normal taxable person. This process of
registration is called GST registration.
For certain businesses, registration under GST is mandatory. If the organization carries
on business without registering under GST, it will be an offence under GST and heavy
penalties will apply.
GST registration usually takes between 2-6 working days. We‟ll help you to register for
GST in 3 easy steps.
*CBIC has notified the increase in threshold turnover from Rs 20 lakhs to Rs 40 lakhs.
The notification will come into effect from 1st April 2019.

Who Should Register for GST?

 Individuals registered under the Pre-GST law (i.e., Excise, VAT, Service Tax etc.)
 Businesses with turnover above the threshold limit of Rs. 40 Lakhs* (Rs. 10
Lakhs for North-Eastern States, J&K, Himachal Pradesh and Uttarakhand)
 Casual taxable person / Non-Resident taxable person
 Agents of a supplier & Input service distributor
 Those paying tax under the reverse charge mechanism
 Person who supplies via e-commerce aggregator
 Every e-commerce aggregator
 Person supplying online information and database access or retrieval services
from a place outside India to a person in India, other than a registered taxable
person

*CBIC has notified the increase in threshold turnover from Rs 20 lakhs to Rs 40

lakhs. The notification will come into effect from 1st April 2019.
What is GST Registration Process?
The Goods And Services Tax (GST) Registration services at ClearTax helps you to get
your business GST registered and obtain your GSTIN.
 Types of Returns under GST

Types of GST Returns

1. GSTR-1

GSTR-1 is the return to be furnished for reporting details of all outward supplies of
goods and services made, or in other words, sales transactions made during a tax
period, and also for reporting debit and credit notes issued. Any amendments to sales
invoices made, even pertaining to previous tax periods, should be reported in the
GSTR-1 return.
GSTR-1 is to be filed by all normal taxpayers who are registered under GST. It is to be
filed monthly, except in the case of small taxpayers with turnover up to Rs.1.5 crore in
the previous financial year, who can file the same on a quarterly basis.
2. GSTR-2A

GSTR-2A is the return containing details of all inward supplies of goods and services
i.e. purchases made from registered suppliers during a tax period. The data is auto-
populated based on data filed by the suppliers in their GSTR-1 return. GSTR-2A is a
read-only return and no action can be taken.
3. GSTR-2

GSTR-2 is the return for reporting the inward supplies of goods and services i.e. the
purchases made during a tax period. The details in the GSTR-2 return are auto-
populated from the GSTR-2A. Unlike GSTR-2A, the GSTR-2 return can be edited.
GSTR-2 is to be filed by all normal taxpayers registered under GST, however, the filing
of the same has been suspended ever since the inception of GST.
4. GSTR-3

GSTR-3 is a monthly summary return for furnishing summarized details of all outward
supplies made, inward supplies received and input tax credit claimed, along with details
of the tax liability and taxes paid. This return is auto-generated on the basis of the
GSTR-1 and GSTR-2 returns filed.
GSTR-3 is to be filed by all normal taxpayers registered under GST, however, the filing
of the same has been suspended ever since the inception of GST.
5. GSTR-3B

GSTR-3B is a monthly self-declaration to be filed, for furnishing summarized details of

all outward supplies made, input tax credit claimed, tax liability ascertained and taxes
paid.
GSTR-3B is to be filed by all normal taxpayers registered under GST.
6. GSTR-4 / CMP-08

GSTR-4 is the return that was to be filed by taxpayers who have opted for the
Composition Scheme under GST. CMP-08 is the return which has replaced the now
erstwhile GSTR-4. The Composition Scheme is a scheme in which taxpayers with
turnover up to Rs.1.5 crores can opt into and pay taxes at a fixed rate on the turnover
declared.
The CMP-08 return is to be filed on a quarterly basis.
7. GSTR-5

GSTR-5 is the return to be filed by non-resident foreign taxpayers, who are registered
under GST and carry out business transactions in India. The return contains details of
all outward supplies made, inward supplies received, credit/debit notes, tax liability and
taxes paid.
The GSTR-5 return is to be filed monthly for each month that the taxpayer is registered
under GST in India.

Composition Levy Scheme under GST

A taxpayer whose turnover is below Rs 1.0 crore* can opt for Composition Scheme. In
case of North-Eastern states and Himachal Pradesh, the limit is now Rs 75* lakh.
As per the CGST (Amendment) Act, 2018, a composition dealer can also supply
services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher. This
amendment will be applicable from the 1st of Feb, 2019. Further, GST Council in its
32nd meeting proposed an increase to this limit for service providers on 10th Jan 2019*.
Turnover of all businesses registered with the same PAN should be taken into
consideration to calculate turnover.
*CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5
Crores.