GST is a multi-stage tax system which is comprehensive in nature and applied on the sale of goods and services. The main aim of this taxation system is to curb the cascading effect of other Indirect taxes and it is applicable throughout India.
GST is referred as Goods and Services Tax. It was implemented to replace a variety of previous indirect taxes, including the value added tax, service tax, purchase tax, excise duty, and others. GST is a tax that India imposes on the supply of specific products and services. There is only one tax that is imposed in India.
How GST Works?
Manufacturer: The manufacturer will have to pay GST on the raw material that is purchased and the value that has been added to make the product.
Service Provider: In this case, the service provider will be responsible for paying GST on both the product's purchase price and the value added to it. However, the manufacturer's tax payment may be deducted from the total GST that must be paid.
Retailer: It must be paid by the retailer on both the product they bought from the distributor and the margin they added. However, the retailer's tax payment may be deducted from the total amount of GST that must be paid.
Consumer: GST must be paid on the product that has been purchased.
Use the Trademark Class Finder Tool
There are four different components of GST such as CGST, SGST, IGST, and UTGST.
CGST: Central Goods and Services Tax is charged on the intra state supply of products and services.
SGST: State Goods and Services Tax like CGST, is charged on the sale of products or services within a state.
IGST: Integrated Goods and Services Tax is charged on inter-state transactions of products and services.
UTGST: Union Territory Goods and Services Tax is levied on the supply of products and services in any of the Union Territories in the country, viz. Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh. UTGST is levied along with CGST.
Objective of GST
The following are the key objectives of Goods and Services Tax:
To minimize the cost
To enhance the productivity and efficiency
To make taxation simple by eliminating multiple tax system
Enhances the compliances with businesses
To improve the country’s revenue
To make ‘One Nation, One Tax’
To replace majority of indirect taxes
To widen taxpayer base in India
To decrease the cascading effect of taxes
History of GST
On July 1st 2017, the Goods and Services Tax implemented in India. But, the process of implementing the new tax regime commenced a long time ago. In 2000, Atal Bihari Vajpayee, then Prime Minister of India, set up a committee to draft the GST law. In 2004, a task force concluded that the new tax structure should put in place to enhance the tax regime at the time.
In 2006, Finance Minister proposed the introduction of GST from 1st April 2010 and in 2011 the Constitution Amendment Bill passed to enable the introduction of the GST law. In 2012, the Standing Committee started discussions about GST, and tabled its report on GST a year later. In 2014, the new Finance Minister at the time, Arun Jaitley, reintroduced the GST bill in Parliament and passed the bill in Lok Sabha in 2015. Yet, the implementation of the law delayed as it was not passed in Rajya Sabha.
GST went live in 2016, and the amended model GST law passed in both the house. The President of India also gave assent. In 2017 the passing of 4 supplementary GST Bills in Lok Sabha as well as the approval of the same by the Cabinet. Rajya Sabha then passed 4 supplementary GST Bills and the new tax regime implemented on 1st July 2017.
Tax Laws Before the Implementation of GST
The Centre and the State used to collect tax separately. Depending on the state, the tax regimes were different.
Even though import tax was levied on one individual, the burden was levied on another individual. In the cases of direct tax, the taxpayer must pay the tax.
Prior to the introduction of GST, direct and indirect taxes were present in India.
Who Should Register for GST?
The below mentioned entities and individuals must register for Goods And Services Tax:
E-commerce aggregators
Individuals who supply through e-commerce aggregators
Individuals who pay tax as per the reverse change mechanism
Agents of input service distributors and suppliers
Non-Resident individuals who pay tax
Businesses that have a turnover that is more than the threshold limit
Individuals who have registered before the GST law was introduced
Registration of GST
Any company that is eligible under GST must register itself in the GST portal created by the Government of India. The registered entities will get a unique registration number called GSTIN.
It is mandatory for all Service providers, buyers, and sellers to register. A business that makes a total income of Rs.20 lakhs and more in a financial year must be required to do GST registration. It takes 2-6 working days to process.
How to know the GSTIN - GST Identification Number?
A 15-digit distinctive code that is provided to every taxpayer is the GSTIN. The GSTIN will be provided based on the state you live at and the PAN. Some of the main uses are mentioned below:
Loans can be availed with the help of the number
Refunds can be claimed.
The verification process is easy.
Corrections can be made.
