The Previous Taxation System
Before the introduction of the GST tax system, the Union and the states calculated and levied taxes based on numerous stages of taxation on a product or commodity, under their laid-out systems and laws.
For every junction of the economic environment, different goods and services were put through various independent taxes, which were variable. These taxes were based on the stage and on the destination of the commodity in question.
Consider an example, the Value Added Tax or VAT was charged by every state in India before on purchases of goods and services. The VAT for each state was based on that state’s taxation laws and systems.
Disadvantages of The Previous Taxation System
All in all, there were 2 problems regarding the previous system of taxation:
- The tax charged and paid was based on the price of the commodity, after subtracting the price of the already taxed materials, goods or services. This wasn’t always done by the brightest minds which created a lot of confusion and in turn led to double taxation.
- The previous taxation system varied from state to state, thereby, the percentage of tax to be levied differed from state to state.
The Present System Of Taxation – GST
GST or the Goods and Services Tax is a form of indirect tax charged on various purchased goods and services. It is uniform throughout the country, with no variations.
GST was taken on by the Government of India to improve the process of charging and collection of taxes at all junctions in the economic ecosystem. The GST also integrates the country, in a way, owing to the uniform tax rate all over the country.
It has replaced a number of indirect taxes that previously existed. The GST taxation system is basically a destination-based, comprehensive, and multi-stage tax. It is, in effect, charged on every addition of value.
In the GST regime, tax is charged at every junction as mentioned before.
- For intra-state, CGST or Central GST and SGST or State GST are charged.
- For inter-state, Integrated GST comes into effect.
To define GST as a destination-based, comprehensive, and multi-stage tax, it is necessary to know what the following entail:
- Destination-based – Even if a product is manufactured in state A and sold at state B, GST will be levied at the point of consumption, that is, the revenue will go to state B.
- Comprehensive – Implemented in every state, irrespective of the category of the product, in equal proportion.
- Multi-stage – GST is levied from multiple stages from production to consumption makes it a multi-stage tax.
The journey of GST from former Prime Minister Atal Bihari Vajpayee’s committee for drafting the GST law to its launch in July 2017 was a long one.
Important Features of The GST Bill
The GST system was executed by the Government after passing the bills mentioned below:
- Goods and Services Tax Bill
- Compensation Goods and Services Tax Bill
- Integrated Goods and Services Tax Bill
- Union Territory Goods and Services Tax Bill
The GST Act was passed in the parliament, during the tenure of Prime Minister Narendra Modi-led NDA Government, on the 29th of March in 2017 and became effective from 1st of July 2017.
GST was first brought into the spotlight and then passed to battle the abnormal VAT system and to reform the entire system of taxation in India. The objective of the Goods and Services Bill is to provide a much simplified taxation system to both suppliers and consumers.
Late Mr. Arun Jaitley, the former Finance Minister of India, quoted that the present system of taxation will help keep inflation in check also.
The previous taxation system, as mentioned earlier, was inconsistent and garnered a lot of confusion. In essence, it lacked uniformity that GST provides. Through the introduction of a uniform rate of GST all over the country, GST offers uncomplicated and consistent taxation on commodities, irrespective of which category they belong to or which state they are being levied for.
GST was adopted with a four-tier block owing to the fact that the government found it wrong to charge uniform taxes for both luxuries and necessities. The 4 GST tax slabs for various goods and services, including luxuries, are 28%, 18%, 12%, and 5%. Daily necessities and commodities aimed for mass consumption like salt, vegetables, bread, eggs, pulses, etc., are not levied the tax for. However, 12-18% tax is charged for other daily-used products like sugar, tea, spices, etc.
Advantages Of GST
Some of the advantages of GST are mentioned below :
- It removes the cascading effect of taxation
- It accumulates various taxes into one
- It helps in the reformation of the Indian taxation system
- It also helps in representing India as a common market, in regard to every place
- It makes Goods and Services produced or manufactured in India more competitive in the global market
- It has a much higher threshold for registration than its predecessor
- The online procedure for GST is much simpler
- It also has a composition scheme for small businesses and MSMEs
- It creates a defined treatment for the e-commerce industry
- It helps in regulating the unorganized sector
- As it is uncomplicated, it has increased efficiency in terms of logistics.
Components Of GST
GST includes a total of 3 sub-taxes or individual taxes (in its scope) :
- IGST – Integrated Goods and Services Tax – This is collected by the Union Government for an inter-state commerce, which is a sale between 2 states.
