GST bill was introduced in India on July 1, 2017. Many people since then have been wondering what GST means and often search on internet GST explained. Many people also search for what is GST in detail. This blog talks in length about what GST is with example, GST rates, GST bill, and the information mandatory to be mentioned in the GST bill.
What is GST?
Also Read: GST registration Process
GST or Goods and Services Tax is the indirect tax reform in India introduced by the government of India. It has subsumed taxes, such as Central Excise Law, Service Tax Law, Entry Tax, VAT, Octroi, etc. GST was introduced with the aim of bringing the state economies together and improving the overall economic growth of the country.
GST is levied on manufacture, sale, and consumption of goods and services. It has replaced all the indirect taxes levied by the central and state government. Under the GST ACT, it is mandatory for businesses to obtain a GST identification number in the state they are registered. There are four types of GST:
- SGST – State GST, collected by the State Govt.
- CGST – Central GST, collected by the Central Govt.
- IGST – Integrated GST, collected by the Central Govt.
- UTGST – Union territory GST, collected by union territory government
You can get all the GST information on the government website.
What is GST with example?
Now, let us understand what GST is with example.
Let’s assume a jeans manufacturer buys raw material, such as thread, buttons, zip, etc. to stitch jeans. The raw material cost him Rs. 300 in which he paid Rs. 30 as a tax. After manufacturing the jeans, he added his own value and sold it for Rs. 350. Now, the tax on the jeans will be 35 @ 10% tax rate. However, since the manufacturer has already Rs, 30, the tax will now be Rs. 5 only (Rs. 35-30).
Now, the wholesaler who bought the jeans would keep his margin for profit and sell the jeans for Rs. 450. This time the tax will Rs. 45. Now the effective tax will be Rs 10 (Rs. 45-35). At the final stage, i.e. of the retailer, he would keep his margin and sell the jeans for Rs. 600. Again using the 10% rule, the tax would be Rs. 60. However, with Rs. 45 already paid, the tax incidence will be Rs 15. To sum up, the total GST in the entire chain from the manufacturer to the retailer will be Rs 30 + 5+ 10 + 15 = Rs. 60.
How much is GST in India?
The Indian government has categorised the goods and services in 5 GST tax rates:
|No Tax or 0%||Items such as jute, fish, chicken, eggs, milk, curd, natural honey, cereal grains, salt, kajal, drawing and colouring books, etc.||Hotels and lodges with tariff below Rs. 1,000 and grandfathering service has been exempted under the GST Act.|
|0.25%||Industrial diamonds and unsorted rough diamonds.|
|5%||Fish fillet, apparel below INR 1,000, footwear below INR 500, creamed milk, kerosene, coal, postage or revenue stamps, branded food, roasted gram, dhoop batti, cigarette filter rods, etc.||All restaurants and restaurants in hotels with room tariff of less than INR 7,500, textile job work, supply of e-waste, transport services, including railways and air, food parcels, etc.|
|12%||Apparel above INR 1,000, butter, ghee, animal fat, dry fruits, tooth powder, colouring books, umbrella, cellphones, ketchup & sauces, sewing machine, spoons, folks, spectacles, printing ink, handbags, bio-diesel, mechanical sprayer, etc.||Business class air ticket, non-ac hotels, fertilisers, state-run lotteries, etc.|
|18%||Items such as bidi patta, pasta, sugar, kajal pencil sticks, soup, ice cream, jams, preserved vegetables, aluminium foil, wire, cables, shampoo, detergents, fans, compressors, furniture, articles of plastics, etc.||Restaurants and restaurants in hotels with room tariff of above INR 7,500, IT services, telecom services, outdoor catering, financial services, branded garments, etc.|
|28%||Luxury and sin products, such as molasses, pan masala, ATM, vending machines, ceramic tiles, water heater, automobiles, motorcycles, vacuum cleaner, etc.||Private run lotteries authorized by states, cinema, race club betting, etc.|
Is HSN Code mandatory for GST Invoice?
Many small businesses find it difficult to found HSN code for the goods supplied. Hence, to reduce the burden for small business owners, the GST council has relaxed the requirement to fill the HSN code on invoices based on the sales turnover of the business.
As per Notification by the Central Tax, the HSN code on the invoice can be displayed as follows:
- The entities having an annual turnover of less than INR 1.5 crores in the preceding financial year are not required to display the HSN Code on the GST invoice.
- Entities having an annual turnover between INR 1.5 crores and 5 crores in the preceding financial year are required to display the first 2 digits, i.e. chapter of the HSN code on the GST invoice.
- Entities having an annual turnover of more than INR 5 crores in the preceding financial year are required for display the HSN code, i.e. two digits for chapter and chapter heading of the HSN code on the invoice.
So, the entities with an annual turnover of more than INR 5 crores are required to display the 4-digit HSN Code on the GST invoice.
What is a GST Bill?
The GST bill is generated when a person or business having GST registration supplies goods and services to its customers. As per GST invoice rules, the suppliers are mandatorily required to provide the GST invoice when the value of the goods is more than Rs. 200. It is mandatory to issue the GST bill in the format specified in the GST Invoice Format Rules.
What are the details to be mentioned on the GST Bill?
As per the GST invoice rules, the following details are mandatory to mention in the GST bill:
- The name, address, and GSTIN of the supplier of the goods and the services.
- Invoice number which consists of alphabets, numerals, and special characters, such as a hyphen, dash, or slash.
- GST bill date.
The name, address, and GSTIN of the recipient of goods and services. If the worth of the taxable supply is more than INR 50,000 and recipient is not registered under GST, his name, address, and the address of the delivery must be mentioned on the GST bill.
In case the worth of the taxable supply of less than INR 50,000, the name and address of the recipient and the address of the delivery must be mentioned, if requested by the recipient.
The HSN Code and SAC Code of the goods and services must be mentioned on the GST Bill. The requirement of the HSN Code and SAC Code is relaxed for taxpayers having an annual turnover of less than INR 1.5 crores.
- Description of the goods and services supplied to the receivers.
- The quantity and unit of measurement.
- The total value of the supply of the foods or services.
- GST tax rates applicable along with the amount of GST, IGST, SST, and CGST.
- Place of the supply along with the state, in case the supply is inter-state.
- Mention whether the tax is payable on the reverse charge basis.
- Signature (or digital signature) of the supplier.
How many copies of GST Bill must be generated?
For goods – 3 GST bill:
- Original for Recipient
- Duplicate for Transporter
- Triplicate for Supplier
For services – 2 GST bill:
- Original for Recipient
- Duplicate for Supplier