GST denotes “Goods and Services Tax”. It is a value-added tax system that is used by many countries around the world to streamline the taxation of goods and services. GST is designed to replace a variety of other taxes, such as sale tax and value-added tax, with a single, unified tax system.
GST Registration Procedure
All businesses are required to pay service tax; VAT has to be registered under goods and service taxes. An applicant can initiate the GST registration process on the GST Portal. Once the application is submitted, the online portal will generate an ARN status. ARN stands for Application Reference Number, and it will be used to check the GST Registration application status. GSTIN is a 15-digit code allotted to every taxpayer registered with GST.
All you need to know about the threshold limit for GST registration
Documents Required for GST Registration
Documents for Individuals
- Pan Card
- Address Proof
- Aadhar Card
- Bank Account Details
- Photograph
Partnership Firms
- Pan Card
- Address Proof
- Bank account details
- Copy of partnership deeds
- Registration Certificate
- Photographs of authorized signatories
- Proof of Appointing an Authorized Signatory
Hindu Undivided Family
- Pan Card
- Address Proof
- Bank account details
- Photograph of the owner
- Aadhar card or Pan card
Company
- Pan Card
- Bank details
- Address Proof
- Pan and address proof
- Pan and Aadhar Card
- Article of Association or Memorandum of Association
- Proof of Appointment of an Authorized Signatory
- Photographs
- Certificate of incorporation provided by the Ministry of Corporate.
GST Registration for Services: Documents Required
Objectives of GST
1. Simplification of Tax Structure
The primary objective of GST is to simplify the tax structure, and the main aim of GST is to create a single , unified tax system that replaces a range of indirect taxes like sales tax, service tax, and value-added tax.
2. One Nation One Tax
GST established the One Nation, One Tax system and made taxation uniform across the country.
3. Reduction in Tax Evasion
GST introduces a digital and structured tax filing system, which increases transparency and reduces tax evasion.
Impact of GST
1. How does it affect business?
GST has brought significant changes to the business. It made things easier by replacing multiple taxes with a single integrated system, and GST helps reduce the workload of businesses and helps grow the economy.
2. How it affects Consumers?
Consumers have seen the impact of GST in the form of lower prices for various products and services. This is because GST removes hidden taxes and includes a single tax which helps to make things cheaper and gives consumers more purchasing power.
GST Rates
· Nil Rates
Items in this category are not subject to GST, which means there is no tax levied on them.
· 5% Rates
This category includes items like households and some services.
· 12% and 18% rates
Most Goods and Services fall into this category include items like electronics and cosmetics.
· 28% Rates
This is the highest GST rate applicable to luxury items and services.
Types of GST
There are four GST types: integrated Goods and Services Tax (IGST), State Goods and Service Tax (SGST), Central Goods and Service Tax (CGST) and Union Territory Goods and Service Tax (UGST).
1) IGST (Integrated GST)
Taxes are collected by the Central Government for transactions between different states to avoid double taxation.
2) SGST (State GST)
Taxes are collected by the Central Government for transactions within the same state.
3) CGST (Central GST)
Taxes are collected by the Central Government for transactions within the same state.
4) UTGST (Union Territory Goods and Service Tax)
Union Territory Goods and Service Tax is nothing but the GST applicable on the goods and services supplied within the Union Territory of India.
New GST Notification for 2023
- From 1St August 2023, it will be mandatory for all businesses with a turnover of 5 Crore or above to produce e-invoices.
- Businesses with a turnover of Rs. 100 Crore or more must submit tax invoices and credit-debit notes to the Invoice Registration Portal within seven days from the date of the invoice, starting May 1.
- Amnesty Schemes valid up to June 30, 2023 are introduced for late filers of GSTR-4, GSTR-9, and GSTR-10 defaulters attracting Section 62 of the CGST Act and for applying for revocation of cancelled GST Registration in REG-21.
- The threshold for taking legal action, except in situations with fake invoices, has been changed from 1 to 2 Crore.
- The prescribed fees for compounding GST offenses have been lowered to a range between 25% and 100% of the tax amount.
Introduction to GST Worldwide
France was the first country in the world to implement a goods and services tax. The modern form of GST, as it is known today, was first implemented in New Zealand in 1986.
New Rule of GST
- It will be mandatory for companies with a B2B transaction value of Rs. 5 Crore to produce an electronic
- Businesses generating the yearly income of those with a turnover of Rs.10 Crore or more were mandated to
- GST Taxpayers whose aggregate turnover is more than Rs. 5 Crore in any financial year have to compulsorily produce an e-invoice for a B2B supply of Goods or Services Both or for exports from 1st August
- It is compulsory for businesses with an annual turnover of 100 crore as of May 1st, 2023.
- You should apply an 8% GST to any received payment or issued
GST slabs in India
GST rates in India for various Goods and Services are divided into four slabs.
• 5% GST
• 12% GST
• 18%GST
• 28% GST
GST Turnover Requirement for GST Registration
Companies surpassing an annual turnover of Rs. 40 lakh (for goods) and Rs. 20 lakh (for service) are required to register for GST.
1) For Regular Business
Businesses with a cumulative turnover of Rs. 20 lakh (Rs. 10 lakh for special category states) in a financial year were required to register for GST.
