GST(Goods and Service Tax)

The announcement for the adoption of Goods and Services (GST) tax was made in the midnight of 30th June 2017 and came into effect from 1st July 2017.

Concept: - Goods and Services Tax is a consolidated indirect tax policy that encompasses VAT, CST, Service Tax, Central Excise duty, Entertainment Tax, etc and is valid all over India with effect from 1st July 2017.

When to register for GST: - Mandatory to get GST Registration when annual turnover exceeds INR 40/20 lakh or supply goods and services inter-state or through E-commerce platform.

What are the GST tax rates: - Tax rates vary from 0% to 28% depending on the type of goods & nature of the services you are selling.

Input Tax Credit Availment: - Only business units registered under GST can avail credit of tax paid at the time of purchase while filing GST returns.

Return Filing & Payment: - Every GST registrant requires to file monthly/quarterly returns and One annual return. Requires paying tax every month.

Composition Scheme: - Business units having an annual turnover less than INR 1.5 crore may opt the scheme. Requires to pay subsidize tax ranges from 1% to 5% & file quarterly returns.

When is GST Registration Mandatory in India ?

Turnover Criteria: - All taxpayers who have an annual turnover above ₹40 lakhs are required to get new GST registration. For Service supply, Turnover limit is ₹20 lakhs.

Causal taxpayer: - If you supply goods or services in events/exhibitions where you do not have a permanent place of business, you need to get online registration for GST 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, then he has to apply for GST Registration in India before beginning operations in India. The validity of a new registration under GST 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 must also get registered under GST.

E-Commerce portal: - Every e-commerce portal (such as Amazon or Flipkart) under which multiple vendors selling their product requires to be enrolled under GST first.

Interstatesupply: - Businesses who engage in supply of goods or services outside its state boundaries must get registered with the GST Department. Such businesses are subject to Integrated Goods and Services Tax (IGST), which is charged on the supply of goods or services from one state to another.

Export: - Exports are Zero Rated Supply in India and therefore, businesses engaged in export must get registered under GST in India.

Why I need 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:

1. Become more competitive: - You will be more competitive in comparison to your unregistered competitors since you will carry valid tax registration.

2. 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 like Flipkart, Amazon, Paytm, Shopify or through your own website, you must need a GSTIN.

3. Can take input tax credit: - Only Registered GST holders can avail input of GST tax paid on their purchases and save the cost.

4. Can sell all over India without any restrictions: - Without having GSTIN you cannot trade inter-state. This is possible only if you registered your business under GST.

5. Apply Government Tenders: - Various government tenders require GSTIN to apply tender. If you don’t have, you may miss the business opportunity.

6. Open Current Bank Account: - Especially, 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.

7. Dealing with MNCs: - Generally, MNC’s does not get comfortable to deal with small business entities until they carry valid tax registration proof.

What is GSTIN ?

GSTIN is an abbreviation for Goods and Service Tax Identification Number. It consists 15 alphanumeric digits. This is generated by the Government after you have successfully completed GST registration.

First 2 digits 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.

Advantages of GST Registration :

1. Validating the legitimacy of a business and granting legal authorization to operate

2. Enhancing the business's credibility with customers, suppliers, and financial institutions

3. Allowing businesses to claim input tax credit on purchases of goods and services utilized for business purposes, thereby reducing their overall tax liability

4. Simplifying the compliance process by eliminating the need for multiple registrations and reducing compliance costs

5. Allowing businesses to broaden their market reach by selling goods and services across India without any limitations on inter-state movement

6. Providing a competitive edge to businesses by lowering their tax burden, enabling them to offer goods and services at a lower cost compared to their competitors

7. Simplifying the tax structure and compliance burden, making it easier for businesses to operate

8. Providing legal protection to businesses by enabling them to take legal action against customers or suppliers in case of non-payment or non-compliance.

Penalty for Not Registered under GST :

In accordance with section 122 of the CGST Act, the penalty for not obtaining GST registration in India within time is INR 10,000/- or 10% of tax due from the supply made, whichever is higher. In addition to the penalty, businesses shall be required to pay GST on the supply made along with the interest whether he has collected GST from their customer or not.

Furthermore, not having GST Registration can result in :

1. Goods and vehicles may be held in detention.

2. Goods and vehicles may be confiscated.

3. The person or supplier would not be eligible to claim input tax credit.

4. The person or supplier would be unable to transfer the input tax credit.

Documents Required for GST Registration

1. PAN Card of the Business or Applicant: - GSTIN is linked to the PAN of the business. Hence, PAN is required to obtain GST certificate.

2. Identity and Address Proof of Promoters: - documents like PAN, passport, driving license, Aadhaar card or voters identity card must be submitted for all the promoters.

