Everything You Need To Know About GST And Why It Is Important For Your Business
Ever since GST or the Goods and Service Tax was introduced in India on 1st July 2017, there has been a lot of discussion about it, with almost everyone weighing its pros and cons, trying to decipher what it is, and the most important evaluating whether their business requires GST registration and how to register? The lack of complete knowledge along with the relative infancy of the GST structure has created a fear of the unknown within the minds of business owners while they are still grappling to learn all about it and to comply with the norms.
Here we will dispense information regarding GST and why it is important to register your business for it.
What is GST?
GST is known as the Goods and Services Tax. It is an indirect tax that has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017.
GST is a comprehensive, multistage, destination-based tax.
- It is comprehensive because it has subsumed almost all the indirect taxes except a few State taxes.
- It is multi-staged as the GST is imposed at every step in the production process, but is meant to be refunded to all parties in the various stages of production other than the final consumer.
- It is a destination-based tax, as it is collected from a point of consumption and not a point of origin like the previous taxes.
Why was GST introduced?
Prior to getting a business GST registration, a businessman had to pay a number of taxes for all aspects of his business, right from procuring raw materials to transportation along with various other taxes levied at State and Central level. The number of liable taxes confounded businessmen and made the calculation of the various taxes a tedious affair which was heavy on the pocket too.
The business GST registration process replaced these indirect taxes levied by the Central and State Governments and provided for a single and streamlined process. The GST presents India as a unified market to business owners and also aims at bringing a lot of black money back into the mainstream economy. The tax is implemented at every step of value creation under the GST structure.
What is CGST, SGST and IGST?
GST is further categorised into three broad categories, namely, CGST, SGST and IGST.
The transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government.
What is Business GST Registration?
The business GST Registration is a process by which a business gets itself registered under GST. Once a business is successfully registered, a unique registration number is assigned to it known as the Goods and Services Tax Identification Number (GSTIN). This is a 15-digit PAN-based unique identification number allotted to every GST registered business by the Goods and Services Tax department.
Which businesses can apply for GST Registration?
Irrespective of the type of business or the service it provides, businesses fulfilling the following criteria need to apply for business GST registration–
A product business with an annual turnover of Rs. 40+ lakhs requires GST Registration. However, if it is placed in the special category, the limit is Rs. 20 lakhs. Similarly, service businesses with an annual turnover of Rs. 20+ lakhs need to apply for GST Registration. However, for businesses in the special category, the limit is Rs. 10 lakhs.
When does a business need to apply for multiple GST Registrations?
If a business runs operations in two different States, they need to obtain separate registrations for each State.
Also, if a business has multiple business verticals or several branches in a single State then too, they need to obtain separate GST registrations provided they meet the relevant eligibility criteria/parameters. But the process of obtaining GST Registration is uniform all over the country. For eg: The process of obtaining GST Registration in Pune is same all across the country.
Importance of GST Registration for businesses
The business GST Registration is important and has several benefits for the business and for the general taxation structure and economy of the country.
- The business GST registration makes do with the cascading effect of tax, thereby eliminating the burdensome ‘tax on tax’ from the consumer.
- The threshold for business GST registration or the eligibility factor is higher than before, thus making it easy for certain micro-businesses to survive and establishing clear eligibility criteria for businesses.
- GST makes provision for Composition Scheme for small businesses.
- The simpler online facilities for GST compliance have made it easier for businesses to understand the process and simpler to obtain GST registration for small businesses as well as for larger organisations.
- GST registration is beneficial for taxpayers and businesses as there are relatively lesser compliances under GST.
- GST establishes a defined treatment for e-commerce activities.
- Under the GST structure, there is an increased efficiency in logistics which benefits businesses and the economy at large.
- The biggest importance and advantage of GST is that it regulates the unorganised sectors.
Along with these, GST also brings about transparency on the taxes that are levied on the supply of goods and services. This will help improve tax compliance as well as boost the revenue of the Government, thereby accelerating the GDP and improving the overall economy of the country.
All the above pointers make GST a favourable option for businesses and therefore make it important for businesses to opt for GST registration for small businesses as well as organisations.
How to register for GST?
The process of GST registration for small businesses as well as large firms is the same and is entirely done online (https://gstregistration.org/ ). The process is simple to understand and follow once the business knows which documents need to be submitted and the steps to follow. Businesses can download GST registration checklist to keep the necessary documents handy and to understand the registration process clearly.
Alternatively, entrepreneurs can get their business GST registration done by opting for services such as those offered by deAsra Foundation. Entrepreneurs can also get their other GST related queries and doubts cleared by approaching deAsra too.