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An overview to Goods & Service Tax
The Goods and Services Tax (GST) is a consumption tax levied on goods and services in various countries. It's collected by businesses from consumers and then remitted to the government. In India, GST was officially implemented on 1st July 2017, replacing the previous complex system of multiple taxes like excise duty, service tax, and value-added tax (VAT).
The 101st Constitutional Amendment Act of 2016, a pivotal legislation in the Indian Constitution, marked a significant milestone in the country's economic landscape. Enacted to introduce the Goods and Services Tax (GST), this amendment streamlined the tax system, fostering economic growth. The GST, essentially a value-added tax, was rolled out nationwide as a result of this constitutional amendment.
Under the GST regime, registration is mandatory for businesses exceeding a specified annual turnover. This ensures compliance with tax regulations and fosters transparency in the taxation process.
Key Components of Goods and Service Tax (GST)
The Goods and Services Tax (GST) system in India comprises several components, each serving a distinct purpose:
- Central Goods and Services Tax (CGST):
- Levied by the central government on both intra-state and inter-state supplies of goods and services.
- The CGST rate remains uniform across all states and union territories.
- State Goods and Services Tax (SGST):
- Imposed by the state government on intra-state supplies of goods and services.
- The SGST rate varies from one state to another.
- Integrated Goods and Services Tax (IGST):
- Levied by the central government on inter-state supplies of goods and services.
- Calculated as the sum of CGST and SGST rates.
- Union Territory Goods and Services Tax (UTGST):
- Imposed by the central government on supplies of goods and services within a union territory.
- The UTGST rate mirrors the SGST rate.
These components ensure a comprehensive tax structure covering various transaction types, as outlined below:
- Intra-state supply of goods and services: Subject to CGST and SGST.
- Inter-state supply of goods and services: Attracts IGST.
- Supply of goods and services from a state to a union territory: Incurs CGST.
- Supply of goods and services from a union territory to a state: Attracts SGST.
- Supply of goods and services within a union territory: Subject to UTGST.
Who Needs to Register for GST?
Registration for GST is mandatory for the following individuals and entities:
- Business Entities: Any business with an annual turnover exceeding Rs. 40 lakhs is required to register for GST. However, for special category states, this threshold is Rs. 20 lakhs.
- Service Providers: Service providers with an annual turnover exceeding Rs. 20 lakhs (Rs. 10 lakhs for special category states) must register for GST.
- Exemptions: Entities dealing exclusively with GST-exempted goods or services are not subject to turnover thresholds.
- Previously Registered Entities: Entities registered under older tax frameworks (such as Excise, VAT, Service Tax, etc.) must migrate and register under the GST regime.
- Inter-State Suppliers: Individuals or entities involved in the supply of goods across state boundaries.
- Casual Taxable Entities: Those who occasionally undertake taxable supplies.
- Entities under Reverse Charge Mechanism: Businesses are obligated to pay tax under the reverse charge mechanism.
- Input Service Distributors & Agents: Distributors of input services and their representatives.
- E-Commerce Platforms: Operators or aggregators of e-commerce platforms.
- Non-Resident Taxable Entities: Individuals or entities that are non-resident but engage in taxable supply within India.
- Supplier's Agents: Representatives supplying goods on behalf of a principal supplier.
- E-Commerce Suppliers: Individuals or entities offering goods or services through an e-commerce aggregator.
- Online Service Providers: Entities delivering online information, database access, or retrieval services from outside India to individuals in India, excluding those already registered under GST.
GST Registration Turnover Limits
- Service Providers: GST registration is mandatory for service providers with an aggregate turnover exceeding Rs. 20 lakhs annually. For special category states, this limit is Rs. 10 lakhs.
- Goods Suppliers: As per notification No.10/2019, suppliers exclusively engaged in the supply of goods must register for GST if their annual turnover crosses Rs. 40 lakhs. However, certain conditions apply:
- They should not provide any services.
- They should not make intra-state supplies in specific states.
- They should not supply ice cream, pan masala, or tobacco.
Special Category States: Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, and Uttarakhand are designated as special category states.
Aggregate Turnover Calculation
Aggregate turnover includes taxable supplies, exempt supplies, exports, and inter-state supplies, minus taxes, value of inward supplies, value of supplies taxable under reverse charge, and value of non-taxable supplies. It's calculated based on PAN, combining turnover from multiple places of business.
