Launched on 1 July 2017, the Goods & Services Tax (GST) applies to all Indian service providers (including freelancers), traders and manufacturers. A variety of Central taxes like Service Tax, Excise Duty, CST and state taxes like Entertainment Tax, Luxury Tax, Octroi, VAT are accumulated in the GST. Also, taxpayers with a turnover of less than ₹1.5 crore can choose a composition scheme to get rid of tedious GST formalities and pay GST at a fixed rate of turnover.
Every product goes through multiple stages along the supply chain, including purchasing raw materials, manufacturing, selling to the wholesaler, selling to the retailer and then the final sale to the consumer. Interestingly, GST will be levied on all of these 3 stages. Let’s say if a product is produced in West Bengal but is being consumed in Uttar Pradesh, the entire revenue will go to Uttar Pradesh.
What is GST Registration?
Any Goods & Service business whose turnover exceeds 40 lacs and 20 lacs respectively (10 lakhs for NE and hill states), required to register as a taxable person. This process of tax registration is called GST registration.
For certain businesses, GST registration is mandatory. If those organizations carry out business without a valid GST registration, it will be an offence under GST and will face heavy penalties.
Who should get a GST registration?
- Business with turnover above 40/20 lakhs in a financial year. (10 lakh for Northeast states, J&K, Himachal Pradesh and Uttarakhand).
- Every e-commerce business.
- A Person or business who wants to sell through e-commerce business.
- Those who are paying tax under reverse charge mechanism.
- Agents of supplier and input service distributors.
- Casual taxable person/ Non-Resident taxable person.
What are the GST Tax Rates?
GST Tax rates vary from one business to another depending on the type of goods and nature of the services. However below is the list:
- Items that are considered as basic necessities come under 0% GST tax rates.
- Household necessary items and life-saving drugs, etc. are taxed at 5% GST.
- Product like processed foods and computers are taxed at 12% GST.
- Services and products like Hair oil, toothpaste, soaps are taxed at 18% GST.
- Luxury items are taxed at 28%.
Benefits of GST Registration:
- Elimination of Cascading Effects: GST eliminates the cascading effects of tax, ensuring that businesses only pay tax on the value added at each stage of the supply chain. This prevents double taxation and reduces the overall tax burden.
- Higher Threshold for Registration: Under the GST regime, the threshold for registration has been increased to 20 lakhs, exempting many small traders and service providers from the requirement to register. This benefits small businesses and reduces compliance costs.
- Composition Scheme for Small Businesses: The government has introduced a composition scheme for small businesses with a turnover between 20-75 lakhs. This scheme provides the option to pay lower taxes and simplifies the compliance process.
- Easy Online Process: GST registration and filings are done online, making the process simple and convenient. This benefits new businesses as they do not have to go through multiple registrations and can manage their tax obligations easily.
- Reduction in Compliance: With GST registration, businesses no longer need to maintain multiple registrations for different taxes such as VAT, Service Tax, and Excise. The number of compliance requirements is reduced, making it easier for businesses to meet their tax obligations.
- Regulation of the Unorganized Sector: GST brings accountability and regulation to industries that were previously unorganized, such as construction and textiles. Online compliance and payment provisions ensure greater transparency and formalization of these sectors.
It’s important to note that the benefits of GST registration may vary based on the specific circumstances and nature of each business. Consulting with professionals and referring to the relevant GST regulations can provide more detailed and tailored information regarding the benefits of GST registration.
Checklist for GST registration:
Business Details:
- Legal name of the business
- Trade name, if applicable
- Permanent Account Number (PAN)
- Aadhaar number or Passport number
- Contact details (address, email, phone number)
- Date of commencement of business
Proof of Constitution:
- For proprietorship: PAN and Aadhaar card of the proprietor
- For partnership firm: Partnership Deed
- For LLP: Certificate of Incorporation and LLP Agreement
- For company: Certificate of Incorporation and Memorandum & Articles of Association
- For trust or society: Trust Deed or Society Registration Certificate
Bank Account Details:
- Bank account number
- Bank branch address
- Bank account statement or first page of bank passbook
Proof of Address:
- Ownership document or lease agreement of the business premises
- Utility bill (electricity, water, gas, etc.) in the name of the business or proprietor
Authorized Signatory Details:
- Name and PAN of the authorized signatory
- Aadhaar number or Passport number of the authorized signatory
- Photograph of the authorized signatory
Goods and Services Details:
- Description of the goods or services provided by the business
- Harmonized System of Nomenclature (HSN) or Service Accounting Code (SAC) for the goods or services
Digital Signature Certificate (DSC):
- DSC of the authorized signatory (required for private limited company, LLP, and public limited company)
Additional Documents:
- Business registration certificate (if applicable)
- MOA/AOA (for company)
- Board resolution (for company)
It is important to note that the specific requirements for GST registration may vary based on the state and type of business.
The process of GST registration can be summarized as follows:
- Share your requirements and documents with a professional or submit them on the GST portal.
- The professional will submit the application on the GST portal.
- An Application Reference Number (ARN) will be generated for your application.
- The GST department will verify the application and documents.
- If needed, provide any additional information or clarifications requested.
- Once approved, you will receive the GST registration certificate electronically.
Please note that the actual process may involve more specific steps and requirements based on your jurisdiction and circumstances. It’s recommended to consult a professional or refer to the official GST portal for detailed instructions and guidelines.
Key deliverables of the GST registration process:
- GST Registration Certificate: You will receive a certificate as proof of your GST registration.
- GST Login Credentials: You will be provided with login credentials to access the GST portal.
These deliverables are important for complying with GST regulations and managing your GST-related activities effectively.
What do you want to know?
Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed.
A penalty of 10% of the tax amount due subject to a minimum of Rs.10,000. The penalty will at 100% of the tax amount due when the offender has deliberately evaded from paying taxes.
If a business operates from more than one state, the taxpayer should obtain a separate GST registration for each state.
GST will have 3 tax components
- Central Goods and Services Tax or CGST
- State Goods and Services Tax or SGST
- Inter-state transactions will attract the Integrated Goods and Services Tax (IGST)
Input tax credit lets you to reduce your tax that you have already paid on inputs and pay the remaining amount at the time of paying tax.