Learn the Basics of Taxation Process in India

Taxation plays a vital role in the economic development of any country. It is a system used by government of any country to raise or collect revenue from the public. Any government makes use of the collected revenues for the wellbeing of society in different forms such as by paying wages to police or soldiers, by constructing dams or roads, by operating hospitals and schools, by providing meals and medical services to the poor people, and so on. It is difficult for any government to exist without collecting taxes. For maintaining equality in a society, it is necessary to impose taxes on society.

Understand the term ‘Tax’

Tax can be defined as the part of income collected by government from us to provide several facilities like school, medical, water and drainage system, roads constructions, etc. It is a required payment charged by government of any country on individuals or companies for meeting the expenditure which is requisite for the welfare of a society.

Let’s walk through some the features of Tax:

  • Tax is a compulsory payment for the benefit of society
  • It needs legal sanction
  • It is considered as a personal responsibility
  • Tax is waged out of the total income earned by the tax payer

Taxation Structure as per Indian Viewpoint

In India, mainly two types of taxes are implemented:

  1. Direct Tax: This tax is paid directly by people of India to the government. Direct tax is further divided into various types as given below:

1.1 Income Tax: As its name implies, it is a tax on the total income of a tax payer

1.2 Wealth Tax: This tax is charged on the net assets

  1. Indirect Tax: This tax is indirectly paid by the people of India to the government. Indirect tax is further divided into various types as given below:

2.1 Central Excise Duty: It is levied on manufacture or production of goods

2.2. Custom Duty: This type of tax is charged by central government on the import and export of goods from India

2.3 Value Added Tax: It is a tax on the sale of goods which is implemented within the states only. VAT is a multi-stage tax and is paid by the wholesaler, retailers, manufacturer, and is also transferred on consumer.

2.4 Service Tax: Service Tax is a tax levied on taxable services. In this, usually service provider pays text and then recovers it from the consumer from the receiver of the taxable service

Here’s Everything You Need to Know About Income Tax

Income tax is a tax levied directly on the earnings of an individual, association, and business by the government to finance its several operations. Income tax is of two main types: Direct tax and the newly introduced Goods and Services Tax (GST) that subsumes almost all the State as well as Central taxes, including excise, VAT, and service tax.

In addition to funding the government activities, taxes also serve as a fiscal stabilizer helping distribute wealth equally among the population. Taxes are even influential in mitigating the effects of financial cycles. The payment of income tax in India is made as per the terms defined under the Income Tax Act.

In accordance with the Indian Income Tax laws, income from five main sources is deemed taxable. Allow us to explain them briefly:

  1. Income from Salary

In case there’s a relationship of an employee and employer between the payer and the payee then an income can be taxed under Salaries. In contrast, if there’s no such relationship, the income will not be considered to be income from salary.

  1. Income from House Property

This type of income tax is referred to the tax on rental income that is being earned from the House Property. Nevertheless, if the property is not being leased, tax will be charged on the anticipated rent that would have been received if this property was leased. Income from House Property is possibly the only income, which is levied to tax on a national basis.

  1. Income from Profits and Gains of Business or Profession

Under this income head, any earnings received from any manufacturer, business or trade will be liable to tax after deducting particular expenses.

  1. Income from Capital Gains

Any revenue or gain resulting from the transfer of a capital asset effected in the financial year will be chargeable to income tax.

  1. Income from Other Sources

Under this head of income, any earnings that are not liable to tax under the aforementioned four heads of income will be chargeable, given that earnings are not exempted from the calculation of total income.

In India, the tax rates differ as per the income of an individual, alias Income Tax Slab. The slab is modified every year by the government during Budget Session of Parliament.

GST Return Filing Procedure: Everything You Need to Know

Ever since the inception of the Goods and Services Tax, taxpayers are required to fulfill a bunch of compliances which mandates them to file several returns for each Financial Year. In simple words, GST Return filing is compulsory for all those folks who have GST Registration. In order to make you better understand the procedure of Goods and Services Tax Return filing, we’ve come up with this tutorial. Let’s delve in.

What are GST Returns?

