Taxation under the previous system
Prior to the implementation of the GST tax system, how to register for gst the Union and the states computed and assessed taxes using their established systems and regulations that included a number of steps of taxing on a product or commodity.
A variety of independent, fluctuating levies were imposed on various goods and services at each economic intersection. These taxes were computed based on the commodity’s stage and destination.
Take the Value Added Tax (VAT), which was formerly levied by all Indian states on purchases of goods and services. The tax rules and processes in each state served as the foundation for calculating the VAT.
A disadvantage of the previous tax system
Regarding the previous taxation system, there were two major problems:
- After deducting the cost of the materials, products, or services that were already subject to tax, the tax assessed and paid was dependent on the price of the commodity. The best minds weren’t always used for this, which led to a lot of misunderstanding and double taxation.
- States used to tax differently according to their taxation systems, so the percentage of tax they levied was different.
GST – The Current Tax System
The Commodities and Services Tax, also known as GST, is an indirect tax levied on a variety of goods and services. There are no differences and it is the same everywhere in the nation.
India’s government adopted GST to streamline the process of assessing and collecting taxes at all intersections of the economy. Because there is a consistent tax rate across the board, the GST also serves to somewhat integrate the nation.
It has taken the place of a variety of earlier indirect taxes. A destination-based, all-inclusive, multi-stage tax is essentially what the GST taxing system is. In essence, it is a fee for every value added.
As previously indicated, under the GST system, taxes are collected at each intersection.
- In intrastate transactions, the CGST or Central GST is charged along with the SGST or State GST.
- In the case of interstate transactions, Integrated GST is implemented.
For GST to be defined as a destination-based, comprehensive, and multi-stage tax, it must include the following features:
- GST is destination-based – It won’t matter where a product is manufactured and sold, GST will be levied at the point of consumption, so state B will receive the tax revenue.
- Integrated – Applying the same standards in every state, regardless of the product category.
- Several stages – The GST is collected from multiple stages of production to consumption, so it is a multistage tax.
It took a long time for the GST to become a reality, starting with the committee headed by former prime minister Atal Bihari Vajpayee that drafted the GST statute.
An overview of GST Bill’s important features
In order to implement GST, the following bills had to be passed by the Government:
- Tax Bill on Goods and Services
- A bill to compensate the government for the GST
- Bill to implement the Integrated Goods and Services Tax
- Legislation relating to the Union Territory Goods and Services Tax
The GST Act was approved by the parliament on March 29, 2017, when the NDA-led government of Prime Minister Narendra Modi was in power, and it went into effect on July 1 of that same year.
To combat the bizarre VAT system and to revamp India’s whole taxes system, GST was first made public before being passed. The Goods and Services Bill aims to give producers and customers alike a significantly more straightforward taxation regime.
According to the late former Finance Minister of India, Arun Jaitley, the present system of taxation will also help control inflation.
As was already established, the prior taxing system was inconsistent and caused a lot of uncertainty. It was fundamentally lacking the homogeneity that GST offers. The establishment of a single GST rate across the nation allows for simple and consistent taxation of goods, regardless of the category to which they belong or the state for which they are being taxed.
The government felt it improper to impose uniform taxes on both luxuries and needs, which is why the GST was implemented with a four-tier block. The four GST tax brackets are 28%, 18%, 12%, and 5% for a variety of products and services, including luxuries. Daily essentials and goods intended for mass consumption, such as salt, vegetables, bread, eggs, and pulses, are exempt from the levy. Other items used on a daily basis, such as sugar, tea, spices, etc., are subject to a tax of 12–18%.
GST Has Many Advantages
GST has a number of advantages, some of which are listed below:
- Taxation cascades are eliminated
- A single tax is accumulated from various taxes
- Reforming the Indian tax system is facilitated by it
- As a result, India can also be viewed as a common market, regardless of where it is located.
- It boosts India’s competitiveness in the global market by making its goods and services more competitive
- Compared to its predecessor, it has a much higher registration threshold
- There is a much simpler process for filing GST online
- Small businesses and MSMEs are also included in the composition scheme
- The e-commerce industry is treated in a defined way
- Regulation of unorganized sectors is achieved through it
- The logistics have been made more efficient because it is uncomplicated.
The GST component parts
There are 3 sub-taxes or individual taxes included in GST (in its scope):
- A sale between two states is subject to IGST – Integrated Goods and Services Tax – which is collected by the Union Government.
- SGST – State Goods and Services Tax – This tax is collected by the State Government for transactions within a single state.
- GST – Central Goods and Services Tax – This tax is collected by the Union Government for intra-state commerce, which is sales or transactions within one state. There are almost no differences between CGST and SGST except that CGST is regulated by the government.
In addition to GST, there is also a 4th type of tax:
- Tax on goods and services in the Union Territory (UGST)
Union Territory collects these taxes on intra-union territory commerce, which occurs within an individual Union Territory.
The following places are subject to UGST:
- I am Lakshadweep.
- Nicobar and Andaman Islands
- The Dadra and Nagar Havelis
- Diu and Daman
Before GST, here is a list of taxes
- The Excise Department’s duties
- Excise duty on central excise
- The cess
- Customs duties
- VAT by state
- Tax on Central Sales
- Tax on entertainment
- Tax on luxury
- Taxes on purchases
- The entry tax
- Taxes on advertising
- Gambling, lottery, and betting taxes.
