{"id":15191,"date":"2024-08-30T22:38:39","date_gmt":"2024-08-30T17:08:39","guid":{"rendered":"https:\/\/piceapp.com\/blogs\/?p=15191"},"modified":"2024-08-30T22:38:39","modified_gmt":"2024-08-30T17:08:39","slug":"difference-between-gst-and-income-tax","status":"publish","type":"post","link":"https:\/\/piceapp.com\/blogs\/difference-between-gst-and-income-tax\/","title":{"rendered":"Difference Between GST and Income Tax"},"content":{"rendered":"\n<div class=\"wp-block-group has-background\" style=\"background-color:#f2f5f9\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<h3 class=\"wp-block-heading\">Key Takeaways<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>GST is an indirect tax levied on the consumption of goods and services, whereas income tax is a direct tax based on annual earnings.<\/li>\n\n\n\n<li>GST replaces multiple indirect taxes and is categorized into CGST, SGST, and IGST for intra-state and inter-state transactions.<\/li>\n\n\n\n<li>Income tax funds public services and infrastructure, with different forms (ITRs) for various income sources and business types.<\/li>\n\n\n\n<li>GST returns are filed monthly, quarterly, and annually, while income tax returns are typically filed annually by individuals and businesses.<\/li>\n\n\n\n<li>Non-compliance with GST and income tax regulations results in penalties, interest charges, and potentially severe legal consequences<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<p>The Goods and Services Tax (GST) significantly differs from income tax, serving distinct purposes within the broader Indian taxation framework. GST is an indirect taxation method that aims to streamline the existing <a href=\"https:\/\/www.investopedia.com\/terms\/t\/taxation.asp\" target=\"_blank\" rel=\"noopener\">tax system<\/a> by eliminating other multiple taxes. On the other hand, income tax is directly levied on individuals and businesses based on their annual income. If you want to understand the <strong>difference between GST and income tax<\/strong> in detail, keep reading this guide.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What Is GST and How Does it Work?<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/piceapp.com\/blogs\/wp-content\/uploads\/2024\/08\/What-Is-GST-and-How-Does-it-Work-1024x576.png\" alt=\"What Is GST and How Does it Work?\" class=\"wp-image-15227\" style=\"aspect-ratio:16\/9;object-fit:cover\" title=\"\"><figcaption><\/figcaption><\/figure>\n\n\n\n<p>The Goods and Services Tax is a destination-based tax acquired by sellers of goods and services. It has replaced all other indirect taxes that were collected before, such as service tax, VAT, central excise duty, etc. Since its introduction, the Government of India has experienced a smooth transfer of tax credits from suppliers, thus eliminating the cascading effect to a great extent.<\/p>\n\n\n\n<p>\\It has three primary components: IGST, CGST and SGST. When the GST is applied by the Central Government on taxable supplies, it is classified as CGST. Whereas, SGST is the GST component which is imposed by the concerned <a href=\"https:\/\/www.collinsdictionary.com\/dictionary\/english\/state-authority\" target=\"_blank\" rel=\"noopener\">state authorities<\/a>. Both CGST and SGST are levied for intra-state supply of goods and services.<\/p>\n\n\n\n<p>When an interstate supply of goods or services takes place, the Central Government applies IGST on those transactions. These indirect taxes are governed by the GST Act, which came into force on July 1st, 2017.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Types of GST Returns<\/strong><\/h2>\n\n\n\n<p>In India, taxpayers may need to file various types of GST returns. The most common types of GST returns, depending on the specific business type, are as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GSTR-1<\/strong><\/li>\n<\/ul>\n\n\n\n<p>This form is submitted by business owners who must reveal their sales turnover or outgoing supplies on a monthly basis.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GSTR-2A<\/strong><\/li>\n<\/ul>\n\n\n\n<p>It is an automatically generated report that declares the details of all purchases executed by a registered taxpayer.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GSTR-3B<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Taxpayers should issue Form GSTR-3B to put forward details regarding their sales, purchases and input tax claims.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GSTR-4<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Small business owners access this form to process quarterly return. It has different fields for GST returns on a quarterly basis.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GSTR-5<\/strong><\/li>\n<\/ul>\n\n\n\n<p>It is a reserved form for NRIs who are temporarily registered under the GST Act in India.