So you are new to the Goods and Services Tax (GST) and want to understand the machinery of GST in India. If that’s the case, you may want to keep reading. For starters, GST is a tax regime that was put in place to subsume an array of taxes like Excise, Entertainment tax, and so on that were levied under the previous tax structure. If you are the owner of a business, you will have to pay GST if your business turnover is Rs. 40 Lakh per year. In special category states, the turnover threshold is Rs. 20 Lakh.
Merits of the Goods and Services Tax
Here are some advantages of GST:
- GST played a critical role in eliminating the cascading effect of taxes under the previous tax structure. It has eliminated the build-up of taxes like logistics, inter-state tax, and many others that are levied at different stages.
- The calculation of taxes under the previous tax structure was incredibly complicated and tedious under the previous tax system. However, this does not seem to be the case with GST since it subsumes the collection of indirect taxes.
- GST has a wide range of benefits, including detailed rules for E-commerce, logistics that are efficient and easy to navigate, and a composition scheme under GST that can help relatively small businesses.
What are the Different types of GST?
GST is classified into three types – IGST, CGST, and SGST.
Integrated Goods and Service Tax (IGST)
The central government collects this tax when transactions are made between states.
Central Goods and Services Tax (CGST)
This tax is collected by the central government when you conduct transactions within the same state.
State Goods and Service Tax
This tax is collected by the state government when an intra-state transaction is conducted.
The Fundamentals of a Goods and Services Tax Identification Number
A Goods and Services Tax Identification Number (GSTIN) is a unique 15-digit number that GST-registered businesses receive once they complete their GST online registration. The importance of a GSTIN cannot be stressed enough. As an individual or business, you need to maintain your credibility in the eyes of the market and government alike. Having a GSTIN can solidify your legitimacy as a provider of goods and services. A GSTIN is used during GST return filing and prevents tax evasions. It also keeps your transactions safe and protects you from fake businesses.
How do you obtain a GSTIN?
Now that you are considering registering for a GSTIN, you will need to follow a few simple steps as described below to receive your GSTIN:
- Start by visiting the online GST portal and signing in.
- Then, go to services and click on new registration. Submit your phone number, email address, and Personal Account Number (PAN) and proceed.
- You will receive an OTP on the phone number you’ve used for registration. Enter the OTP and proceed to obtain your Temporary Reference Number (TRN).
- Head to the services tab, go to registration, and click on new registration. You will need to enter your TRN and the captcha code that shows up and continue.
- At this point, you will get another OTP and get redirected to a page called saved applications. Click on the edit option.
- Then, fill up all the important business-related details like the location of the business, bank account details, and so on. You will also have to submit documents that serve as proof of those details. Finish the process by submitting your application through verification via E-signature, Electronic Verification Code (EVC), or Digital Signature Certificate. Finally, check your phone and email for your 15 digit Application Reference Number (ARN).
What happens if I do not register?
It depends on the reason for failure to complete your GST registration process. If you unintentionally did not complete it, you will have to pay a 10% penalty. However, if it was deliberate, you could be facing a 100% penalty on your taxable amount. Given the severe consequences you could face, it is highly recommended that you do not put this off.