Benefits of GST Registration for Businesses
- Access Input Tax Credit (ITC): Registered businesses can claim input tax credit on the GST paid for their purchases of goods and services. This effectively reduces the overall tax burden on the business, enhancing its competitiveness.
- Interstate Trade Opportunities: GST registration allows businesses to engage in interstate trade without any restrictions. This flexibility is particularly advantageous for businesses operating in multiple states, facilitating seamless business operations across regions.
- Online Presence: Many online and e-commerce platforms mandate GST registration for businesses to sell their products and services online. Being registered ensures easy access to online markets, expanding business reach and opportunities.
- Competitive Edge: GST registration signifies business credibility and reliability, offering a competitive advantage over unregistered counterparts. It enhances trust among customers and partners, leading to increased business opportunities.
- Government Benefits Eligibility: Registered businesses are eligible for various government benefits, including tax breaks, subsidies, and loans. These incentives can significantly support business growth and development.
- Composition Scheme Option: Small businesses with an annual turnover of up to Rs. 1.5 crore can opt for the GST composition scheme. This simplifies tax compliance by allowing businesses to pay a fixed rate of GST on their turnover, rather than calculating and paying GST on individual transactions.
- Higher Threshold: Businesses with an annual turnover of up to Rs. 40 lakhs are not required to register for GST, providing relief from compliance burdens for small enterprises and startups.
Required Documents for GST Registration
Sole Proprietor / Individual
- PAN card of the owner
- Aadhar card of the owner
- Photograph of the owner (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 authorized signatories (JPEG format, maximum size – 100 KB)
- Address proof of partners (Passport, driving license, Voters identity card, Aadhar card, etc.)
- Aadhar card of authorized signatory
- Proof of appointment of authorized signatory
- In the case of LLP, registration certificate / Board resolution of LLP
- Bank account details*
- Address proof of principal place of business
HUF (Hindu Undivided Family)
- PAN card of HUF
- PAN card and Aadhar card of Karta
- Photograph of the owner (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 authorized 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 authorized signatory (JPEG format, maximum size – 100 KB)
- Board resolution appointing authorized signatory / Any other proof of appointment of authorized signatory (JPEG format / PDF format, maximum size – 100 KB)
- Bank account details
- Address proof of principal place of business
These documents are essential for completing the GST registration process for different types of businesses. Ensure all necessary documents are available and properly formatted to facilitate a smooth registration experience.
Understanding GSTIN, GSTN, and GST Certificate
Goods and Services Tax (GST) has revolutionized taxation in India, and understanding key components like GSTIN, GSTN, and GST certificate is crucial for taxpayers. Here's an overview:
- GSTIN: GSTIN, or Goods and Services Tax Identification Number, is a unique 15-digit identifier assigned to every taxpayer under the GST regime in India. It serves to identify taxpayers and track their transactions. The format includes state code, PAN card number, entity code, and a check digit.
- GSTN: The Goods and Services Tax Network (GSTN) is a non-profit organization facilitating shared IT infrastructure and services for Central and State Governments, taxpayers, and stakeholders. It operates the GST portal, enabling registration, return filing, and payments. Additionally, it supports services like e-invoicing, e-way bills, and compliance reporting.
- GST Certificate: A GST certificate is an official document issued by the Government of India to registered taxpayers. It serves as proof of registration and authorizes the collection of GST from customers. The certificate includes details such as GSTIN, taxpayer name and address, registration date, type of registration, business category, and the signature of the authorized officer.
Consequences of Failure to Obtain GST Registration
Non-Payment or Underpayments
Failure to pay the required GST or underpaying results in a penalty equivalent to 10% of the outstanding tax amount, with a minimum penalty of Rs. 10,000.
Intentional Tax Evasion
Willful evasion of GST payment incurs a penalty equal to 100% of the evaded tax amount.
Secure Your GST Registration Quickly with FinLeg.in
- Obtain your GST registration through FinLeg.in within 7 working days(it may delay depending on the approval time from government side). Simply provide your name, phone number, and email to initiate the process.
- A dedicated GST expert will assist you in understanding your business activities, operating state, and address any queries.
- Our team will collect and verify the necessary documents for GST registration.
- Once payment is made, we initiate the GST registration process and submit your application to the GST Portal.
- You will receive your GST registration within 3 to 7 working days, all done online without the need for physical presence. (Registration time may vary due to delay on the approval time from government side)
- Additionally, gain access to the LEDGERS Platform for GST invoicing and return filing convenience.