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GSTR-6<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Input Service Distributors (ISDs) file this report to distribute ITC among their units.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GSTR-7<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Any entity that deducts TDS from other taxpayers must access this form and submit it within the relevant timeframe.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GSTR-9<\/strong><\/li>\n<\/ul>\n\n\n\n<p>All registered taxpayers must submit GSTR-9 yearly. It gives a summary of all the claims for input tax credits and a detailed list of all transactions made during the previous financial year.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GSTR-10<\/strong><\/li>\n<\/ul>\n\n\n\n<p>You only need to use this if you wish to cancel your registration under GST.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Filing and Due Dates for GST Returns<\/strong><\/h3>\n\n\n\n<p>The GST filing due dates vary based on the type of return and the concerned individual\u2019s annual income. For instance, business owners must submit the GSTR-1 within the 11th day of the following month. Similarly, GSTR-3B needs to be uploaded within the 20th of the next month. Consequently, GSTR-9 is an annual return and must be submitted on 31st December.<\/p>\n\n\n\n<p>Additionally, if you are a registered taxpayer with revenue less than or equal to \u20b95 crores then you may opt for quarterly filing of GSTR-3B and GSTR-1 instead of every month. In case you miss the timeline, late fees and <a href=\"https:\/\/www.investopedia.com\/terms\/i\/interest.asp\" target=\"_blank\" rel=\"noopener\">interest charges<\/a> are levied on the amount owed towards the Government of India.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Penalties for Non-compliance<\/strong><\/h3>\n\n\n\n<p>There are set rules regarding the imposition of fines, interest and late charges for taxpayers who fail to meet their respective GST criteria. Even imprisonment is a possible consequence besides financial obligations for individuals guilty of tax avoidance.<\/p>\n\n\n\n<p>If GST returns are not filed on time, late fees are applied at a rate of \u20b950 per day, with a maximum penalty of 0.25% of the registered taxpayer&#8217;s revenue. The same fee is \u20b920 per day for individuals with no obligation. Additionally, the overdue taxes are subject to a yearly interest rate of 18%. To maintain the validity of GSTIN, one must adhere to these rules.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What Is Income Tax and How Does it Work?<\/strong><\/h2>\n\n\n\n<p>Income tax is a direct tax levied from both businesses and individual income earners according to their yearly income. While calculating the tax amount, the taxable income after deductions and appropriate tax slabs are cautiously adhered to.<\/p>\n\n\n\n<p>The funds raised through income tax are used for public healthcare, general infrastructure development and education. It is essential for taxpayers to file income tax returns and clear off their tax dues on time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Types of Income Tax Returns<\/strong><\/h2>\n\n\n\n<p>According to their business nature and revenue sources, individuals and businesses must file several categories of Income Tax Returns (ITRs). The ITR-1 form is accessed by individuals who get monthly wages or pensions. Similarly, the ITR-2 form is used by entities earning through dividends, capital gains or international transactions.<\/p>\n\n\n\n<p>However, for businesses, there are three different ITR forms: ITR-3, ITR-4, and ITR-5. The one that needs to be selected by the business specifically depends on their annual turnover and list of revenue sources.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Filing and Due Dates for Income Tax Returns<\/strong><\/h3>\n\n\n\n<p>To avoid late fees, individual taxpayers and businesses must file income tax returns within the prescribed deadlines.<\/p>\n\n\n\n<p>Conventionally, for individuals, the deadline for filing ITRs has been set as 31st July of the assessment year. For business corporations and partnership firms, the last ITR filing date is 30th September of the assessment year.<\/p>\n\n\n\n<p>You can use two methods to submit the <a href=\"https:\/\/www.investopedia.com\/terms\/t\/taxreturn.asp\" target=\"_blank\" rel=\"noopener\">income tax returns<\/a>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>By mailing a paper copy to the Income Tax Department<\/li>\n\n\n\n<li>By opting for the e-filing option on the official Income Tax website<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Penalties for Non-compliance<\/strong><\/h3>\n\n\n\n<p>A late income tax filing can cost you fines of up to \u20b910,000. It includes penalties of 50% to 200% levied on the tax evaded along with additional interest charges. Repeated instances can even result in a prison sentence.