1. What is GST? Explain its types.
Answer: GST (Goods and Services Tax) is an indirect tax levied on the supply of goods and services in India. It replaced multiple indirect taxes like VAT, excise, and service tax.
Types of GST:
- CGST (Central GST): Collected by the Central Government on intra-state sales.
- SGST (State GST): Collected by the State Government on intra-state sales.
- IGST (Integrated GST): Levied on inter-state sales, collected by the Central Government.
- UTGST (Union Territory GST): Applicable in Union Territories like Chandigarh, Daman & Diu.
2. What is GST and why was it introduced?
Answer: GST (Goods and Services Tax) is a comprehensive, destination-based indirect tax that has replaced multiple indirect taxes like VAT, service tax, excise duty, etc. It was introduced in India on 1st July 2017 to simplify the tax structure, remove cascading effect (tax on tax), and create a unified national market.
3. What are the different types of GST?
Answer: There are four types of GST in India:
- CGST – Central Goods and Services Tax (levied by the Central Government)
- SGST – State Goods and Services Tax (levied by the State Government)
- IGST – Integrated Goods and Services Tax (levied on inter-state supply of goods/services)
- UTGST – Union Territory Goods and Services Tax (levied in Union Territories)
4. What are the GST tax slabs in India?
Answer: GST is divided into five tax slabs:
- 0% (Exempted): Essential items like milk, fruits, books.
- 5%: Household necessities like sugar, tea, edible oil.
- 12%: Processed foods, computers, medicines.
- 18%: Soaps, smartphones, ACs, footwear.
- 28%: Luxury items like cars, TVs, cigarettes.
5. What is the GST registration threshold limit?
Answer: As of now (subject to change):
- For goods: Rs.40 lakhs (Rs.20 lakhs for some special category states).
- For services: Rs.20 lakhs (Rs.10 lakhs for special category states).
6. What is the HSN/SAC code under GST?
Answer:
- HSN (Harmonized System of Nomenclature) is used to classify goods.
- SAC (Service Accounting Code) is used to classify services. These codes help in systematic identification of goods/services for taxation purposes.
7. What is the difference between CGST, SGST, and IGST?
Answer:
- CGST + SGST: Applied on intra-state transactions (within the same state).
- IGST: Applied on inter-state transactions (between different states).
- Example: If a product is sold from Maharashtra to Karnataka, IGST is charged. If sold within Maharashtra, CGST + SGST applies.
8. What is Input Tax Credit (ITC) under GST?
Answer: ITC allows businesses to claim credit for GST paid on purchases against GST liability on sales.
Conditions for claiming ITC:
- Must have a valid tax invoice.
- Goods/services must be used for business.
- Supplier must have filed returns and paid taxes.
- No ITC on blocked credits (e.g., personal expenses).
9. What is the GST return filing process?
Answer:
- GSTR-1: Outward supplies (sales) – Filed monthly/quarterly.
- GSTR-3B: Summary return with tax payment – Monthly.
- GSTR-9: Annual return (consolidated).
- GSTR-4: For composition dealers (quarterly).
- GSTR-2A/2B: Auto-populated purchase details for ITC reconciliation.
10. What are the GST return forms and their due dates?
Answer: Common return forms include:
- GSTR-1: Details of outward supplies – Due monthly by the 11th of the next month.
- GSTR-3B: Monthly summary return – Due by the 20th of the next month (currently 20th, 22nd, or 24th based on state).
- GSTR-9: Annual return – Due by 31st December of the next financial year.
11. How do you reconcile GST returns with books of accounts?
Answer: Reconciliation involves matching:
- Sales as per books vs. GSTR-1
- Purchases as per books vs. GSTR-2B/2A
- GST paid as per GSTR-3B vs. ledger This ensures accuracy, helps in claiming correct ITC, and avoids notices from GST authorities.
12. What is the Reverse Charge Mechanism (RCM) in GST?
Answer: Under RCM, the recipient (buyer) pays GST instead of the supplier.
Examples:
- Services from an unregistered supplier.
- Goods transport agency (GTA) services.
- Import of services.
13. What is the Composition Scheme under GST?
Answer: A simplified scheme for small businesses with turnover < Rs.1.5 Cr (Rs.75 lakhs for some states).
Features:
- Pay a fixed GST rate (1% for manufacturers, 5% for restaurants).
- No ITC claim allowed.
- Cannot sell inter-state.
- File GSTR-4 quarterly.
14. What is the time limit for claiming ITC under GST?
Answer: ITC must be claimed earlier of these two:
- Before filing September return of the next financial year.
- Annual return filing date (GSTR-9).
(For FY 2023-24, ITC must be claimed by 20th October 2024 or before filing GSTR-9.)
15. How is GST applicable to exports and imports?
Answer:
- Exports are treated as zero-rated under GST. Exporters can claim a refund of ITC or IGST paid.
- Imports are treated as inter-state supplies, so IGST is applicable along with customs duty.
16. What is GSTIN? How is it structured?
Answer: GSTIN (GST Identification Number) is a 15-digit unique number for taxpayers.
Structure:
- First 2 digits: State code (e.g., 27 for Maharashtra).
- Next 10 digits: PAN of the business.
- 13th digit: Entity number under same PAN.
- 14th digit: 'Z' by default.
- 15th digit: Check digit.
17. What are the penalties for late GST filing?
Answer:
- Late fee: Rs.50/day (Rs.25 CGST + Rs.25 SGST) for GSTR-1/GSTR-3B (Max Rs.5,000).
- Interest: 18% p.a. on unpaid tax (from due date to payment date).
- Cancellation of GST registration for continuous non-filing.
18. What is the Place of Supply under GST? How does it determine the type of GST levied?
Answer: The place of supply determines whether a transaction is considered intra-state (CGST and SGST/UTGST applicable) or inter-state (IGST applicable). The rules for determining the place of supply vary depending on the nature of goods or services and the location of the supplier and recipient.
19. What are exempt and nil-rated supplies under GST? What is the key difference between them?
Answer:
- Exempt supplies are goods or services that are not subject to GST, and no ITC can be claimed on inputs used for these supplies.
- Nil-rated supplies are goods or services that are taxable at a 0% GST rate. Unlike exempt supplies, businesses dealing in nil-rated supplies can claim ITC on their inputs.
20. What is the anti-profiteering clause in GST?
Answer: The anti-profiteering clause aims to ensure that the benefit of any reduction in GST rates or ITC availed by businesses is passed on to consumers by way of reduced prices. The National Anti-Profiteering Authority (NAA) was set up to investigate complaints of profiteering.
21. Explain the concept of mixed supply and composite supply under GST.
Answer:
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- Composite supply consists of two or more taxable supplies of goods or services, or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, where one of them is a principal supply. The GST rate of the principal supply applies to the entire composite supply. (Example: Buying a laptop with a pre-installed operating system.)
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- Mixed supply consists of two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price, where 1 these supplies are not naturally bundled. The GST rate of the supply with the highest rate applies to the entire mixed supply. (Example: A Diwali gift hamper containing sweets, chocolates, and dry fruits.)
Bonus: Common Follow-up Questions
- What is the difference between GST and VAT?
- How do you handle GST for exports? (Answer: 0% GST, refund available under LUT)
- What is the HSN code? (Harmonized System of Nomenclature for product classification)
- Stay updated with latest GST notifications & circulars (GST laws evolve frequently).
- Know how to use GST portal for filing returns and claiming refunds.
- Practical knowledge of using Tally / SAP / Excel for GST accounting is a big plus.