3. Address Proof for Place of Business: - Documents like rental agreement or sale deed along with copies of electricity bill or latest property tax receipt or municipal khata copy must be submitted for the address mentioned in the GST application.

4. Bank Account Proof: - Scanned copy of the first page of bank passbook showing a few transactions and address of the business must be submitted for the bank account mentioned in the registration application.

Composition Scheme under GST :

One can take benefit of GST Composition Scheme by registering into this scheme. There are certain eligibility criteria for businesses to register for this scheme. These are as follows :

1. The firm/business must not work as e-commerce.

2. Beneficiary dealing in supply of goods or restaurant can apply.

3. Interstate supply of goods must be absent. The business should only perform its business within its registered state.

4. Turnover must not be more than 1 Crore (in special states must not be more than 75 lakhs).

5. Business working in the service sector has been kept away from this scheme.

This scheme has made the business easy for small businesses/startups as it has reduced the liability to pay tax and has limited compliance.

GST Composition Scheme is for the small taxpayers, which is framed to reduce the tax compliance burden. Small taxpayers need not to file monthly GST returns and they need to pay nominal GST at a fixed rate of turnover.

Any business having an annual turnover up to ₹1.5 Crore can opt for GST registration under composition scheme.Whereas special category states can apply for GST composition scheme only if turnover is less than INR 75 lakhs.

The rate under GST Composition Scheme are very low, i.e. 1% & 5%

Manufacturers	2% of turnover ( 1% CGST plus 1% SGST)
Restaurant Services	5% of turnover(2.5% CGST plus 2.5% SGST)
Traders. Retailers, Wholesaler, etc	1% of turnover (0.5% CGST plus 0.5% SGST)

The GST Council in its 32nd meeting had introduced a new composition scheme for service providers as well as mixed supplies of goods & services.

Under this composition scheme threshold limit for GST Registration shall be Rs. 50 lakhs and the GST tariff rate shall be 6%, i.e. 3% CGST + 3% SGST. The suppliers under this scheme would require to file only annual GST return GSTR-9A and no need to file GSTR-4.

A person opting for composition levy will have to pay tax on a quarterly basis before 18th of the month succeeding the quarter during which the supplies were made.

A business who opted for composition scheme cannot sell goods Inter-State or to SEZ. Thus, for making supplies to outside the state, a business needs to take registration as a regular taxpayer.

Difference between comp. and Reg. Scheme :

	Composition Scheme	Regular Scheme
Compliance	Relaxed Compliance in order to safeguard small businessmen.	Normal compliance required.
Tax Rate	Composition taxpayers need to pay nominal GST at a fixed rate of turnover, which is normally 1-5%.	Tax rate for regular taxpayers’ goods and services, which is from 0-28%.
Input Tax Credit	Composition taxpayers cannot avail Input tax credit benefit.	Normal taxpayers can avail Input tax credit benefit.
GST Return Filing	Composition taxpayers required to file quarterly return.	Normal taxpayers required to file monthly return.
Tax Invoice	Composition taxpayers cannot issue tax invoice to their customers.	Normal taxpayers can issue tax invoice to their customers.

Benefits of the GST composition scheme :

1. Reduction in liability to pay tax: The tax rates under composition scheme range from 1% to 3% which is very less than general GST rates which range from 0% to 28%.

2. Limited Compliance: One of the major benefits of GST Compliance scheme is that small businesses/startups registered under this scheme has to submit less number of documents. Businesses have to file only quarterly rather thrice in a month.

3. Ease of doing business: This scheme has made the business easy for small businesses/startups as it has reduced the liability to pay tax and has limited compliance.

4. More liquidity: Ventures registered under this scheme have to pay lower taxes than others.So, it involves less working capital. Hence brings liquidity.

Limitation of the GST composition scheme :

1. Limited to Inter-state business: It is applicable only if the firm is operating within the boundaries of its state.

2. Tax from your pocket: The taxpayer under this scheme has to pay taxes from his pocket and is not allowed to charge from his buyer.

3. Provision of penalty: If any business registered under this scheme is found faulty for registering for the scheme, then it will have to pay all the taxes levied on it along with 100% of the levied amount as the penalty.

4. Cannot avail input tax credit: Businesses who opted for GST composition scheme cannot avail the input credit of GST paid on goods and services purchased.

5. Can Not issue Tax Invoice: In such a case, a business can issue only a bill of supply in lieu of a tax invoice.

Types of GST returns

GSTR 1: Purpose of this return is to furnish details of all sales including B2B and B2C. Due date of this return is 10th of every month and in case of a quarterly return, the end of next month of every quarter.