- SGST – State Goods and Services Tax – This is collected by the State Government for an intra-state commerce, which is a sale or transaction taking place within a single state.
- CGST – Central Goods and Services Tax – This is collected by the Union Government for an intra-state commerce, which is a sale or transaction taking place within a single state. CGST is almost similar to SGST except for the fact that the CGST is levied by the Central Government.
Type of sale
Old Taxation System
New Taxation System
VAT + Service Tax/Central Excise and others
CGST + SGST
Service Tax/Central Excise + Central Sales Tax and others
GST is also segregated into a 4th type of tax :
- UGST – Union Territory Goods and Services Tax
This is collected by the Union Territory for intra-union territory commerce, which is a transaction happening within a single Union Territory.
Places, where UGST is levied are:
- Andaman and Nicobar
- Dadra and Nagar Haveli
- Daman and Diu
List of Taxes Before GST
- Duties of Excise
- Central Excise Duty
- Duties of Customs
- State VAT
- Central Sales Tax
- Entertainment Tax
- Luxury Tax
- Purchase Tax
- Entry Tax
- Advertisement Taxes
- Taxes on betting, gambling, and lotteries, etc.
Under the GST regime, every company, organization, cooperative society, Self-help groups, federations, unions, individuals, etc that supplies products and commodities have to register themselves under the Goods and Services Tax.
The registration for GST does not depend on the type of products or services supplied and is uniform for all types, whether it is a daily necessity or for luxury or for entertainment. It does not depend on the consumer who bought or enjoyed the commodity.
GST depends on the annual turnover of the said individual or organization, that is, their total income in a year. If the annual turnover is more than a certain pre-specified value set by the Government of India or the Central Board of Indirect taxes and Customs (CBIC), then that individual or the particular company or organization has to register for Goods and Services Tax.
- For most states, the pre-defined value of annual turnover for registering for GST is INR 20 Lakhs per annum
- For other states, the annual turnover should be above INR 40 LPA
- For some of the states, the annual turnover should be above INR 10 LPA (For North-east states and hill states)
The concerned individual or company or organization can register for GST with the Goods and Services Tax Network or GSTN.
After registering, they have to pay the desired and pre-defined values of tax to the concerned authorities and are in turn are permitted to levy tax revenues from their customers, or the people or companies they deal with, the appropriate amount of GST.
After a particular individual or organization is done registering with the Goods and Services Tax Network for GST, he/she/they will be issued a GSTIN or Goods and Services Tax Identification Number which is unique.
This GSTIN is a 15-digit unique identification code. It is assigned state-wise by the Government of India. After an individual or company receives its GSTIN, it gets a legal identity as a supplier authorized by the Government of India. After this the company or individual can avail the benefit of inputting tax credit and charge GST to recipients of their goods and services.
Definition of GST Registration
The GST registration process, as the name suggests, refers to the process of registering a business under GST.
Only a certain number of businesses, as set and provided by the Government of India and the CBIC (Central Board of Indirect taxes and Customs), have to register under the Goods and Services Tax. Registering under GST for those businesses is mandatory as set per the rules of the Government of India.
If an individual or organization keeps on carrying its businesses without registering under GST, after being directed to do so and within a pre-defined deadline, will have to pay a hefty sum of money. This act will be considered as an offence. The applicable penalty will be put down by the Central Government and the CBIC.
An individual or company trying to register under GST can do so by visiting the Official GST Registration Portal. One is advised to go through the guidelines available in the portal and then carry out the process of GST registration online.
Going through an offline method is one can register themselves at their nearest GST Seva Kendra.
The completion of a GST registration takes about 2-6 working days (excluding holidays).
Note – The Central Board of Indirect taxes and Customs has recently notified an increase in threshold turnover from the previous sum of INR 20 LPA to INR 40 LPA effective from the 1st of April 2019.
Consequences of The GST Registration
Registering a business under GST has some consequences. A company or individual that has already completed its GST registration online through the GST website or offline for the business is/are liable for enjoying all the benefits that befall or entail upon completing the registration process.
After the completion of registration through GSTN, an individual or organization has to pay the desired and pre-defined value of tax to the concerned authorities and are in turn permitted to levy tax revenues from their customers, or the people or companies they deal with (or supply products and services), the appropriate amount of GST.
What Does Gst Registration Include In Terms Of Details?
