Hello Friend! Welcome back. How are you? Definitely OK, right? Today we discuss a very interesting but an important topic “GST”. Everybody knows the term “GST”. So here I want to tell you “12 important things you must know before registered yourself in GST“(Last one is very important).
1. What is GST?
The full form of the word GST is “Goods and Service Tax”. It is an indirect tax. According to our tax structure, there are two types of tax, one is the direct tax and another is the indirect tax. The direct tax is directly paid to the Government by the taxpayers, for example, income tax and wealth tax (However wealth tax is abolished now). It is levied by the Government on the income or profit of the individual and it cannot be shifted to another person.
On the other hand, the Indirect tax is levied by Government on goods and services and not on the direct income or profit of the individual. The tax burden can be shifted from one taxpayer to another.
So, GST is an indirect tax. It is a tax on goods and services. When you sell any goods or provides any services, GST may be attracted.
2. Why GST?
To understand this you have to know the tax structure (Indirect Tax structure) of India before the GST regime. There were four types of duties/taxes before GST namely Excise Duty, VAT, Central Sales Tax (CST) and Service Tax.
Excise duty was levied on the manufacture of the goods. Although the excise duty was on manufacture it was charged when those particular goods were removed from the factory or warehouse or depot of the manufacturer.
Vat stands for Value Added Tax. It was a state level tax. The vat was levied when there was a sale of goods. There was another tax called CST. It was on interstate sale of goods.
Service tax was levied at the time of providing any service by the service provider.
The main problem of the earlier indirect tax system was the cascading effect. Cascading effect of tax means tax charge on tax. It is a tax which is applied at every stage of supply chain. For example, a manufacturer of West Bengal sold goods to a dealer of Jharkhand. For this, he charged excise duty and central sales tax (CST) on the value of such goods.
Now the dealer of Jharkhand cannot get the benefit of input tax credit of excise duty and CST. But he must want to recover the amount of such duties and taxes. For this purpose, he will add the amount of duties and taxes with the value of goods and sale to another dealer of Jharkhand. For this, he will collect vat from the 2nd dealer.
When the second dealer sells the goods to the ultimate consumer, he collects output vat and adjusts the input vat against it. So there is tax charged on tax. Tax is applied at every stage of supply.
It was really confusing to a common man.
The main slogan of GST is “ONE NATION, ONE TAX”. Now when a manufacturer wants to sell goods to another dealer he just collects GST. When that dealer wants to sell goods to another one, he also collects GST. So there is no confusion about tax.
3. Need for GST Registration
GST registration means a person, whether individual or partnership firm or any company registered itself under the GST system. After registration, they can be called registered GST person. The taxable person after registration can
- be recognized as registered suppliers of goods or services.
- claim input tax credit on GST paid at the time of purchase of goods.
- make interstate sale.
- collect tax from customers.
So, as a registered taxable person, you can get many benefits from the Government.
4. Eligibility Criteria for GST registration
A taxpayer is liable for registration under the GST system if the aggregate turnover of his business in a financial year exceeds Rs 20 Lakhs (For Special Category states, the amount is Rs. 10 Lakhs).
Aggregate turnover means the aggregate value of all taxable supplies, exempt supplies, exports of goods or services both and interstate supplies but excludes taxes, cess and the value of inward supplies on which tax is payable by a person on reverse charge basis.
However, in the following cases, GST registration is mandatory irrespective of the turnover of the taxpayer:
- Interstate Taxable Supply:
Interstate supply means the supply of goods from one state to another. If a businessman of West Bengal supplies goods to a business in Jharkhand, then GST registration is required.
- Casual Taxable Person:
A casual taxable person has no fixed place of business. It means a person who occasionally undertakes transactions involving the supply of goods or services or both in the course of business. A casual taxable person has to apply for registration at least five days prior to the commencement of business.
- Non-Resident Taxable Person:
A nonresident taxable person means a person who occasionally undertakes transactions involving the supply of goods or services or both, but who has no fixed place of business or residence in India.
- Persons who are required to pay tax under reverse charge:
Reverse charge means the person receiving goods and/or services are liable to pay the tax instead of the person who supplies the goods and/or services.
- Persons who are required to deduct tax at source under section 51.
- Input Service Distributor
- Every electronic commerce operator like Amazon, Flipkart etc
- Persons who are supplying goods or services or both through e-commerce operators.
5. Type of Registration
In the GST system, there are two type of registration- (a) Registration under the Regular scheme and (b) Registration under Composition scheme.
The main purpose of composition scheme is to give relief to small taxpayers from maintaining GST formalities. It is a simple and easy scheme under the GST law. However, it is an optional scheme and this scheme can be opted by any registered taxpayers whose turnover in the preceding financial year is less than Rs. 1.00 Crore (As per 23rd GST Council Meeting, the amount will be Rs. 1.50 Crore. However it is yet to be notified). In the case of North East State and Himachal Pradesh, the limit is Rs. 75 Lakhs.
The following points are very important for composition scheme:
- Input tax credit cannot be claimed by the taxpayer.
- The taxpayer cannot make any interstate supply of goods.
- The taxpayer cannot supply exempt goods.
- Persons who are supplying goods through e-commerce portal cannot be eligible for composition scheme.
- A casual taxable person or nonresident taxable person cannot apply for registration under the composition scheme.
- The manufacturer of ice-cream, pan masala or tobacco shall not be eligible for registration under composition scheme.
- Service providers, other than restaurant service, mandap keeper or catering service, are not eligible for composition scheme.
- The taxpayer cannot issue ‘tax-invoice’, He can issue ‘bill of supply’.