Verify GST Number Online by visiting GST official Page. Enter the GSTIN mentioned on the invoice in the search box and followed by captcha, Final click "enter" to view the details.
GST Registration Certificate
A GST Certificate is a legal document that the relevant authorities issue to a company that has registered for the GST system. Under this system, enterprises having a yearly revenue of at least Rs. 20 lakhs and some special businesses must register. Form GST REG-06 is used to issue the GST registration certificate. From the official GST Portal, you can download the GST Certificate if you are a registered taxpayer under this system.
The certificate is not physically handed out. It is only accessible digitally. GSTIN, Legal Name, Trade Name, Business Constitution, Address, Date of Liability, Validity Period, Types of Registration, Particulars of Approving Authority, Signature, Specifications of the Approving GST Officer, and Date are all included on the GST Certificate.
GST Registration
GST (Goods and Services Tax) registration is a mandatory tax registration for businesses engaged in the supply of goods or services in India. It has replaced several indirect taxes levied by the central and state governments. Here are the key points regarding GST registration in India:
1. Eligibility:
Threshold Limit: As of my last update in September 2021, businesses with an annual turnover of more than Rs. 20 lakhs (Rs. 10 lakhs for special category states) are required to register for GST. However, this threshold limit can change, so it's important to check the latest regulations.
2. Types of GST Registration:
Regular GST: For businesses with a turnover above the threshold limit.
Composition Scheme: Available for businesses with a turnover up to a certain limit. Businesses under this scheme are taxed at a nominal rate and are required to file simplified returns.
3. Documents Required:
PAN Card of the Business
Proof of Constitution of Business (Partnership Deed, Certificate of Incorporation, etc.)
Identity and Address Proof of Promoters/Directors
Address Proof of the Place of Business
Bank Account Details
Digital Signature
Letter of Authorization/Board Resolution for Authorized Signatory (in case of companies)
Photographs of Promoters/Directors/Partners
Specimen Signature
4. Application Process:
Online Application: The application for GST registration is done online through the GST portal.
GST Common Portal: The GST Common Portal (www.gst.gov.in) is used for all activities such as registration, return filing, payment of taxes, etc.
GSTIN: After successful verification, a unique GST Identification Number (GSTIN) is issued to the applicant.
5. Input Tax Credit (ITC):
Claiming ITC: GST registered businesses can claim input tax credit on the taxes paid on their purchases, which helps in avoiding the cascading effect of taxes.
6. Filing Returns:
Regular Filing: GST-registered businesses need to file monthly, quarterly, and/or annual GST returns based on their turnover.
7. Late Fees and Penalties:
Compliance: Timely filing of returns and payment of taxes is crucial to avoid late fees and penalties.
8. GST Rates:
Different Slabs: Goods and services are categorized under different tax slabs (0%, 5%, 12%, 18%, and 28%). It's important to charge the correct GST rate on your supplies.
9. Audit and Assessment:
Audit: GST audits can be conducted by tax authorities to ensure compliance.
Assessment: Tax authorities can assess a business's GST liability and compliance.
10. Cancellation of Registration:
Voluntary or Mandatory: Registration can be canceled voluntarily by the business or mandatorily by the tax authorities under certain circumstances.
GST Registration Turnover Limit
GST registration can be obtained voluntarily by any person or entity irrespective of turnover. GST registration becomes mandatory if a person or entity sells goods or services beyond a certain turnover.
Service Providers: Any person or entity who provides service of more than Rs.20 lakhs in aggregate turnover in a year is required to obtain GST registration. In special category states, the GST turnover limit for service providers has been fixed at Rs.10 lakhs.
Goods Suppliers: As per notification No.10/2019 any person who is engaged in the exclusive supply of goods whose aggregate turnover crosses Rs.40 lakhs in a year is required to obtain GST registration. To be eligible for the Rs.40 lakhs turnover limit, the supplier must satisfy the following conditions:
Should not be providing any services.
The supplier should not be engaged in making intra-state (supplying goods within the same state) supplies in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand.
Should not be involved in the supply of ice cream, pan masala or tobacco.
If the above conditions are not met, the supplier of goods would be required to obtain GST registration when the turnover crosses Rs.20 lakhs and Rs.10 lakhs in special category states.