In terms of details, during the registration of any business under GST, there are certain requirements that the candidate applying has to fulfill.
The data that are asked while filling up the application registration under GST:
- The State/Union Territory to which the individual or organization belongs to
- The District
- The Legal Name of the Business (the one for which the registration process is being undertaken)
- The Permanent Account Number (PAN)
- The e-mail address of the one who is filling up the form (He/She has to be a fundamental part of the business for which the registration process is being undertaken)
- The Mobile/Contact Number.
There are different types of registrations under GST. There are also various types of business entities like individuals supplying through e-commerce, or non-resident taxable individuals, or resident taxable individuals, or casual taxable persons, etc. and even more types of businesses.
But the aforementioned types of individuals or organizations that are in essence business entities are required to get their GST registrations done. These types of entities have to obtain the same mandatorily, irrespective of their annual turnover or turnover limit.
Some of the turnover limits, regarding GST, that are required compulsorily to have completed their GST registrations for various goods and services providers and suppliers are mentioned below:
- Service providers – Any individual or organization that provides a service and has an average turnover (over a certain period of time) more than INR 20 Lakhs per annum is mandatorily required to possess a GST registration, irrespective of the service provided. In some of the states having special privileges, the aggregate turnover should be more than INR 10 LPA as mentioned before (fixed, without any variations irrespective of the place).
- Goods providers/Dealers – Any individual or organization that is engaged in the act of providing exclusive goods, daily necessities, etc whose average turnover is more than a sum of INR 40 LPA, irrespective of the type and kinds of goods provided, has to have completed the GST registration.
For individuals or organizations to have an INR 40 LPA annual turnover, they have to satisfy the following conditions:
- The goods provider should not be indulged in making intra-state (within a single state) commerce or business in Arunachal Pradesh, Meghalaya, Manipur, Nagaland, Sikkim, Mizoram, Puducherry, Tripura, Uttarakhand, and Telangana (the North-east states, Puducherry and the states of Uttarakhand and Telangana)
- The goods provider should not be engaged in providing any kinds of services
- The goods provider should not have a business involving tobacco, zarda or pan masala, or ice cream
If the above-mentioned conditions are not satisfied by goods providers, then they have to obtain the GST registration for an annual turnover limit of INR 20 Lakhs or INR 10 Lakhs in some states.
Some of the special category states (with special privileges) are (under the GST Act):
- Jammu and Kashmir
- Arunachal Pradesh
- Himachal Pradesh
Note – The net or aggregated turnover for a company or an individual can be calculated using the following formula:
Net or aggregated turnover = (Inter-state deals or supplies + Exports (if any) + Taxable supplies + Exempt supplies) – (Value of non-taxable supplies + Taxes + Value of supplies that are taxable under reverse charge + Value of inward supplies) Furthermore, the net or aggregated turnover is calculated on the basis of the PAN. Therefore, even if an individual or an organization has multiple businesses in different places, they all have to be summed to arrive at the net turnover.
List of Those Who/That Should Register For Gst
- Companies or individuals that were/was registered under the old taxation system or the pre-GST law (under, for example – VAT, Service Tax, Excise, etc.)
- Non-resident taxable individuals/casual taxable individuals
- Companies or individuals with an annual turnover of INR 40 LPA (which is above the present threshold limit for turnovers regarding GST)
- The above condition for North-eastern states, Jammu and Kashmir, Himachal Pradesh, and Uttarakhand is applicable for an annual turnover of INR 10 LPA)
- Input service distributors and agents of a dealer or supplier
- Those who pay taxes under the Reverse Charge Mechanism (RCM)
- All e-commerce aggregators
- An individual or company that supplies via an e-commerce aggregator
- An individual or company supplying online information and retrieval services or database access from a place that is outside the territory of India. They also should not be a registered taxpayer entity
- NRI taxable individual
- Business transferees
- Inter-state operators/dealers.
Voluntary Registration Under Gst
Any individual or organization can complete the GST registration and obtain the GSTIN (Goods and Services Tax Identification Number) anytime, irrespective of annual turnovers.
As a result, some of the individuals or companies acquire GST registration without crossing the threshold limit of annual turnovers. The main reasons for acquiring GST registration without valid grounds are:
- Improving the credibility of one’s business
- Claiming various input tax credit benefits
- Satisfying the requirements and demands of various B2B (Business to Business) customers.
