In today's dynamic business environment, it is essential for Indian small and medium businesses and startup founders to be aware of tax regulations and compliance. The implementation of GST has brought a significant change in the tax structure of India, leading to the revision of VAT returns, CENVAT and service tax regulations.
Let us first understand what VAT, CENVAT and Service Tax are and how they were regulated before the implementation of GST.
VAT or Value Added Tax is a consumption tax charged on the value added to goods and services at each stage of production or distribution. The tax is levied on the final price paid by the consumer. Before GST implementation, VAT was regulated through various state-level VAT Acts. The VAT returns were filed monthly or quarterly, based on the turnover of the business.
CENVAT or Central Value Added Tax is a tax on the value added during the production or manufacturing of goods. The tax is paid by the manufacturer or producer of goods. Before GST implementation, CENVAT was regulated through the Central Excise Act, 1944. The CENVAT returns were filed monthly or quarterly, based on the turnover of the business.
Service Tax is a tax levied on the services provided by businesses. Prior to GST implementation, service tax was regulated through the Finance Act, 1994. The service tax returns were filed twice a year.
After the implementation of GST, VAT and other indirect taxes were subsumed under GST. However, businesses that were registered under VAT had to file a final VAT return for the period ending on June 30, 2017, before migrating to GST. This final VAT return had to be filed irrespective of the turnover of the business.
Further, businesses that were not registered under VAT but were liable to pay VAT had to register themselves under VAT and file VAT returns for the previous financial year, i.e. 2016-17. The deadline for registering under VAT and filing VAT returns for the previous financial year was September 30, 2017.
The VAT returns are now filed under the GST regime. The VAT returns have been replaced with GSTR-1 and GSTR-3B. GSTR-1 is a monthly or quarterly return, depending on the turnover of the business, that contains details of outward supplies made during the period. GSTR-3B is a monthly return that contains details of inward and outward supplies, input tax credit and tax liability.
After the implementation of GST, CENVAT and Service Tax were also subsumed under GST. The CENVAT returns were replaced with GSTR-3B, which contains details of inward and outward supplies, input tax credit and tax liability. The service tax returns were replaced with GSTR-3B for the period July 2017 to June 2018. From July 2018 onwards, the service tax returns were replaced with GSTR-9, which is an annual return that contains details of outward and inward supplies made during the financial year, input tax credit availed, tax paid and other related information.
The implementation of GST has led to the revision of VAT returns, CENVAT and service tax regulations. Indian small and medium businesses and startup founders must be aware of the changes in the tax structure and comply with the regulations to avoid penalties and legal issues.
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