GST – Goods & Services Tax
GST has been implemented successfully by the Central Government to streamline all types of indirect taxation to a “Single Taxation” system on July 1st of 2017 with a great public support. Such “One Tax for One Nation” is the culmination of three taxes such as Central Goods and Service Tax (CGST), State Goods and Service Tax (SGST) and Integrated / Interstate Goods and Service Tax (IGST).
Goods & Services Tax:
This is a single tax applied to the supply of goods and services right from the manufacturer to the consumer. GST, a comprehensive, destination based, the multi-stage tax will be levied on every value addition. What does it represent Multi-stage in the statement?
It represents multiple steps an item goes through from the manufacturer to the final sale. We could classify them as:
- Buying raw materials – First stage;
- Manufacturing/production – Second stage;
- Sale to the wholesaler – Third stage;
- Sale to the retailer – Fourth stage;
- Final sale to the customer – End stage
Here, at every stage, the tax is levied.
On the same tax basis, both CGST & SGST are levied. CGST replaces all Central indirect taxes say Service Tax, Excise Duty and SGST replaces VAT, Octroi, Lottery or betting taxes, Luxury tax, Purchase tax, etc. Certain goods like Crude Petroleum, Motor Fuels, Tobacco products, Natural Gas, Consuming alcohol are still charged with Excise Duty.
Why is GST important?
Our Indian tax structure is divided into Direct and Indirect Taxes. Direct Taxes are levied where the liability cannot be passed to someone else. Say, for instance, Income Tax. You are only liable to pay tax for your own earned income. The liability can be passed to someone in the case of Indirect Taxes. For example, when a merchant pays VAT on his sale, he can pass the liability to the customer. Here, the customer pays the price for the item and VAT and the merchant pays the VAT to the Government. So, the customer not only pays the product amount, but also pays the tax liability and the charges are at a higher outlay at the time of buying any product. Why does this burden happen to the end customer?
It is because the merchant shall pay a tax at the time of buying an item from the wholesaler. To recover and pay the VAT to the Government, he passes the liability to the customer who in turn pays an additional amount. So, the merchant is left with no option to recover the VAT paid that’s how it has been passed on the customer’s head.
Goods and Services Tax has an Input Tax Credit system which makes the seller claim the tax that is already paid so that the final tax on the end customer is reduced.
How does GST benefit all?
Consumer: It acts as a single and transparent taxation system. Most of the goods costs, services were with many hidden taxes due to the multiple taxing with incomplete or no input tax credits. But now as per GST rules, there is only one tax from the manufacturer to the final customer which exactly shows the transparency of the taxes paid to the final customer.The overall tax burden on most of the commodities has come down, which eventually benefits the consumers.
Business & Industry: A comprehensive Income tax system is the foundation of the GST regime in our country. The tax paying services say Registrations, Returns and Payments, are availed to the taxpayers through online. This implementation makes the system easy and transparent.
GST makes doing business in the country as a tax neutral irrespective of the place of running a business. Decreased transaction costs finally lead to an enhanced competitiveness in the industry and trade.
Central & State Governments: GST replaced multiple indirect taxes levied by both Central and State Governments. The robust IT infrastructure makes GST in a better tax compliance way. GST is anticipated to decrease the Government’s collection cost of tax revenues and will lead to higher returns efficiency.
GST & advantages :
- GST is a friendly taxation for export oriented businesses because GST is not applied to goods and services which are exported out of the country.
- The lowered tax burden could convert into lower prices on goods for the customers in the long run.
- To widen the tax base, more business entities come under the GST Tax system which leads to more tax revenue collections.
- Companies which are not working as organized sectors come under a Tax
- GST incurred on input costs can be recovered by the manufacturers, suppliers, retailers, and wholesalers. This system eliminates the cost of doing business, thus brings fairer prices for consumers.
- The entire Indian market becomes a unified market, which converts into lower business costs. This facilitates flawless goods movement across the states and reduces the business transaction cost.
GST Slabs on Product & Services:
A four slab structure is designed in the GST scheme under which the goods and services will be taxed. 5%, 12%, 18% and 28% are the four slabs under the GST. A large number of items are categorized under 18% tax slab and 1211 items come under various slabs.
5% GST is applied on the products: Bio gas, Postage or revenue stamps, coffee, tea, spices, frozen vegetables, pizza bread, kerosene, coal, medicines, stent, skimmed milk powder, lifeboats, Agarbatti, Kites, attires under Rs 1000, footwear costs under Rs 500, cream, branded paneer, 5% GST is applied to the Services: Small restaurants, Textile job work, Railways and Air transport.
12% GST is applied on the products: Cell phones, dry fruits in packed form, Bhutia, Butter,Salt, Ayurveda medicine, ghee, tooth powder, Agarbatti, coloring books, picture books, Umbrella, Ketchup & Sauces, cheese, Spoons, forks, Diagnostic kits and reagents, Exercise books and notebooks, ladles, skimmers, cake servers, Eye glasses, corrective, Play cards, Board games like carom and chess and Ludo.