2) For Service Providers
Service providers with an aggregate turnover of Rs. 20 lakh (Rs. 10 lakh for special category states) were required to register for GST.
Taxation of Salary under GST
Salaries are not considered goods or services, so they are not taxable under the GST regime.
Input Tax Credit in GST
Input Tax Credit means the goods and service tax paid by a taxable person on any purchase of goods and services that are used or will be used for business. It allows businesses to offset the tax they have paid on inputs against the tax liability on their output.
GST Exemption Limit
GST Exemption Limit 40 lakh as the annual threshold for GST Exemption in case of provider of goods.
Benefits of GST
· Easy Compliance
All taxpayer services, like registrations, returns, and payments, would be available to the taxpayer online, so this compliance makes it easy and transparent.
· Improved Competitiveness
Because of GST, it helps to improve competitiveness by reducing transaction costs. Therefore, GST is highly significant for enhancing competitiveness.
· Simple and straightforward to manage
Multiple indirect taxes of the Central and the State Governments are replaced by GST. Backed by a robust end-to-end IT system, GST would be simpler and easier to administer than all indirect taxes.
· High revenue efficiency
GST helps to decrease the cost of collecting tax revenues for the Government which will lead to higher efficiency.
· Input Tax Credit
Businesses can claim Input Tax Credit allowing them to offset the GST paid on purchases against the GST liability on sales, which helps reduce the overall tax burden.
· Boost to the Economy
GST helps boost the economy by reducing the tax burden on businesses and prompting investment.
· Transparency
All GST transactions are recorded digitally, prompting transparency and accountability in the tax system.
· Consumer Benefits
GST offers various consumer benefits. GST has led to reduced prices for certain goods and services.
· International Trade
GST has made Indian goods more competitive in the international market, and it helps boost exports.
· Improved Logistics
GST helps to reduce check posts and improve efficiency in the movement of goods, decreasing transportation time and costs.
Calculating GST
1. Know the GST Rate
Firstly, you need to find out the GST rate applicable for the products and services you are dealing with. In India, GST rates can be 5%, 12%, 18%, and 28%, depending on the item.
2. Separate Taxable Value
From the total price of the product and service, you will need to figure out the part that’s taxable. This is the amount for which GST will be calculated.
3. Calculate GST Amount
You need to multiply the taxable value by the GST rate and then divide by 100, which gives you the GST amount.
GST Amount = (Taxable Value* GST Rate)/100
4. Total Invoice Amount
To find the total amount to be paid, you need to add the taxable value and the GST amount together.
Total Invoice Amount = Taxable Amount + GST Amount
5. Revenue Calculation
If you have the total invoice amount and GST rate and you want to figure out the taxable value or GST amount, you can use this formula.
Taxable Value = (Total Invoice Amount* 100) / (100+ GST Rate) GST Amount = Total Invoice Amount minus Taxable Value
GST-Free Items in India
There are certain items that are exempt from the Goods and Service Tax and the list of items is explained as follows:
· Essential Food Items
Basic food items like fruits and vegetables, meat, fish, milk, and food grains are exempt from the Goods and Services Tax.
· Healthcare Services
Medical services provided by doctors, hospitals, and clinics are generally GST-free.
· Education
Educational services like school fees and related materials are free.
· Public Transportation
Public transportation services like buses, railways, and metros are usually GST-free.
· Books and Newspapers
Printed books and newspapers are exempt from GST.
· Agricultural Equipment
Some agricultural equipment and machinery must be GST-free.
· Handmade Products
Some handmade products, like handmade carpets, are exempt from GST.
Petrol’s GST status
No, petrol is not currently included under the goods and service tax in India.
Conclusion
GST is a game-changer for taxes worldwide. This complete guide covers everything you need to know about it. GST makes taxes simpler and helps countries collect money more efficiently. It’s not without challenges, but it’s a big step forward. GST is vital for businesses, governments, and everyday people.
FAQ (Frequently Asked Questions)
1) What is GST?
GST stands for Goods and Services Tax. It is a comprehensive tax reform that aims to simplify the indirect tax system.
2) How does GST work?
GST is a destination-based tax where the tax is collected at the point of consumption, making it a multi-tax.
3) What are the various GST Rates?
GST has multiple tax rates, including 5%, 12%, 18%, and 28%, with certain goods and services exempted or taxed at a 0% rate.
4) What are the advantages of GST?
GST brings benefits such as a simplified tax structure and increased tax compliance.
5) Who needs to register for GST?
Businesses with a specified turnover or engaged in specific activities are required to register for GST.
6) What is the process for submitting GST Returns?
GST returns can be filled out online through the GST portal by providing the necessary details of sales and purchases.
7) What is an Input Tax Credit?
Input Tax Credit allows businesses to claim a credit for the GST they paid on Inputs which can be used to offset their GST liability.
8) Are there any exemptions under GST?
Yes, certain essential goods and services are exempt from GST, and specific items are taxed at 0%.
9) How has GST simplified inter-state trade?
GST has replaced the earlier state-level entry taxes, making it easier and more cost-effective for businesses to transport goods across borders.
10) What difficulties are associated with the implementation of GST?
Challenges include initial compliance difficulties, technology adaptation, and managing the transition from the previous tax system to GST.
