The Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off. Every product goes through multiple stages along the supply chain, which includes the purchasing of raw materials, manufacturing, sale to the wholesaler, selling to the retailer and then the final sale to the consumer. In short, only value addition will be taxed and burden of tax is to be borne by the final consumer.
The Goods and Services Tax came into effect from July 1, 2017 through the implementation of One Hundred and First Amendment of the Constitution of India by the Indian Government. The Goods and Services Tax replaced multiple Central and State Government taxes. The tax rates, rules and regulations are governed by the GST Council which consists of the finance minister of central and all the states. GST is meant to replace a slew of indirect taxes with a unified tax. GST tax rates vary from 0% – 28% depending on the type of service or Nature of Goods. The GST is paid by consumers, but it is remitted to the government by businesses selling goods and services. In effect, GST provides revenue for the government.
WHAT IS GSTIN?
GSTIN is an abbreviation for Goods and Service Tax Identification Number. It consists of 15 alphanumeric digits. This is generated by the government after you have successfully completed GST registration.
- First 2 digit show state code
- Next 10 digit indicates PAN Number
- Next 1 shows serial number of GST registration in a state.
- Last 2 digits are random
Benefits of GST REGISTRATION
GST registration not only helps you in getting your business recognized as a legal registrant but also opens a number of opportunities for your business. Benefits to GST registered business at glance are as follows:-
- More competitive: You will be more competitive in comparison to your unregistered competitors since you will carry valid tax registration.
- Expand your business Online: You cannot sell products or services on e-commerce platform without GST registration. If you’re planning to give a blow on e-commerce platform or through your own website, you must need a GSTIN.
- Current Bank Account: In case of sole proprietor business Banks & Financial Institution does not open a current bank account in the name of business trade name unless you carry any government proof in the name of your business. GST registration certificate can help you to open a current bank account.
- Input tax credit: Only Registered GST holders can avail input of GST tax paid on their purchases and save the cost.
- Selling all over India: Without having GSTIN you cannot trade inter-state. This is possible only if you registered your business under GST. Every state requires separate GSTIN.
- Government Tenders: Various government tenders requires GSTIN to apply tender. If you don’t have you may miss the business opportunity.
- Dealing with MNCs: Generally, MNC’s does not comfortable to deal with small business entities until they carry valid tax registration proof.
COMPONENTS OF GST
Central Goods and Services Tax or CGST
Central Goods and Services Tax (CGST) levy is governed by the Central Goods and Services Act, 2017. This tax is charged on the transaction value of the goods or services supplied. The tax is imposed on Intra State supplies of both goods and services by the Central Government.
Union Territory Goods and Service Tax or UTGST
This tax levy is governed by the Union Territory Goods and Services Act (UTGST), 2017. And such a tax is charged on the transaction value of goods or services supplied. The transaction value is the price actually paid or payable for the said supply of goods or services.
Integrated Goods and Services Tax or IGST
Integrated GST is an indirect tax imposed and collected by the Central Government on the inter-state supply of goods or services. Such supplies do not include alcoholic liquor for human consumption. Integrated Goods and Services Tax (IGST) is a tax imposed on all Inter-State supplies of goods and services.
State Goods and Services Tax or SGST
State Goods and Services Tax (SGST) is levied on the transaction value of the goods or services supplied under SGST Act. The transaction value is the price actually paid or payable for the said supply of goods or services. The tax is imposed on Intra State supplies of goods and services by the State Government.
GST Rates- Tax Slabs Explained
The Government has proposed a 5 – Tier tax structure under 5 slabs of 0%, 5%, 12%, 18% and 28% for all the goods and services. Various goods and services were under different slabs as follows.
1) 0% (No Tax Slab)
Fresh meat, jute, fish chicken, milk, eggs, curd, butter milk, fresh fruits and vegetables, natural honey, besan, flour, salt, bread, sindoor, prasad, bindi, stamps, printed books, judicial papers, handloom, bones and horn cores, newspapers, bangles, bone grist, etc.; hoof meal, cereal grains hulled, horn meal, salt-all types, palmyra jaggery, kajal, etc.