12% GST is applied to the services: Business class air ticket, State-run lotteries, Fertilizers, Work contract, Non-AC Hotels.
18% GST is applied on the products: Biscuits, cornflakes, soups, ice cream, Bidi Patta, pastries and cakes, sauces,preserved vegetables, Curry paste, pasta, mayonnaise and salad dressings, instant food mixes, flavored refined sugar, footwear costing more than Rs 500, Trademarks, goodwill, software, jams, mineral water, tissues, envelopes, Bamboo furniture, Swimming pools and paddling pools, tampons, note books, steel products, printed circuits, camera, speakers and monitors, Kajal pencil sticks, Electrical Transformer, CCTV, Optical Fiber, mixed condiments and mixed seasonings, and Tractor parts, Headgear and parts, Aluminium foil, Weighing Machinery, Printers [Except multifunction printers]
18% GST is applied to the services: IT services, financial services, AC hotels with liquor serve, branded garments, telecom services, Room tariffs between Rs 2,500 and Rs 7,500, Restaurants inside five-star hotels.
28% GST is applied on the products: ceramic tiles, water heater, ATM, vending machines, automobiles, motorcycles, aircraft for personal use, weighing machine, washing machine, dye, sunscreen, aerated water, wallpaper, vacuum cleaner, shavers, hair clippers, molasses, chocolate not containing cocoa, chewing gum, shaving creams, after shave, pan masala, paint, Bidis, waffles and wafers coated with chocolate, dishwasher, hair shampoo, deodorants.
28% GST is applied to the Services: Hotels with room tariffs above Rs 7,500, 5-star hotels, cinema, Private-run lotteries authorized by the states, race club betting
No TAX is levied on the product: Newspapers, bangles, handloom, Bones and horn cores, stamps, judicial papers, printed books, Children’s’ picture, drawing or coloring books, Kajal, Human hair, hoof meal, horn meal, bone grist, bone meal, Palmyra jaggery, Salt – all types, vegetables, flour, besan, bread, Prasad, Jute, fresh meat, fish, chicken, eggs, milk, natural honey, fresh fruits, buttermilk, curd, Cereal grains hulled, Bindi, Sindoor.
No TAX is levied to the Services: Rough precious and semi-precious stones attract 0.25 GST per cent, Hotels and lodges with tariff below Rs 1,000, Grandfathering service has been exempted under GST.
The Gold and rough diamonds will be taxed at 3% and 0.25% respectively.
What is GST?
There were a lot of indirect taxes in India like VAT (Value added tax), CST (Central State Tax), CESS, etc. Due to the presence of different taxation systems it was very difficult and complex and was subject to a lot of the tax amount been spent on collection of taxes. All of this Changed when GST was implemented in India in 2017.
Goods and Service Tax (More commonly known as GST) is a taxation system which amalgamates all of the indirect taxes in a single branch. It aims at decreasing the complexity that has plagued the Indian tax system for decades and will streamline the tax collection process for a lot of goods at the same time deceasing the amount that is lost from the previous tax systems.
Why is it Important?
The former indirect tax system has been a burden as it was mostly a cumulative tax system in which the previous levels tax is also compounded on the next stage. Also there was a taxation on the trade done between different states. The goods and service tax aims at removing the cumulative pressure that is been done on the tax payers and thus promoting the payment of tax and eradicating the presence of “Black Money” along with it.
How to Register for GST?
Since the whole process is digitalized the registration must be done through the portal GSTN under 30 days. Applications are usually submitted through the government website www.gst.gov.in. Separate registration must be done depending on the size of the business done by the person i.e. if the business has multiple verticals then separate registration must be done for each vertical. There is a separate process for private companies and partnership companies which will be discussed later. It is compulsory for any business with a turnover of more than 20 lakhs and 10 lakhs for states who are under the special category. Even though if the supplies or the business done by the persons are not exceeding 20 lakhs or 10 lakhs respectively, there are business which are required to register for GST like E-commerce operators, TDS deductor, Casual traders Agents supplying on behalf of other taxable persons etc.
GST REGISTRATION IN COCHIN.
Cochin is known for its ports, Chinese fishing nets, and mostly for the IT firms and business that is present there. By the advent of GST in Kerala most of the compounded tax pressure has been reduced dramatically and the use of online portal for registration has been a huge leap forward for the business that is done here in Cochin. But like any new law there is always doubts regarding the registration of goods and services done by each firm or business. We’ll be concentrating on the GST registration procedures that are required for Private company and limited liability partnerships.
The pro-Business approach adopted by the Kerala government and the introduction of GST bill has helped facilitate a start-up boom in Kerala as it will help to bring in much needed industrial development for the state. Firstly, a private company is expensive as it will require around 10,000-25,000 rupees just for registration which includes government fees and fees for Chartered accountants. Also you have to file your tax returns every year which will cost an additional 25,000 rupees every year.