Special Category States: Under GST, the following are listed as special category states - Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
Aggregate Turnover: Aggregate turnover = (Taxable supplies + Exempt Supplies + Exports + Inter-State Supplies) – (Taxes + Value of Inward Supplies + Value of Supplies Taxable under Reverse Charge + Value of Non-Taxable Supplies).
Aggregate turnover is calculated based on the PAN. Hence, even if one person has multiple places of business, it must be summed to arrive at the aggregate turnover.
Types of GST Registration
There are various types of GST registration like regular, casual taxable persons, non-resident taxable persons and eCommerce operators. Casual taxable persons, non-resident taxable persons and eCommerce operators are required to obtain GST registration irrespective of turnover limit.
Casual Taxable Persons: The GST Act defines as a casual taxable person as a person who occasionally supplies goods or services in a State or a Union territory where the entity has no fixed place of business. Hence, persons running temporary businesses in fairs or exhibitions or seasonal businesses would fall under casual taxable person under GST.
Non-resident Taxable Persons: Non-resident taxable person (NRI) under GST is any person or business or not-for-profit supplying goods or services but have no fixed place of business or residence in India. Thus, any foreign person or foreign business or organisation supplying goods or services to India would be a non-resident taxable person – requiring compliance with all GST regulations in India.
E-Commerce Operators: Electronic commerce operator is every person who, owns, operates or manages digital or electronic facility or platform for electronic commerce. Thus, any person selling through the internet can be termed as an eCommerce Operator requiring GST registration irrespective of business turnover.
What is GSTIN?
GSTIN or Goods and Services Tax Identification Number (GSTIN) is provided to entities having GST registration number. GSTIN is 15 characters in length. The allocation of GSTIN is based on PAN and State of the applicant. In a GST registration number, the first two digits represent the State Code. The following next 10 digits represent the PAN of the applicant.
Voluntary GST Registration
Any person or entity that wishes to supply goods or services can obtain GST registration voluntarily, irrespective of business turnover. Voluntarily obtaining GST registration can help the business avail Input Tax Credit and also provide GST bill to customers.
Penalty for NOT Obtaining GST Registration.
Any person or entity that crosses the aggregate turnover limit must obtain GST registration within 30 days of becoming liable to obtain GST registration. Delay or non-compliance can lead to a penalty of Rs. 10,000 and loss of input tax credit during the period of delay.
Benefits of GST Registration
The following are some of the advantages of GST registration:
Bank Loans: GST registration and GST return filing serve as proof of business activity and create track record for a business. Banks and NBFCs lend to businesses based on GST return data. Hence, GST registration can help you formalize your business and get credit.
Supplier Onboarding: To become a supplier of reputed companies, GST registration is often times a must during the supplier onboarding process. Hence, GST registration can help you get more business.
eCommerce: GST registration is a must to sell online and through various platforms like Amazon, Flipkart, Snapdeal, Zomato, Swiggy, etc., Hence, having a GST registration will allow you to sell online.
Input Tax Credit: Entities having GST registration are eligible to collect GST from customer for the supply and offset the liability against GST taxes paid while purchasing various goods and services. Hence, GST registration can help you save on taxes and improve margins.
Documents Required for GST Registration
Sole proprietor / Individual
PAN card of the owner
Aadhaar card of the owner
Photograph of the owner (in JPEG format, maximum size – 100 KB)
Bank account details*
Address proof**
LLP and Partnership Firms
PAN card of all partners (including managing partner and authorized signatory)
Copy of partnership deed
Photograph of all partners and authorised signatories (in JPEG format, maximum size – 100 KB)
Photograph of all partners and authorised signatories (in JPEG format, maximum size – 100 KB)
In the case of LLP, registration certificate / Board resolution of LLP
Bank account details*
Address proof of principal place of business
HUF
PAN card of HUF
PAN card and Aadhar card of Karta
Photograph of the owner (in JPEG format, maximum size – 100 KB)
Bank account details
Address proof of principal place of business
Company (Public and Private) (Indian and foreign)
PAN card of Company
Certificate of incorporation given by Ministry of Corporate Affairs
Memorandum of Association / Articles of Association
PAN card and Aadhar card of authorized signatory. The authorised signatory must be an Indian even in case of foreign companies/branch registration
PAN card and address proof of all directors of the Company
Photograph of all directors and authorised signatory (in JPEG format, maximum size – 100 KB)
Board resolution appointing authorised signatory / Any other proof of appointment of authorised signatory (in JPEG format / PDF format, maximum size – 100 KB)