Registration for GST
All businesses, groups, cooperative societies, self-help organizations, federations, unions, and other entities that provide goods and services are required to register with the Goods and Services Tax under the GST regime.
The requirement to register for GST is the same for all sorts of goods and services provided, regardless of whether they are necessities for everyday life, luxurious extras, or amusement. The consumer who purchased or used the commodity has no bearing on it.
GST is determined by the aforementioned person’s or organization’s annual turnover, or total yearly income. One must register for the Goods and Services Tax if their yearly turnover exceeds a certain threshold set by the Indian government or the Central Board of Indirect Taxes and Customs (CBIC). This can be done by an individual, a specific firm, or an entire organization.
- GST registration is required for businesses with an annual turnover of at least INR 20 lakhs in most states
- A turnover of INR 40 LPA is required for other states
- It is necessary for some states to have a turnover above INR 10 LPA (North-east states and hill states).
Goods and Services Tax Network or GSTN can help individuals, companies, and organizations register for GST.
After registering, they are required to pay the desired and pre-defined amounts of tax to the relevant authorities and are then allowed to charge tax payments on their clients, or the people or businesses they do business with, in the proper amount of GST.
A unique GSTIN, or Goods and Services Tax Identification Number, will be given to a specific person or business once they have completed registration with the Goods and Services Tax Network for GST.
The 15-digit GSTIN is a special identification number. The Indian government distributes it according to each state. Once a person or business acquires their GSTIN, they are officially recognised as a supplier by the Indian government. Input tax credit can then be used by the business or person, and recipients of their products and services will be charged GST.
An explanation of GST registration
Businesses are required to register under GST in order to become GST-compliant.
Only a specific number of companies must register for the Goods and Services Tax, according to the guidelines established by the Government of India and the CBIC (Central Board of Indirect Taxes and Customs). According to the regulations imposed by the Indian government, these firms must register for the GST.
If a person or a group continues to operate their activities without registering under the GST, they will be required to pay a sizable fine after being instructed to do so and within a certain time. It will be illegal to perform this action. The CBIC and the Central Government will determine the appropriate penalty.
The Official GST Registration Portal can be accessed by anyone trying to register for GST, whether they are an individual or business. It is recommended that before beginning the online GST registration process, one reads the instructions provided in the site.
One can register offline at their closest GST Seva Kendra by going through an offline method.
It typically takes about 2-6 working days to complete a GST registration (excluding holidays).
As of April 1, 2019, the Central Board of Indirect Taxes and Customs has increased the threshold turnover to INR 40 LPA from the previous sum of INR 20 LPA.
Registration for GST – Consequences
There are various repercussions to GST registration for businesses. Any firm or person that has already finished the GST registration process, whether online through the GST website or offline for the business, is eligible to take advantage of all the advantages that follow or imply registration.
Following the completion of registration via the GSTN, an individual or organization is required to pay the desired and predefined amount of tax to the relevant authorities and is then authorized to levy tax revenues from their customers, or the people or businesses with whom they do business (or supply goods and services), in the appropriate amount of GST.
When it comes to details, what does GST registration include?
In more specific terms, the applicant must meet a number of standards in order to register their business under the GST.
The information that is requested on the GST registration application form:
- Individuals or organizations belong to a particular state or union territory
- Taking place in the district
- A business’s legal name (the one for which the registration process is being completed)
- A Permanent Account Number (PAN) is a unique number used to identify an account
- The e-mail address of the person who is filling out the form (s/he should be an integral part of the business being registered).
- Phone number or contact information.
Limitation on turnover
Under GST, registrations can take several various forms. There are also numerous different sorts of business entities, such as people who sell goods or services online, non-resident taxpayers, resident taxpayers, casual taxpayers, etc., as well as additional business types.
However, the aforementioned categories of people or organizations, who are essentially commercial entities, must complete their GST registrations. Regardless of their yearly turnover or turnover cap, these types of companies are required to get the same.
The following list includes some of the GST turnover thresholds that suppliers and providers of various goods and services must meet in order to compulsorily complete their GST registrations:
- Providers of services – Regardless of the service given, everybody or any business that offers a service and has an average annual turnover of more than INR 20 lakhs is compelled to have a GST registration. The total turnover should be greater than INR 10 LPA in some of the states with specific advantages, as was previously stated (fixed, without any variations irrespective of the place).
- Providers/Dealers of goods – Regardless of the nature and varieties of items offered, any person or organization engaged in the act of delivering unique goods, requirements, etc. that has an average turnover of more than INR 40 LPA must have finished the GST registration process.
In order to have an annual turnover of INR 40 LPA, individuals or organizations must meet the following requirements:
- The supplier of the commodities should refrain from engaging in intra-state (within one state) trade or business in Arunachal Pradesh, Meghalaya, Manipur, Nagaland, Sikkim, Mizoram, Puducherry, Tripura, Uttarakhand, and Telangana
- Neither the goods provider nor the services provider should provide any kind of service
- It is not acceptable for the goods provider to be engaged in the trade of tobacco, zarda, pan masala, or ice cream
If the aforementioned requirements are not met, goods providers must register for GST in order to conduct business with an annual revenue cap of INR 20 lakhs, or INR 10 lakhs in some states.