2) 5% Tax Slab
5% Tax would be applicable on goods such as apparel below Rs. 1,000, fish fillet and footwear below Rs 500 and packaged food items, skimmed milk powder, cream, branded paneer, coffee, tea, frozen vegetables, spices, rusk, pizza bread, kerosene, coal, sabudana, lifeboats, medicines, stent, cashew nut, raisin, cashew nut in shell, ice and snow, insulin, bio gas, kites, postage or revenue stamps, first-day covers Agarbatti, stamp-post marks etc.
3) 12% Tax Slab
Goods such as apparel above Rs 1,000, cheese, ghee, butter, frozen meat products, packaged dry fruits animal fat, fruit juices, sausage, Ayurvedic medicines, bhujia, namkeen, tooth powder, picture books, colouring books, exercise books and note books, sewing machine, umbrella, ketchup & sauces, cellphones, diagnostic kits and reagents, fertilisers, fish knives, spoons, forks, cake servers, ladles, skimmers, tongs, corrective, spectacles, chess board, playing cards, carom board and other board games would be taxed at the rate of 12%. Also, services such as non-AC hotels, state-run lotteries, business class air tickets will fall under 12% GST tax slab.
4) 18% Tax Slab
This slab has maximum goods under it, such as footwear costing more than Rs 500, biscuits (All categories), bidi patta, flavoured refined sugar, cornflakes, pasta, preserved vegetables, pastries and cakes, jams, soups, sauces, instant food mixes, ice cream, tissues, mineral water, tampons, envelopes, steel products, printed circuits, note books, speakers and monitors, Kajal pencil sticks, camera, aluminium foil, weighing machinery, headgear and parts thereof, CCTV, printers electrical transformer, bamboo furniture, optical fiber, mayonnaise and salad dressings, swimming pools and padding pools, mixed condiments and mixed seasonings, curry paste, etc.
5) 28% Tax Slab
Bidis, molasses, chewing gum, waffles and wafers coated with chocolate, chocolate not containing cocoa, pan masala, paint, deodorants, aerated water, shaving creams, hair shampoo, after shave, sunscreen, wallpaper, dye, water heater, ceramic tiles, weighing machine, dishwasher, ATM, washing machine, vacuum cleaner, vending machines, shavers, hair clippers, automobiles, aircraft for personal use, will be charged at the rate of 28%.
WHEN GST REGISTRATION MANDATORY IN INDIA?
- Turnover Criteria: All taxpayers who have an annual turnover above ₹40 lakhs are required to get new GST registration.
- Causal taxpayer: If you supply goods or services in events/exhibition where you do not have a permanent place of business, you need to get online GST Registration before starting a business. Such a dealer has to pay GST on the basis of an estimated turnover of 90 days. The validity of causal GST Registration is 90 days.
- NRI taxpayer: NRI taxpayer, who does not have a place of business in India, wishes to start a business and then he has to apply for GST Registration in India before beginning operations in India. The validity of a new GST registration is 90 days.
- Agents of a supplier & Input service distributor: All Input service distributor who wants carry-forward benefit of input tax credit requires GST registration.
- Reverse Charge:A business who requires to pay tax under the reverse charge mechanism need GST registration
- E-Commerce portal: Every e-commerce portal (such as Amazon or Flipkart) under which multiple vendor’s selling their product requires gst registration.
What is Input Tax Credit?
Input tax credit lets you reduce your tax which has already paid on inputs and pay the remaining amount at the time of paying tax. You pay taxes on the purchase when a product is purchased from a registered seller, and when you sell the product, you too collect the tax. With input credit, you can adjust the taxes paid at the time of purchase with the amount of tax on sales (output tax) and pay the balance liability of tax, i.e. tax on sale minus tax on the purchase.
Input Tax Credit can be claimed only for business purposes. Input Tax Credit will not be available for goods or services exclusively used for Personal use, Exempt supplies, Supplies for which Input Tax Credit is specifically not available
The list of documents required for registration of GST for various business are as follows:
- PAN Card
- Address proof of proprietor
- Proof of Business
- PAN Card of LLP
- LLP Agreement
- Partners’ proof
Private Limited Company
Certificate of Incorporation
PAN Card of Company
Articles of Association
Memorandum of Association
Resolution signed by board members
Identity and address proof of directors
These Documents can be shown as proof of address
Voter Identity Card
Telephone or Electricity Bill
Bank Account Statement