- The taxpayer has to maintain the word “composition taxable person” on every notice or signboard in the place of business.
- The rate of tax under composition scheme is (a) for manufacturer- 1% (CGST-1.5% and SGST- 0.5%), (b) for Traders of Goods- 1% (CGST-1.5% and SGST- 0.5%) and (c) for Restaurants not serving alcohol- 5% (CGST-2.5% and SGST-2.5%).
It is very important to decide which option is best for you. You have to decide which is more profitable.
In most of the cases when my clients ask me which option is best, my answer is ‘Regular’. Composition scheme is only for those whose total sale is not more than Rs. 20 lakhs. Yes, less than Rs. 20 Lakhs. Sometimes dealers are bound to take GST registration for the purchase of goods even if there turnover is less than Rs. 20 lakhs. They are basically sold their goods to the customer i.e. B2C transaction.
Now imagine your turnover is Rs 55 lakhs. As per rule, you can take registration under composition scheme. But my dear friend, what is your amount of purchase if your turnover is Rs 55 lakhs? It may be Rs 45 Lakhs. Now if the GST rate of your product is 12%, then you lose (Rs 45 Laks x12%) Rs 5.40 Lakhs input tax credit.
Again you have to give 1% on Rs 55 lakhs as GST i.e. Rs 55 thousand. So your total extra expenses will be Rs 5.95 Lakhs. Is it profitable? What happened if the GST rate is 18%?
It is totally my opinion. You have to decide what will be the good option for your business.
6. Documents required for Registration
The documents required for GST registration are as follows:
- PAN Card:
PAN card is a very important document. Your GST Registration Number is PAN based number. So PAN card is required.
- Identity and Address Proof along with the photograph.
- Bank Details:
You have to give various information about your Bank account like Account Number, Branch name and Address, IFSC code etc. For this, you have to upload a valid document like bank Statement or cancel cheque. Generally, I prefer to cancel cheque.
- Address Proof for the place of business:
If the property belongs to you, then you have to upload a valid address proof like municipal khata copy or copy of electricity bill or property tax receipts. If the property is rented/leases/shared then a copy of the consent letter duly signed by owner/joint holder must be submitted along with any of the above-mentioned address proof of the original or joined owner.
- Business Registration Documents:
In case of proprietorship concern, no registration document is required to be submitted. On the other hand, in case of partnership firm, partnership deed must be submitted. Further, in the case of LLP or Company, the incorporation certificate must be submitted.
- Digital Signature:
In the case of the proprietorship, no digital signature is required. Otherwise, class 2 or class 3 digital signature is required for the authorized signatory to submit the application, filling return etc.
7. Mobile Number and e-mail Id
At the time of registration, mobile number and e-mail id are required. It may happen that the CA/CMA or other practitioners may use their own mobile number and e-mail id. In that case, all the required OTP will come in their mobile number. If you want to change your consultant then you will face difficulty to get user id and password.
You can contact and request to the proper officer to change the mobile number and email id but it will be time-consuming. So you have to careful in this matter.
I always advise my client to give their mobile number at the time of registration. Yes, I use my e-mail id with proper consent of my client. If they want to go to another consultant then they can change the password very easily because of their mobile number (I also provide them the password because password always belongs to the client and it is not my property).
8. Rejection of Application
Your application for GST Registration may be rejected by concerned Officer due to non-availability of valid documents. But before rejection, the concerned Officer must raise some queries and demand some valid documents.
If you fail to provide the proper documents then the application is rejected. But if you submit all the information against queries then your application will be granted. So, be careful about this matter.
9. Proper filling of Return
As soon as you get the registration number, your return filling countdown starts. If you will not file your GST return in time then there will be the late fine of Rs 50 per day subject to a maximum of Rs. 10,000 per month. Right now there are two types of return for regular taxpayers- GSTR 3B (Monthly) and GSTR 1 (Monthly or quarterly). For composition taxpayer, only GSTR 4(Quarterly) has to file.
10. Due date of filling Return
In the case of the regular taxpayer, the monthly return filling (GSTR 3B) due date is 20 of the following month. For GSTR 1, it may be monthly filling (if turnover is Rs. 1.50 Crore or more) or maybe quarterly filling (turnover up to Rs 1.50 Crore). For monthly filling, the due date is 11th of the next month and for quarterly filling, the due date will be 30th/31st of the following month from the end of the relevant quarter.
As per the latest notification, from July 2017 to September 2018, all GSTR 1 filing due date is 31st October.
11. Maintenance of Accounts and other Records
GST is an accounting based law. If the taxpayer maintains proper records then only input tax credit is available under GST system. Every registered person shall keep and maintain, at his principal place of business, the following books, and records:
- Records relating to production or manufacture of goods;
- Records relating to the inward and outward supply of goods or services;
- Stock records;
- Details of input tax credit;
- Details of output tax payable;
- Any other documents as may be prescribed.
Books of accounts and others records shall be retained and preserved for a period of 72 months (6 years) from the due date of furnishing of Annual Return for the year relating to such accounts and records.
12. Don’t try to evade tax
Yes, my friend! Very important point it is! Tax evasion is a crime. Never try to falsification of your books of accounts. Under the GST regime, Rules are very strict.
And if you will do proper business then your wealth will be automatically high.
One of my clients told me that GST is a good move of Government. He will take advantage of it. Last month he paid Rs. 18000 tax. Believe me; he was very happy because his business is growing. For a small businessman, Rs 18000 tax in a month is not a matter of joke.
So friend, enjoy your business life. Do your regular job properly. Pay your tax timely. Be happy and make everybody happy.
If you have any other important points then please inform me in the comment section. I will update it in future. Thanks.