What is GST Registration?
Subsequent to the roll-out of the GST (Goods and Service Tax) since July 2017, all the earlier indirect taxes, being imposed by the state or central government has been replaced. Under this GST system, it got mandatory to convert the previous VAT/CST State wise Assessee and Service Tax or Excise assessee to the new tax reform and get GST Registration for their business. Moreover, every business whose turnover is more than Rs. 20 lakhs (except some northeastern states where the limit is 10 lakhs) is required to get registered as a normal taxable person.
The Full form of GST is Goods and Services Tax, as we all know by now. These have been the biggest indirect tax reforms of India. The Act coming into effect on 1st July 2017, replaced most other indirect taxes, that previously existed in India. In other words, GST in India substituted Central Excise Law, Service Tax Law, VAT, Entry Tax, Octroi, etc, levied by States or Central Govt.
The model adopted by Indian Govt is the Dual GST model, in which both States and Central levy tax on Goods or Services or either.
The Act makes it essential to be levied on every stage of value addition/purchase/change of hands, occurred. In simpler words, the business adds the GST to the price of the product, at the time of sale/supply, and a customer has to pay the sales price plus GST. The GST portion is forwarded to the government, by the business. GST is one indirect tax for the entire country.
However, it is a Destination Based Tax, goods manufactured in one state, say “A” and sold to the final consumer in another state. say “B”, the GST will be levied at the point of consumption. So, the entire tax revenue will go to state “B” and not “A”.
To understand better What is Goods and services tax in India, let us understand with an example.
Any product goes through a variety of stages before reaching the end consumer.
Take a furniture manufacturer, for illustrating, and to keep it simple, we assume a GST of 10% is applicable, at all stages.
Stage 1: Manufacturing
The manufacturer buys wood, his raw material, worth INR 550 that includes the GST of INR 50 (10% of INR 500, that was the sale price of wood).
He, then, manufactures chairs from this wood, adding his value, of INR 150, cost of his work. So, now, the chair is of the gross value of INR 700.
Now, the total tax amount on the output of the chair comes to INR 770 (10% of INR 700). Now, under the current GST system, he can set off the tax that was paid to purchase the raw materials. Therefore, the final GST that the manufacturer will incur will be of INR 20 (total tax amount till now minus the tax he has already paid) i.e. INR 20 (70-50). Setting off the earlier tax paid, using his GST number.
Stage 2: Wholesale
Now, that chair is passed from the manufacturer to the wholesaler at a gross value of INR 770, including GST of INR 70 (10% of 700). The wholesaler then adds his value, polishing and covering the chair. And adds his margin of INR 230 making the total INR 1000 (770+230). This brings the total tax amount on the final to INR 100 (10% of 1000). Like the manufacturer, the wholesaler, too, can set off this tax amount with the tax that he had paid at the time of purchasing the chairs from the manufacturer. Thus, the final GST for the wholesaler would be INR 30 (100 – 70).
Stage 3: Retailer
In this final step, the retailer buys the chair from the wholesaler at INR 1100 that includes GST of INR 100 (10% of 1000). He then adds his own value of INR 200, for advertising and marketing, making the total cost of the goods INR 1300. The GST applicable here is INR 130 (10% of 1300), but since the retailer had paid a tax while purchasing the goods, he can set it off. Thus, the final GST incidence for the retailer would be INR 30 (130-100).
In the end, since the retailer will sell the product at INR 1430, this is inclusive of a GST of INR 130, paid by the customer.
This tax would have been much higher in our previous tax structure, as no setting off of taxes was allowed under it.
Thus, GST is a win-win scenario for the entire value chain. For businesses, it’s easier, the GST Refund Claim procedure is simplified, as it is processed against a single GST number. They can claim credit for tax paid in acquiring the raw material. And for the end consumer, who’ll only need to bear the GST charged by the last seller in the supply chain. At no stage, there is going to be “tax on tax”, decreasing the cost of goods.
Types of GST
In keeping with the federal nature of India, where both the Centre and the States have been assigned the powers to levy and collect taxes, the government and the GST council decided to adopt the Dual GST model. This tax structure has been implemented to help taxpayers take the credit against each other.
As both, state and central, governments have distinct responsibilities to perform, they need to raise their own tax revenue, hence, are simultaneously levying GST.
Central GST – CGST
Being levied by the Central Govt, on the consumption and supply of goods and services, whose proceeds will be attributable to the Centre, as per the CGST Act.
State GST – SGST
The SGST rate is levied on the consumption and supply of goods and services, the proceeds of which will be attributable to the States, as per the SGST Act – which is passed and recognized by the assemblies of respective States.