For the registration of private firm two or more persons are necessary but there is an upper limit for maximum number of partners in a private company. Registration for GST is done through the GST portal www.gst.gov.in. The following documents are necessary while registering for GST for private companies.
- Documents required from the company
- Company PAN card.
- Companies certificate of registration.
- Declaration to Adhere with the provisions.
- MOA (Memorandum of Association)/AOA (Articles of Association).
- Bank Statement copy.
- Resolution of the board copy.
- Documents required from the directors of the company.
- Proof of Identification and PAN of the Directors.
- Registered office documents of the company.
- NOC (No objection certificate) from the owner.
- Agreement of Rent in case the office building is rented.
- Copy of Water bill, Electricity bill, Land line bill etc.
Limited liability partnership as the name suggest is the type of organization in which the partners have limited liability over the company. He or she is not liable for the actions done by the other partners. Registration of LLP is relatively less expensive. To start an LLP in India one must acquire DPIN (Designated Partner Identification Number). Then you need to acquire your Digital Signature Certificate and get your LLP name approved by the Ministry of Corporate Affairs.
Then you can file your incorporation form after the approval of the LLP name.
- Documents from the LLP
- Board of Resolutions Copy.
- LLP’s PAN card.
- Partnership agreement of the LLP.
- LLP registration certificate.
- Bank statement copy.
- Declaration to adhere to the provisions.
- Documents from the partners.
- Proof of Identification and PAN card from the partners.
- List of Documents from the companies registered office.
- Ownership proof if the building is owned or rental agreement if the premises is rented (NOC a no objection certificate is required)
- Copy of the Utility bill eg: Water Bill, Electricity Bill etc.
The registration procedure of GST is more or less the same for all companies excluding the documentation requirements that may differ from company to company.
STEP 1 (GST Portal)
- As told before all the documentation and registration is done online through the portal gst.gov.in
- After reaching the page click on Services option >Registration >New Registration.
STEP 2 (OTP Validation)
- Select Tax payer from the drop down list that is provided.
- Select the State or Union Territory and the corresponding district.
- Enter legal name of business as it is mentioned on the PAN (Make sure that it is correct as it will be checked with the data base)
- Enter the PAN number in the permanent account number field.
- The Email of the Primary Authorized Signatory must be filled.
- Enter the valid Indian mobile number of the Primary Authorized Signatory and click proceed.
- An OTP will be generated and sent to your registered mobile number. Enter the OTP number and email in the OTP Email field and proceed to the next step.
- After OTP validation a TRN (Temporary Reference Number) will be generated which is later used. If in case, you can’t complete the registration you can use the TRN number later.
STEP 3 (Submitting Business Information
- Log in to the GST portal using the TRN (Which requires Entering the captcha and OTP verification).
- Information like trade name, Constitution of Business, District and sector, Commissioneratecode, Composition Scheme, date of commencement of business, date of liability are done in this stage.
STEP 4 (Promoter Information)
- Name, date of birth, mobile number, email address and gender of the promoter must be given.
- Designation and DIN of the promoter must be given.
- DIN must be given only for the following type of people.
- Public Sector undertaking.
- Unlimited Company.
- Foreign company Registered in India.
- Private Limited Company.
- Photo of the promoter, PAN &Aadhar, Residential Address, Details of citizen ship must be given. (In case the applicant uses his/her Aadhar they can use their Aadhar e-sign instead of a digital signature.
STEP 5 (Authorized Signatory Information)
- The person nominated by the promoters to deal with the GST filings of the company is the authorized signatory.
- Incase if the promoter is the authorized signatory then the fields will be auto populated.
STEP 6 (Principle place of Business and other places)
- The address details, Email address, telephone- mobile-and fax number along with the STD code must be applied.
- Nature of possession must be specified. If the principle place of business is done in SEZ (Special Economic Zone) or if the applicant is a developer inside SEZ then he/she must upload the necessary documents from the government by choosing “Others” value in Nature of possession.
- For own premises a copy of the electricity bill or tax receipt or Municipal Khata copy can be issued.
- For rented and leased a copy of the lease or rent agreement along with electricity bill or Municipal Khata can be produced.
- For premises not covered above a copy of Consent letter along with a copy of Electricity Bill or Municipal Khata copy can be produced to prove ownership.
- If you have any additional places of business, then that can also be added.
STEP 7 (Details of Goods and Services)
- The HSN code (Harmonized System Nomenclature) in case of services and SAC (Service Accounting Code) is used for declaring the top five goods and services that you deal with. In case if there is more than five good then you can declare the top five goods and services you are dealing with.
STEP 8 (Details of Banking Account)
- Bank account number, IFSC code and type of account is entered in this step.
(If there are five accounts then all five account details must be entered).
STEP 9 (Verification and ARN generation)
- In this step the information entered is verified and the digital signature is added.
- Once the application is signed you’ll get a success message and Application Reference Number is (ARN) is sent to the mobile and email address. This can be used to track your GST application.