What is GST?
On 29th March 2017, Parliament passed a law enacting Goods and Services Tax, also known as GST. Indirect taxes such as VAT, excise, and service tax have been replaced with it.
Every point of sale in the supply chain is subject to this comprehensive destination-based tax. For example, let us say you’re a wholesaler and sell to Mr. X, a retailer, who further sells to Mr. Y (Consumer). To begin with, the tax will be charged on the purchase made by Mr. X from you. Secondly, Mr. Y will be charged a tax on any purchase made from Mr. X.
GST registration numbers are assigned to every business registered under GST.
Various Types of GST
Currently, the central and state governments are both levying the tax in India using a common tax slab that is called dual GST. However, GST can mainly be divided into three categories:
SGST (State Good & Services Tax) – It is a tax imposed by states and union territories on goods/services manufactured and sold within their borders.
CGST (Central Goods & Services Tax) – It is a tax levied by the Central government on the intra-state exchange of goods and services.
Integrated Goods and Services Tax (IGST) – This tax is levied by the government when goods or services are transferred between states. Each state and the federal government share this tax equally.
Tax benefits for Startups and Small & Medium Businesses (SMB)
GST registration can provide certain advantages to startups and small businesses:
- According to the 31st GST council’s declaration to boost startups and small businesses, no late fee will be charged for returns filed under GSTR-1 and GSTR-3B.
- Business in India has never been this easy. A GST registration is all that’s required for startups and SMBs. It used to be a bit complicated.
- One uniform indirect tax system. GST has subsumed many indirect and direct taxes, including excise, VAT and others. Managing taxes has become considerably easier.
- The compliance requirements are straightforward.
- Ease of paperwork & logistics for clients in dense populations
Starting a small business or a small and medium business is exempt from the GST
Businesses with annual turnovers of under Rs. 40 lakhs per year are not required to register under the GST law. As a result, many new startups and small businesses with incomes between Rs. 5 lakh and Rs. 40 lakh are not subject to the tax.
Do you need a GST registration for a startup business?
Online GST registration is quite simple. Here are the steps:
- Visit the GST website at https://www.gst.gov.in/. From the Services section, select New Registration.
- Enter your PAN, your email address, your mobile number, and click on “Proceed” to generate the Temporary Reference Number (TRN).
- It will be sent to your mobile device or emailed to you. Validation is required.
- You will receive a TRN number once you validate your number. Please use this number to complete the GST registration process.
- Sign in using the TRN, enter the captcha, and verify the OTP. Select the pencil icon under Action.
- Describe your business by entering all the information requested, such as trade name, commissioner code, composition scheme, etc. Select Save and Continue.
- Indicate the name and contact information of the authorized signatory who is responsible for filing GST returns for the business.
- Provide details of the business address. This section should include the details of the warehouse if, for example, you operate an e-commerce business and use Amazon’s warehouse.
- Describe the five most important products the applicant provides. Give the HSN code for goods and the SAC code for services.
- Please provide information about the principal place of business, such as the address, official contact information (email, phone number, etc. ), and the nature of possession. You can upload relevant proofs to support your claim.
- Fill in all your business’s promoters’ and directors’ information on the next screen. If your business is a proprietorship, enter the proprietor’s details. The portal allows you to enter the details of up to ten promoters or partners. After entering the details, click Continue.
- Review the details. You will need to e-verify the name of the authorized signatory after selecting the verification checkbox.
- The application reference number (ARN) is generated after signature verification and a success message appears on the screen. It can be used to track the status of your application. The GST number will be assigned to you once the process is complete.
It can take a long time for startups and small businesses to register for GST. A chartered accountant can save you time.
Regardless of whether you want an accountant to help with taxes on a daily basis. Many online accounting solutions are quite cost-effective, whether they are paid or free.
Finally, GST implementation can make a huge difference in achieving financial goals without a lot of difficulties, just like a startup gains success when its concept is correctly executed.