Integrated GST – IGST
IGST is also referred to as Inter-State GST, levied on the consumption and supply of goods and services, whenever such supplies are happening inter-state boundaries, and in terms of imports, as per the IGST Act.
To determine whether Central Goods & Services Tax (CGST), State Goods & Services Tax (SGST) or Integrated Goods & Services Tax (IGST) will be applicable in a taxable transaction, it is important to first know if the transaction is an Intra State or an Inter-State supply.
People Required to get Registered under the GST Act
Any person who engages in any economic activity (carries on any business anywhere in India) is treated as a taxable person. ‘Person’ includes individuals, an AOP/BOI, company, firm, LLP, HUF, any corporation or Government company, body corporate incorporated under laws of the foreign country, co-operative society, local authority, government, trust, artificial juridical person.
The businesses are responsible for the collection of GST from consumers and payment to the GoI. In any sale, in addition to the cost of the product, the business will levy a GST tax and collect the same from the customer. When the GST tax is collected, businesses are to file GST return every month and remit the GST tax collected before the 20th of next month.
It is mandatory that below people promptly get their GST enrolment done.
- Any person who is already registered under an earlier law (i.e., Excise, VAT, Service Tax etc.) needs to register under GST, too.
- Businesses whose turnover exceeds Rs. 20 Lakhs (Rs. 10 Lakhs for North-Eastern States, Uttarakhand, J&K, and Himachal Pradesh ), in a financial year. If your turnover is from the supply of only exempted goods/services which are exempt under GST, this clause does not apply.
- Casual taxable person – a person who sells goods and/or services, in the taxable territory – where he has not had any fixed place of business. Selling as a principal or an agent or in any other capacity
- Non-Resident Taxable person – a taxable person residing outside India and coming to India to occasionally, and undertaking any business transaction in the country. But having no fixed place of business in India.
- When a business which is registered has been transferred to someone/demerged, the transferee shall take registration with effect from the date of transfer.
- Anyone who drives the inter-state supply of goods
- Those paying tax under the reverse charge mechanism
- Agents of a supplier & Input service distributor
- A person who supplies via e-commerce aggregator
- Every e-commerce operator or aggregator
- A person who supplies online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person
- Input service distributor (ISD) – when office of the supplier of goods and/or service, which receive tax invoices towards receipt of input services and issues a prescribed document for the purposes of distributing the credit of GST, paid on the said services to a supplier of taxable goods and/or services, having same PAN number as that of the ISD.
The GST Law implies that any business entity should obtain a unique number by concerned tax authority for collecting the tax and for availing Input Tax Credit (ITC).
GST Registration is PAN-based and state-specific.
You, as a supplier, are allotted with a 15-digit, now you can Login to Government GST Portal – www.gst.gov.in, and the certificate of registration is available for you on the portal.
Voluntary registration is also allowed by GST Portal.
Documents Required for GST Registration
GST Registration is a one-time registration with no need for renewal.
As we all know GST is PAN-based, so PAN is the most important document for GST Registration (except for non-resident of India). The document list, for GST Filing, differs for every business category and every state.
- Pan Card
- Valid India phone number and e-mail-id
- Proof of Place of business
- Bank Account
Other than these, below is also mandatory
1. List of Goods and Services
2. Proof of appointment of Authorized Signatory (Letter of Authorization)
3. Authorized Signatories photo
4. digital signature in case of Companies and LLP’s, of the person who authorized to sign the GST application
5. Company’s Incorporation certificate
6. Other registration details such as Professional Tax, State Excise License details (whichever applicable)
The process to Get Yourself Registered with GST
The Registration under the GST Act, which is essential to avail the benefits of the Input Tax Credits, demands below procedures to be followed. For ease in acquiring GSTIN number, Apply GST here.
- Log on to the online Govt GST portal.
- On the “Register Now” page, under Taxpayers (Normal).
- Chose “New Registration”.
- Fill in all the requested detail, as applicable. Such as Name, Address etc.
- The portal will send one OTP, each to your mobile and email, to verify the details provided.
- As you verify the OTP, the GST Online verification process is complete. You will receive a Temporary Application Reference Number (ARN).
- Now you need to fill Part B of the application form using this ARN. The documents you will require for this step include:
- Bank account details
- Constitution of business
- Details of Goods and Services dealt in
- Proof(s) of state, district, and centre of business
- Date of commencement
- Business Details
- Promoter / Partners
- Authorized Signatory
- Authorized Representative
- Principal Address of Business
- Additional Addresses of Business
8. Fill in all the information and upload all the documents required in the application form and submit. You’ll receive an acknowledgement, within 15 minutes, with a temporary user name (this will be your GSTIN number) and a password to login to the GST website will be sent oy you.