Documents Required For A GST New Registration
- In general –
- Aadhaar card of the applicant
- PAN (Permanent Account Number) card of the applicant
- Proof of registration of the applicant’s business or Incorporation certificate
- Identity proof of Promoters or/and Director
- Address proof of Promoters or/and Director
- Photographs of Promoters or/and Director
- Address proof of the place of applicant’s business
- Bank account statement/cancelled cheque
- Letter of Authorization/Board Resolution for Authorized Signatory (BRAS)
- Digital Signature
- For Sole Proprietorship / Individual
- Aadhaar card of the sole proprietor
- PAN card of the sole proprietor
- Photograph of the sole proprietor
- Details of Bank account of the sole proprietor
- Office address proof of the sole proprietor
- For Partnership deed/LLP Agreement
- Aadhaar card of all partners
- PAN card of all partners
- Photograph of all partners
- Details of Bank account of all partners
- Proof of address of the place of business(s)
- For Private limited/Public limited/One person company
- PAN card of the company
- Certificate of Registration of the company
- MOA (Memorandum of Association) /AOA (Articles of Association) of the company
- Aadhar card of all Directors
- PAN card of all Directors
- Photograph of all Directors
- For Society or Trust or Club
- PAN card of the society
- Certificate of Registration of the society
- PAN Card of Promotor/ Partners
- Photograph of Promotor/ Partners
- Details of Bank account of Promotor/ Partners
- Proof of Address of registered office of the society.
GST Official Website
The official website of GST (hosted by the Government of India) is : https://www.gst.gov.in
GST Online Registration Process (Gst Apply Online)
- Part – A
- Go to the government GST Portal
- Go to the ‘Services’ tab
- Select ‘Registration’ and click on ‘New Registration’
- In the first blank for ‘I am a’, select ‘Taxpayer’ from the drop-down menu available
- Next fill the details for ‘State/UT’, ‘District’, ‘Legal Name of the Business’, ‘Permanent Account Number (PAN)’, ‘E-mail Address’, and ‘Mobile Number’
- This form is numbered as PART-A of GST REG-01
- Cross-check the details
- Verify the information provided by requesting and entering a One-Time Password (OTP), which will either be sent to your mail ID or mobile number (you will get to choose)
- Next after verifying, you will receive a Temporary Reference Number (TRN) which has to be noted for future reference
- Part – B
- First log in with your TRN and enter the CAPTCHA code correctly
- Complete the OTP verification through the OTP sent to your mail ID or mobile number
- You will then be redirected to Part-B of the GST Registration form
- Next, you will have to fill the PART-B of GST REG-01 form
- This time, fill in the details regarding ‘Name of the Business’, ‘PAN of the Business’, ‘Date of the Commencement of the Business’, and ‘State/UT of the Business’
- In this section, you have to mention all existing registrations (if any)
- Next, fill in the details regarding at most ‘10 partners or promoters of the Business’. If the registration is for a proprietorship firm, then fill in the details regarding the proprietor, ‘Personal Details’, ‘Designation’, ‘Director Identification Number’ (DIN), ‘PAN’, and ‘Aadhaar Number’
- Fill in the details regarding the individual that you have authorized to file GST returns
- Fill in the details regarding the ‘Principal Place of Business’, ‘Address of the Principal Place of Business’, ‘Office contact details’, and nature of possession of the office campus/premises
- Fill in the details regarding the ‘Additional Place of Business’, ‘Details of Goods and Services to be Supplied’, and ‘Bank Account Details of the Company’
- Next step is uploading all the required documents based on the type of business you are registering for
- Click on ‘Save and Continue’
- After submitting the Part-B of the application, you will need to sign it digitally
- Click on ‘Submit’
- After this, you will receive an Application Reference Number (ARN) for future reference through your mail ID or mobile number to confirm the completion your registration
- After Part – B
- After the final submission of the PART-B of GST REG-01, you will be redirected to another page
- Here you will receive an acknowledgment, in the form GST REG-02
- Intimation to GST REG-03 will indicate any pending information from your side
- In case of any information is pending from your side, you have to visit the department and produce or clarify (in case of cross scrutiny) the uploaded documents within 7 working days. This will be presented in form GST REG-04
- In case the department rejects your application (because of finding errors in the application or some other reason), you will be informed in form GST REG-05
- On successful completion and scrutiny of your application, you will be issued a Certificate of Registration (CoR) by the department and approval will be in form GST REG-06
Note – After the successful completion of PART-A and PART-B and approval of the application form of an individual or a company by the concerned department, he/she/they are assigned a 15-digit alphanumeric code known as the GSTIN or Goods and Services Tax Identification Number. The GSTIN is the unique code used for identification on matters relating to GST.