Frequently Asked Questions (FAQs)
A GST certificate is an official document issued by the Indian government, certifying a business's registration with the Goods and Services Tax (GST) system. It serves as a unique identification number for tax purposes.
Any business, whether online or offline, registered for GST with the Indian government must possess a GST certificate.
Yes, obtaining a GST certificate is mandatory for businesses in India to charge GST on goods and services sold.
Businesses with an annual turnover exceeding Rs. 40 lakhs are required to register for GST. However, lower turnover thresholds apply to special category states and certain e-commerce businesses.
No, only individuals or entities registered under GST are permitted to collect GST from customers.
An E-way bill is an electronic document serving as evidence for the movement of goods valued at more than Rs. 50,000. It contains details of the supplier, recipient, goods, and transportation.
E-way bills must be generated before the commencement of goods transportation, as per CGST Rules.
Yes, it's mandatory for consignments exceeding Rs. 50,000 in value. Exceptions apply for certain modes of transportation and specific locations.
Transporting goods without an E-way bill may result in a penalty of Rs. 10,000 or the amount of tax evaded, whichever is higher.
The Composition scheme allows small businesses to pay GST at a fixed rate based on turnover.
Businesses with an annual turnover below Rs. 1.5 crore in the preceding financial year are eligible. Certain exclusions apply, such as service providers and non-resident Indians.
No, dealers under the Composition scheme cannot claim input tax credit.
The scheme remains valid as long as all conditions specified by the law are met. Businesses eligible for the scheme can opt-out by filing an application.
Aggregate turnover includes the value of all taxable supplies on an all-India basis, excluding certain specified supplies.
Inter-state supply occurs when the supply location is in a different state, while intra-state supply takes place within the same state.
SGST and CGST are levied on intra-state supplies by state and central governments, respectively. IGST is applicable to inter-state transactions.
Entities liable for GST registration must apply within 30 days of meeting the criteria, before commencing business.
The primary authorized signatory is responsible for GST portal tasks on behalf of the taxpayer, typically nominated by the business promoters.
Yes, PAN is mandatory for obtaining GST registration, except for certain cases involving foreigners and foreign companies.
GST registration remains valid until cancelled, surrendered, or suspended, except for non-resident and casual taxable persons with fixed expiry dates.
Apply for GST number by filling the appropriate registration form on the official GST website and providing relevant details.
Any business exceeding the turnover threshold and engaged in taxable supplies or e-commerce activities must register for GST.
There are no fees for GST registration conducted through the official GST Portal.
Compulsory registration under GST applies to businesses exceeding the prescribed turnover threshold engaged in taxable supplies.
The threshold turnover limit for GST registration is Rs. 40 lakhs/20 Lakhs for most states, with lower limits for special category states.
HSN code stands for Harmonized System Nomenclature code. It is a classification system comprising six digits used to categorize goods for GST purposes.
The HSN code helps in the systematic classification of goods across various industries, facilitating uniformity in taxation and trade practices.
The HSN code simplifies the process of identifying and classifying goods for taxation under GST, aiding in accurate tax assessment and compliance.
The HSN code consists of six digits, with each digit representing a specific category or classification of goods, providing a detailed hierarchy for classification.
Businesses are responsible for determining the appropriate HSN code for their goods based on the nature and characteristics of the products.
Accurate classification using the correct HSN code ensures consistency in tax reporting, helps in determining the applicable GST rates, and minimizes the risk of errors or discrepancies in taxation.
While there are general guidelines for assigning HSN codes, businesses should refer to official HSN code directories or seek professional guidance to ensure accurate classification.
By providing a standardized system for classifying goods, the HSN code streamlines processes related to invoicing, tax calculation, and compliance, thereby enhancing operational efficiency.
Businesses may need to review and update their HSN codes periodically, especially when introducing new products or modifications to existing ones, to ensure compliance with evolving regulatory requirements.
Businesses can refer to official HSN code directories provided by tax authorities or utilize online resources and tools available for HSN code classification.
SAC code stands for Service Accounting Code, comprising six digits. It serves to classify services for GST purposes, similar to the HSN code for goods.
The SAC code plays a crucial role in accurately categorizing services for taxation under GST. It ensures uniformity, accuracy, and efficiency in tax assessment and compliance for service-oriented businesses.
Yes, a salaried individual can apply for GST registration if they are also engaged in business activities, such as freelancing or running a side business. However, mere employment and receipt of a salary do not necessitate GST registration.