While logging into the GST portal using the temporary user name and password received, you will have to go to the “Login” page and then click on “First-time login” option, which will be available at the bottom of the login page.
You can Download your Registration Certificate within the stipulated time of 3-5 days, once the GST officer verifies your application. In case, your application isn’t approved, the officer will ask for more information. This needs to be filed within 7 working days. Once the details are provided, the officer may still reject the application providing reasons.
As soon as the details provided are approved, the application will be processed and you will receive a Certificate of Registration.
Exemptions from GST
The exemptions in the GST is divided into two categories:
The businesses supplying goods and/or services with a value of less than Rs.20 Lakh and within your state. This limit is below Rs.10 Lakh of value in the state of Jammu & Kashmir (J&k), Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, and Uttrakhand.
Following classifications of person are exempted from obtaining GST registration –
1. An agriculturist, to the extent of supply of produce out of cultivation of land,
- 2. The person engaged exclusively in providing business of supplying goods and/or services that are not liable to tax or are wholly exempted from tax under the CGST/SGST/UTGST Act,
3. Individual advocates, including senior advocates,
4. Individual sponsorship service providers, including players,
5. An interstate supplier of goods,
6. The person engaged in supplying taxable goods or services or both and the total tax on such supplies is required to be paid by the recipient of goods or services or both under reverse charge mechanism.
Reverse Charge Mechanism (RCM) Explained
Typically, the supplier/business owner of goods and/or services is supposed to pay the tax, to the govt, as taxes are collected by the supplier on behalf of the customers, which is then paid to the government. In the case of RCM, the buyer is liable to pay GST, his cost and pay tax amount to the govt, instead of the supplier.
.In other words, Reverse charge is when the buyer pays the tax directly to the government.
So when A is providing services worth INR 100 to B and GST is 10%, under the normal regime, B will pay A INR 110.Out of which A will pay the Govt INR 10 (tax). But under the RCM, B needs to pay A INR 100 and will directly pay the Govt, the tax of INR 10.
RCM may be applicable to both goods and/or services in specified cases only.
- An Unregistered dealer is supplying to a Registered dealer, e.g. when a registered wholesaler or a retailer is buying from an Agriculturist
- When an e-commerce operator is supplying, e.g. when Ola arranges transport services of its user’s cab service providers registered with it, then Ola, liable to pay GST and collect it from the customers and not the cab registered service providers.
- Supply of goods and/or services as specified by CBEC, e.g. silk yarn, beedi leaves, cashew nuts etc
It is advisable to go for GST consultation to know how your business can take benefit of RCM.
Implications of GST
A common Tax for Goods and Services, GST in India was introduced to reduce the tax burden on both companies and consumers. In the previous system, the tax structure was complex. There were multiple taxes added at every stage of the supply chain, but the end cost of the product did not clearly show the actual cost of the product and how much tax was applied. As the business was not taking credit for taxes paid at previous stages. As a result. This method provides a return of the tax paid on the purchase of goods and services, which is offset with the tax to be paid on the supply of goods and services. As a result, the end customer needs to pay less.
- Single National Market
- Reduction in Tax Evasion
- Due to Transparency, the Tax Base has widened
- Multiple/Cascading Taxes eliminated, lowering the tax burden on the final consumer
- Easier Procedures for Compliance, Tax Filing, and Documentation
- Uniform Tax Regime
- Few states still lack the infrastructure
- The highest GST slab, of 18%, increases the price substantially
- Exemptions not applicable in all states
- Compliance and getting every business on-board is still a long way to go
- Registration process seems cumbersome and time-taking to small businesses
- New cesses for luxury goods and automobiles levied
- Refund Problems for Exports need more intervention for data matching
How You can Comply Better With GST
Proper compliance with the GST is essential to take benefit of the GST returns.
This has, basically, three parts to it.
- each taxpayer needs to be clear about the classification and the rates the good or services, they are supplying, fall under. He must be clear about What are GST returns?
- the taxpayer must understand the classification and the rates applicable to the raw material.
- and finally, the taxpayer must pay taxes and file returns.
The GST has rules laid down for the way records of purchases and sales are made & reported, inventory managed, how to create GST invoices and how we report our purchases and sales, and ultimately, the way we go for GST return filing online and pay these taxes.
Implementing a good GST compliant software, that simplifies the process, is your best bet. To rank better at the GST Rating system, with your business, get GST Software, here.
GST has brought a long-awaited change from the earlier taxation system. It is aimed at increasing the taxpayer base by bringing SMEs and the unorganized sector under its compliance. When complied fully, can prove to be business friendly as well as consumer friendly.
GST will allow India to better negotiate its terms in the Global trade forums. It is an attempt to remove the shortcomings. This Act is intended to make the Indian market more stable, transparent and corruption-free than before.
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