Returns are a set of forms boasting a pre-approved reporting format. This make terms of essential information easier for the taxpayers for the entire disclosure. Each form has been intended to make sure the complete disclosure of transaction made between sellers and buyers.

Who Should File GST Returns?

Under the GST administration, any regular business is required to file three monthly returns (GSTR 1, GSTR 2, and GSTR 3) along with one annual return (GSTR 9). There’s one more return dubbed GSTR 4 that is submitted on a quarterly basis by composition taxpayers.

Types of Returns under GST

  1. GSTR 3B

To make the migration process of taxpayers easier than ever, Government introduced an interim return form of GSTR 3B for the month of July and August. The form doesn’t require you to provide invoice level information. However, you must need to provide the total values for each field.

  1. GSTR 1

This form requires you to give all the details of the outward supplies of goods and services to the department. It’s worth notable that you should file the form by the 10th of every following month.

  1. GSTR 2

Through this form, you’ll get the details of the inward supplies of goods and services as sanctioned and approved by the recipient of the goods or services. This form must be filed by 15th of the following month.

  1. GSTR 3

This is the auto-populated form consisting of all the details filed under GSTR 1 and GSTR 2. This would let the department estimate the tax payable after making an allowance for Input Tax Credit availability. The form is recommended to be filed by the 20th of every following month.

  1. GSTR 4

This form includes all the details given in the auto-populated form of outward supplies. The form has to be filed by the 18th of the succeeding month after each quarter.

  1. GSTR 5

The form comprises of the details about input tax, outward supplies, tax paid, reaming month, and imports. This is a monthly submission form which must be filed by 20th of the succeeding month.

  1. GSTR 6

This form is all about the details regarding return for input service distributor. This form is recommended to be filed by input service distributor by 13th of every following month.

  1. GSTR 7

This form is to provide all the details about the tax deduction. It needs to be filed by 10th of the every following month.

  1. GSTR 8

This form includes all the details concerning supplies made by the e-commerce seller. It also incorporate details of the tax deducted at source. You have to file the form by 10th of every following month.

  1. GSTR 9

This is an annual return form that requires to be filed by every taxpayer by 31st of the following financial year.

  1. GSTR 10

This form provides all the details of final return, which requires to be filed by taxable person whose registration has been cancelled or surrendered within 3 months of the date of cancellation or surrender whichever is later.

  1. GSTR 11

This form gives you the details of inward supplies that must be provided by a person who has Unique Identification Number (UIN). This form has to be filed by 28th of the month following the month for which statement is filed.

In order to file GST Returns, there’s a need of GST complaint sales and purchase invoices. You can contact a consultant to help you in generating GST complaint invoices with ease.

What are the Major Benefits of GST?

With the aim to make India a unified common marketplace with common tax rates and procedures, the Goods and Services Tax paves the way for an integrated economy at the national level. It subsumes almost all the State as well as Central taxes into a single tax, mitigating the ill effects of cascading and enhancing competitiveness of businesses. The tax is also anticipated to bump up GDP by approximately 2%. Let’s have a look at major benefits of GST.

  1. Elimination of Multiple Taxes

The biggest advantage of GST is that it subsumes most of the indirect taxes being levied nationally. Thus, it abolishes the ‘tax on tax’ effect which has been plaguing the entire supply chain and increasing costs for the end user. This will also give a major boost to the Government’s ‘Make in India’ campaign as goods that are manufactured or supplied in the country will be competitive not only in national markets, but in the international ones too. The Integrated Goods and Services Tax (IGST) will be levied on all imported goods. IGST means State GST plus Central GST, bringing uniformity in taxation on both local as well as imported goods.

  1. Ease of Business Setup

The Goods and Services Tax comes with a unique ‘one country, one tax’ concept that can make the business setup process easy and straightforward. This will be beneficial to do interstate business, preventing unhealthy competition among states. GST is anticipated to bring buoyancy to the Government Revenue by expanding the tax base and enhancing the taxpayer compliance. The tax is likely to provide a major lift to India’s ranking in the Ease of Doing Business Index.