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Difference Between GST Return and Income Tax Return<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"What is GST &amp; Income Tax? Difference between both taxes I Indirect &amp; Direct Tax I Startroot Fintech\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/4PABbBriZwo?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<p>Income tax and GST differ primarily in how they are imposed. While income tax is based solely on an entity&#8217;s annual income, GST is imposed based on the consumption of goods and services. Simply put, income tax is a direct taxation method, unlike the GST.<\/p>\n\n\n\n<p>In the following table, you can find some key differences between the two taxation systems:<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Parameter<\/strong><\/td><td><strong>GST<\/strong><\/td><td><strong>Income Tax<\/strong><\/td><\/tr><tr><td>Tax filing norms<\/td><td>GST registration becomes compulsory when the turnover is more than \u20b940 lakhs for the normal category. For a particular category, GST registration has to be done for revenue of \u20b920 lakhs or more.<\/td><td>Individual taxpayers must pay income tax if their earning crosses \u20b95 lakhs in a year.<\/td><\/tr><tr><td>Payment norms<\/td><td>Burden of tax payment is shifted to the final consumer of goods or services.<\/td><td>Tax has to be furnished by the concerned individuals themselves.<\/td><\/tr><tr><td>Coverage<\/td><td>GST coverage is comprehensive in nature as all members of the society are taxed.<\/td><td>Income tax applicability is restricted to specific salary slab and income brackets.<\/td><\/tr><tr><td>Heads of Tax<\/td><td>GST rates are charged against the services provided or the goods supplied.<\/td><td>Income tax applies to annual salary, rental income from house property, capital gains, etc.<\/td><\/tr><tr><td>Transferability<\/td><td>GST is transferred from one person to another.<\/td><td>Income tax is non-transferable.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Calculation Differences<\/strong><\/h2>\n\n\n\n<p>You can notice prominent differences while analysing the calculation of GST and ITR filing. When GST is evaluated, the combined value of supplies (consumer products\/services) is considered. On the other hand, ITR is calculated based on the net income after all sorts of deductions and exemptions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Compliance Differences<\/strong><\/h2>\n\n\n\n<p>Both in the case of GST and income tax payment, if the taxpayer fails to meet the guidelines, they become liable to pay penalties. Sometimes even stricter legal consequences follow.<\/p>\n\n\n\n<p>If you are not able to clear the GST dues on time, imprisonment can follow along with monetary penalties. However, ITR non-compliance leads to extra charges of up to \u20b910,000 on the unpaid amount.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Are VAT and GST the Same?<\/strong><\/h2>\n\n\n\n<p>GST and VAT are two separate forms of indirect taxes. GST is paid by consumers against the supply of goods and services. Contrarily, VAT or Value-Added Tax is collected by the state government from manufacturers of supplies at different stages of the supply chain. With no intervention from the <a href=\"https:\/\/en.wikipedia.org\/wiki\/Central_government\" target=\"_blank\" rel=\"noopener\">Central Government, <\/a>the tax liability of VAT varies from state to state.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Significant Differences Between GST Filing and ITR Filing<\/strong><\/h2>\n\n\n\n<p>As both GST and income tax are different regimes, the procedures for filing returns also vary from each other. In the following section, you can understand this in a better manner:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Under GST, there are 13 returns altogether. Hence, taxpayers must access the forms according to their nature of business. Conversely, 7 types of income tax returns exist as per the IT Act. You must file only those that apply to you.<\/li>\n\n\n\n<li>Businesses managing a turnover of more than \u20b940 lakhs (for goods) or \u20b920 lakhs (for services) must file GST returns. At the same time, income tax returns should be filed by all Indians who have a source of income exceeding \u20b92.5 lakh.&nbsp;<\/li>\n\n\n\n<li>Finally, GST returns are to be filed monthly, quarterly and even annually. On the other hand, ITR filing as per income levels is necessary once a year.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Conclusion<\/strong><\/h2>\n\n\n\n<p>The collection of GST and income tax plays a crucial role in sustaining and bolstering a country&#8217;s economy. In addition, paying adequate indirect and direct taxes on time makes a registered taxpayer eligible for all kinds of tax benefits like exemptions, tax credits and deductions. Therefore, it is beneficial to understand the differences between the GST and income tax structures to responsibly maintain all relevant records.