Note – GST Seva Kendra are a type of centres (regarding GST and its information) set up by the Government of India for helping businesses, taxpayers, and applicants for registering under GST with GST registration related issues, queries, assistance, and support. The Kendra also helps in uploading GST returns and much more.
Benefits of GST Registration Online
- Termination of Multiple Taxes – Elimination of pre-existing multiple indirect taxes is one of the benefits of GST. Taxes like excise, sales tax,turnover tax, service tax, octroi, CENVAT, etc are not applicable anymore and all those are under a common tax presently.
- Quality and Quantity of money-saving – Initiation of GST has resulted in the elimination of double charging or double taxation of goods and services.The prices of goods and services have, in fact, reduced and this helps in people saving more money than before.
- Business has never been this easy before – GST brought with itthe concept of ‘One Nation One Tax’ as famously quoted by the current Prime Minister. The pre-existing unhealthy competition betwixt the States has been abolished and GST has helped businesses to engage in inter-state business.
- Cascading Effect Reduction – From manufacturing until consumption, GST is applicable at all stages, and hence known as a multi-stage tax. It provides tax credit benefits at every stage in the economic chain of the country. In case of the old taxation system, at every stage, the margin was added and tax was paid on the whole amount, which in turn led to double taxation. Under GST, businesses are availing the benefit of Input Tax Credit and tax is being paid on the amount of value addition only. GST has reduced the cascading effect of tax and therefore has helped in reducing the cost of the product.
- More Employment – As GST has contributed to reducing the cost of products and services, the demand for products and services has increased. The increase in demand has, in turn, led to the increase in supply which in turn led tothe employment graph going up (Economics lesson 101).
- Increase in Gross Domestic Product (GDP) – With the increase in demand, an increase in supply is a must and the vice versa also holds true. This results in an increase in the GDP of a country that GST is doing for India.
- Reduction in the amount tax evasion – Goods and services tax is a single tax that has accumulated various pre-existing taxes and has made the system efficient with fewer chances of corruption and tax evasion.
- More Competitive Product – Manufacturing has become more and more competitive with what GST eliminating the cascading effect of the tax, inter-state tax, high logistics cost, etc. This, in turn, helps the common man to get a well-manufactured/finished product, worth his/her salt.
- Increase in Revenue – In the regime of GST, 17 indirect taxes have been replaced and incorporated into a single tax. The increase in product demand means higher tax revenue for both state and central governments.
Penalty For Non-Compliance
- The Penalty for not registering under GST when a business is coming under the purview of GST is 100% of the tax amount if the offender(s) has/have not applied for GST registration and intends to avoid the same purposefully. The amount is the same as the applicabletax Or INR 10,000; whichever is higher.
- The penalty of 100% tax due or INR 10,000; whichever is higher, is applicable to those who choose Composition Scheme despite not being eligible for it.
- An offender not paying his/her due tax or making short payments is liable to pay a penalty of 10% of the tax amount. However, this amount cannot be less than INR 10,000.
- An individual found guilty of not providing the GST invoice is liable to be charged with 100% tax due or INR 10,000, whichever is higher.An offender will be charged a fine of Rs. 25,000 for incorrect invoicing.
- If an individual has not filed for unpaid tax, there will be a penalty of INR 50 per day and INR 20 per day if he/shewas to file for NIL returns. However, the maximum amount must not exceed INR 5,000.
- There is also the penalty of a jail term for tax offenders for committing fraud.
GST Registration Online FAQs:
1. What is GST Registration?
2. How to register for GST?
3. What is the GST Registration Portal?
4. What is the GST registration last date?
5. How to get a new GST registration?
6. GST Full name?
7. How to get details on GST enrolment?
8. How to apply for GST?
9. What is the fee for GST registration?
10. What are the documents required for GST registration?
11. Who has to register under GST?
12. Who does not have to register under GST?
13. What goods have been exempted under GST?
14. Which commodities are outside the purview of GST?
15. What is meant by a Casual Taxable Individual?
16. What is meant by a Non-resident Taxable Individual?
17. What is GSTIN?
18. What is the format of GSTIN?