GSTR 3B: This is a summary return with details of net tax liability based on the output & input tax. Due date of this return is 20th of every month.

GSTR 4: A business who opt for composition scheme and needs to pay to subsidize GST rates from 1% to 5% & file this quarterly return.

GSTR 1A: The purpose of this return is to rectify/resolve the mismatch in sales figures with your customers to whom you raise the tax invoice.

GSTR 8: An e-commerce operator who needs to collect TCS (Tax collected at source) under GST requires to file this return till 10th of every month

GSTR 9: This is the Annual GST return, which is to be filed by all registered persons till 31st March of every financial year.

Benefits of filing GST returns on time :

1. Avoid Penalty Failing to file GST Returns on time will attract a penalty of INR 200 per day and maximum up to INR 5000 of each return

2. Avoid Registration Cancellation To be worst if you don't file GST Returns on time your certificate might get cancelled.

3. Better Relationship with your prospects Filing GST Returns on time will let your customers claim input credit smoothly hence maintain a healthy relationship with good prospects

4. Better Compliance Rating Government of India has proposed to start the compliance rating system under which scorecard of every GST registrant shall be maintained.

5. Ease of availing loan Evidently, timely and accurate GST Return filing helps a taxpayer a lot while applying for loans from a bank or financial institutions. The Banks ascertain a taxpayer's credibility on the basis of his GST Returns.

6. E-Waybill Generationin order to compel the businesses for regular compliance and GST return filing, the finance ministry has now restricted E-Way bill generation for transportation of goods, in case the trader has not filed GST returns for 2 successive months.

About GST Modification :

1. GST modification: Anyone whose GST application is being processed as well as whose business is already registered under GST.

2. What all can be changed: Details like Name & place of business, addition/deletion of partners or directors and contact details of the authorized signatory.

3. Voluntary modification: In case of any error in GST certificate is detected or a change is required, GST modification can be done immediately.

4. Other changes: In case, any other details have to be changed besides the aforementioned, GST modification will be done by only filing GST REG 14.

5. Change in the Company Name: If there is a change in the name of the business firm or the company name, the same should be immediately updated with GST modification

6. Can PAN Be changed: No. If there is a change of a PAN of a business firm, it can be updated with new GST registration.

What is meant by GST Modification ?

Any change or alteration made in the GST Registration or the details entered in the GST certificate is referred to as GST modification. One may opt for Amendment in GST Registration if he wishes from composite to normal scheme, or if there are mistakes in GST registration. To get GST modification, you need to file form GST REG 14.

What was the amendment made as regards GST Modification ?

Since the beginning of GST regime in 2017, the taxpayers could register under 2 schemes- normal scheme and composite scheme. One could also shift from normal to composite scheme.

However, the government had declared 31st March 2018 as the deadline to get GST Registration under composite scheme by filing Form GST CMP-02. Now, one can't shift from normal to the composite scheme but can go vice-versa with a GST modification.

When is legal GST cancellation India enforced ?

1. Non-filing of GST Returns: If a registered person under the regular scheme has not filed GST Returns for 6 months in a row.

2. Filing of Composite GST Returns: If a registered person under the composite scheme has not filed GST Returns for 3 months in a row.

3. No business activity: If anyone has opted for GST registration under the business name but has not begun any trade in the 6 months since the date of registration.

4. Unlawful GST Registration: If anyone has registered under GST through deceptive means, his GST Certificate will be cancelled immediately with retrospective effect.

5. Non-payment of GST: In case any GST tax evasion is found out from the taxpayer's side, his GST Certificate will be cancelled as a suitable legal action.

6. Flout of norms: GST registrant has violated any rules or provisions as, under CGST Act 2017, he will be subject to statutory GST cancellation.

When do we OPT for GST cancellation ?

There are certain circumstances that may compel a taxpayer to opt for a surrender of GST registration. Given below are some of the cases where a tax assess may opt for GST cancellation procedure :

1. An accidental GST registrationthat can cause unnecessary GST liability.

2. If the turnover of an individual is below 20 lakhsand he has registered under GST, he can opt for GST cancellation.

3. Dissolution or amalgamation of business, GST cancellation procedure is a must to avoid getting tax notices from the government.

4. Suppose government raises the threshold for GST registrationand you get out from its cover, you can opt for GST cancellation India.

5. In case of a take-over bidsurrender of GST registration is a must or the GST tax liability will continue to arise under the previous owner’s name.

GST cancellation status after 28th GST meet : At the 28th GST meeting, the government has changed GST cancellation procedure. Henceforth, the GST certificate shall be suspended immediately after the application for surrender of GST registration. Thus, no GST liability shall arise once you have applied for cancellation of GST registration.