<\/p>\n\n\n\n<p class=\"has-ast-global-color-4-background-color has-background\">\ud83d\udca1 If you want to pay your GST with Credit Card, then download\u00a0<a href=\"https:\/\/play.google.com\/store\/apps\/details?id=one.pice.pice_business_loan&amp;_branch_match_id=1260478299341712556&amp;utm_source=website&amp;utm_campaign=homepage&amp;utm_medium=website&amp;_branch_referrer=H4sIAAAAAAAAA8soKSkottLXz8wryyxJ1SvITE5NLCjQS87P1S9PTcrIz00FAMR0ueciAAAA\" target=\"_blank\" rel=\"noreferrer noopener\">Pice Business Payment App<\/a>. Pice is the one stop app for paying all your business expenses.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">FAQs<\/h3>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1722527229762\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What is the primary difference between GST and income tax?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>GST is an indirect tax applied to the consumption of goods and services, collected from consumers by businesses and remitted to the government. Income tax, on the other hand, is a direct tax levied on an individual&#8217;s or business&#8217;s annual income, paid directly by the taxpayer to the government.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1722527241182\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What are the main components of GST?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>GST in India consists of three main components: CGST (Central Goods and Services Tax) for intra-state transactions collected by the central government, SGST (State Goods and Services Tax) for intra-state transactions collected by state governments, and IGST (Integrated Goods and Services Tax) for inter-state transactions collected by the central government.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1722527249360\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">Who is required to file GST returns?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Businesses with an annual turnover exceeding \u20b940 lakhs for goods or \u20b920 lakhs for services must register for GST and file returns. Different types of returns, such as GSTR-1, GSTR-3B, and GSTR-9, need to be filed based on the business activity and reporting period (monthly, quarterly, or annually).<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1722527257206\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What happens if I fail to file my income tax return on time?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Failing to file income tax returns by the due date can result in penalties up to \u20b910,000, additional interest charges on the unpaid amount, and potential legal consequences, including imprisonment for repeated non-compliance. It&#8217;s crucial to adhere to deadlines to avoid these penalties.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1722527265555\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">Can I claim deductions under both GST and income tax?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Yes, taxpayers can claim input tax credits (ITC) under GST for taxes paid on business-related purchases. For income tax, various deductions are available under sections like 80C, 80D, and 80G, which help reduce the taxable income. Understanding eligible deductions in both regimes can significantly lower overall tax liability.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Key Takeaways The Goods and Services Tax (GST) significantly differs from income tax, serving distinct purposes within the broader Indian taxation framework. GST is an indirect taxation method that aims to streamline the existing tax system by eliminating other multiple taxes. On the other hand, income tax is directly levied on individuals and businesses based [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":15224,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-15191","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-gst"],"_links":{"self":[{"href":"https:\/\/piceapp.com\/blogs\/wp-json\/wp\/v2\/posts\/15191","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/piceapp.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/piceapp.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/piceapp.com\/blogs\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/piceapp.com\/blogs\/wp-json\/wp\/v2\/comments?post=15191"}],"version-history":[{"count":0,"href":"https:\/\/piceapp.com\/blogs\/wp-json\/wp\/v2\/posts\/15191\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/piceapp.com\/blogs\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/piceapp.com\/blogs\/wp-json\/wp\/v2\/media?parent=15191"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/piceapp.com\/blogs\/wp-json\/wp\/v2\/categories?post=15191"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/piceapp.com\/blogs\/wp-json\/wp\/v2\/tags?post=15191"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}