A Detailed Guide to GST Categories for Business Owners in India

Introduction to GST

Goods and Services Tax (GST) was implemented in India on July 1, 2017. This comprehensive, multi-stage, destination-based tax replaced multiple indirect taxes and was designed to bring about tax uniformity in the country. It is levied on every value addition in the production and service delivery processes.

GST Structure

There are three types of GST in India:

1. Central GST (CGST): This is collected by the central government on an intra-state sale.
2. State GST (SGST): This is gathered by the state government on an intra-state sale.
3. Integrated GST (IGST): This is collected by the central government for an inter-state sale.

GST Rates

GST rates in India are divided into five categories – 0%, 5%, 12%, 18%, and 28%. However, specific products and services are taxed under different GST rate slabs. Here’s an outline of the categories:

1. 0% Tax Slab: Essential commodities like fruits, vegetables, grains, milk, eggs, curd, meat, fish, chicken, newspapers, journals, books, hotels and lodges with tariff below Rs 1000, are exempt from GST.
2. 5% Tax Slab: Items under this category include skimmed milk powder, fish fillet, frozen vegetables, coffee, tea, spices, pizza bread, kerosene, coal, medicine, stent, lifeboats, and services like transport services and standalone restaurants.
3. 12% Tax Slab: Items like frozen meat products, butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, namkeen, Ayurvedic medicines, tooth powder, agarbatti, colour books, sewing machine, cell phones, and services like non-AC hotels, business class air ticket fall under this category.
4. 18% Tax Slab: This slab includes most items like biscuits, flavored refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, notebooks, steel products, printed circuits, camera, speakers, and services like AC hotels that serve liquor, telecom services, IT services, branded garments and financial services.
5. 28% Tax Slab: This highest rate applies to luxury and demerit goods like chewing gum, malt extract, deodorants, aftershave, pan masala, aerated water, paint, sunscreen, wallpaper, ceramic tiles, water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, automobiles, motorcycles, aircraft for personal use, and services like five-star hotels, race club betting, cinema.

GST Registration

If your business has an annual turnover exceeding Rs 40 lakhs (Rs 20 lakhs for special category states) for goods and Rs 20 lakhs (Rs 10 lakhs for special category states) for services, it’s mandatory to register under GST. Registration is also mandatory for inter-state suppliers and e-commerce operators, irrespective of turnover.

GST Returns

Every GST-registered dealer must file GST returns, providing details about their purchases, sales, output GST (on sales), and input tax credit (GST paid on purchases). Returns must be filed periodically – monthly, quarterly, or annually depending on the type of registration and nature of the business.

GST Exemptions

Some goods and services are exempt from GST:

1. Agricultural Produce: Unprocessed agricultural products are exempt.
2. Healthcare Services: All healthcare services provided by clinical establishments, authorized medical practitioners, and paramedics are GST-free.
3. Educational Services: Services provided by an educational institution to its students, faculty, and staff are exempt from GST.
4. Public Transport Services: Transport services provided by a stage carriage are exempted.
5. Non-AC Restaurants: Non-AC or non-alcohol serving restaurants are exempt from GST.

Input Tax Credit (ITC)

GST provides for the mechanism of Input Tax Credit (ITC), which allows businesses to deduct the GST paid on inputs from the GST payable on output services or goods.

E-Way Bill

For any movement of goods with a value exceeding Rs 50,000, an E-Way bill must be generated. It is mandatory for both inter-state and intra-state transportation of goods.

Conclusion

Comprehending and implementing GST can be a complex process. Therefore, it’s crucial to stay updated on the latest rules and regulations. It’s advisable to engage the services of a GST practitioner or utilize a software solution that simplifies the process of GST filing and compliance.