  1. Less Bureaucracy

The new tax system offers less bureaucracy. Now, you don’t have to pay bribe to any tax officer. You can check your details and pay your tax online in just few clicks. It brings more transparency to indirect tax laws, making the economics and tax value of supplies easily distinguishable. All in all, it helps the industry to take credit and the government to validate the precision of taxes paid and the consumer to know the exact amount of taxes paid.

  1. Improvement in Economy

One of the major GST benefits is that it provides more taxpayers to government by lowering the cost of goods and services. Called as the biggest reform in Indian indirect tax system, the Goods and Services Tax causes an increase in manufacturing processes and improvement in exports and investments. Now, the government provides more facility with the high-budget product in the well-being of Indian citizens in many different ways. Thus, it’s a win-win situation for both the country and citizens.

  1. Less Price Product

For a common man, GST tax applicability means the removal of double charging in the system. With the introduction of this new tax, the money mind game has been ended. It lowers the price of goods and services, helping common man to save more money. On the business front, it give businesses a national platform to grow with a rapid pace.

What is GST and How it Affects You?

India’s biggest indirect tax reform since Independence, the Goods and Services Tax (GST) was launched on July 1, 2017 at Central Hall of Parliament by Prime Minister Narendra Modi and President Pranab Mukherjee. Came up with the principle of ‘one nation, one tax, one market’, the GST subsumes 17 central and state tariffs. With the new-fangled tax, the movement of goods has become much easier and simpler across the nation. Still confused what is GST? Well, not anymore as in this post, we’ve brought to you the answers of the most-asked queries to help you better understand what is the Goods and Services Tax, its rates, and how it affects you. Allow us to explain you in detail.

GST and its Meaning

Abbreviated as GST, the Goods and Services Tax is the only indirect tax for the entire country, making India a unified common marketplace. The tax applies to the supply of goods, right from the producer to the buyer. Through the new tax, the government aspires to construct a solitary extensive tax structure that will subsume all other minor indirect taxes on expenditure such as Service Tax, Local Body Taxes, Purchase Tax, etc. In accordance with government estimates, this tax will boost India’s GDP (Gross Domestic Product) by approximately 2%.

Why GST Needed?

The new tax splits the complex structure of different central as well as state taxes, which frequently overlap with each other, resulting in a uniform taxation system for the whole nation. Now, taxes will be implemented more effectively as all taxes like Value Added Tax (VAT), Octroi, and Excise Duty will be replaced by one single tax. However, there’re still 3 types of taxes: State GST, Central GST, and Integrated GST for inter-state trade.

GST Rates

There are 4 main tax slabs under GST: 5%, 12%, 18%, and 28% that are intended to lower tax incidence on necessary items. The first rate, i.e. 5% is applied to items of mass consumption that are used particularly by common people. The second and third slabs – 12% and 18% accommodate most of the goods and services, while the last slab of 28% has applied mainly to white goods, including washing machines and refrigerators.

Exemptions under GST

Under this tax, the Indian administration has set GST rates on around 1,211 goods and 500 services in the range of 5 to 28%. Various items like petrol, alcohol, diesel, and natural gas are exempted under this tax. Apart from this, the GST Council has also categorized several items under the 0% tax rate. The list incorporates daily-use items like rice, milk, wheat, meat, fish, fresh vegetables, printed books, newspapers, bone meal, and drawing or coloring books, among others.

GST Rate 0%

A number of services such as healthcare, education, and hotels and lodges with tariff below Rs. 1,000 are deprived of the Goods and Services Tax. However, semi-precious and rough stones have GST rate of 0.25%.

Effects of GST

On salaried employees and self-employed professionals

As the tax is valid mainly for businesses, so it won’t directly affect the salaried and self-employed professionals such as lawyers, doctors, to name a few. Nevertheless, it will affect their expenditure, owing to the change in rates of goods and services they avail. Apart from this, they will continue to pay their income tax like before.

On Businesses

The new tax has revolutionized the way businesses have been operated. The removal of several levies and formation of a single market with lower tax rates and fewer tax exemptions has enhanced the ease of doing business and reduced unnecessary proceedings. It also simplifies a complicated chaos of taxes that companies have been subjected to. Further, reduction in transaction costs of doing business has led to a superior competitiveness for the industry and trade.