The nationwide Goods and Service Tax (GST) implementation has impacted the functioning of small businesses. GST has let go of certain indirect taxes on essential goods and services and merged everything under its head with the slogan “One Nation One Tax”, mainly to ease compliance procedures for small businesses and startups.
Before Goods and Service Tax was implemented, a business with a turnover of Rs.5 lakhs or more needed to obtain VAT registration. Now, a business with a turnover of Rs. 40 lakhs or more is to register for GST, which is a huge compliance relief for most small businesses and startups.
As per Government advisory, any business having a turnover of Rs. 20 lakh or lesser need not compulsorily register under the GST portal. However, for states like Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, Uttarakhand and Himachal Pradesh, the turnover rate is set at Rs. 10 lakhs or lesser.
The one drawback of not registering under GST is that you will not be able to ship your goods or provide any services to other states except for the states you reside in. Hence, for the business to grow at a national level, registration under the GST Act is a must.
To understand this better, let us take up an example. A services startup purchases office supplies worth Rs. 60,000/- before GST, thus incurring a 5% VAT levy. It provides services to another company worth Rs. 50,000/- on which a 15% service tax is levied. How is the tax calculated?
Service tax paid on service provided (50,000*15%) = Rs. 7500
VAT payment on purchase of office supplied (60,000*5%) = Rs. 3000
Total indirect tax payment = Rs.10,500/-
Post the implementation of GST, the tax payment will be only towards GST as below:
GST on service provided (50,000*18%) = Rs. 9000
(-) GST paid on purchase of office supplied (60,000*12%) = Rs. 7200
Net GST to be paid = Rs.1,800/-
Who is eligible to register for GST?
- Businesses with turnover over and above Rs. 40 lakhs
- Individuals already registered for VAT, Excise & Service Tax
E-Commerce aggregators, and suppliers to e-commerce aggregators
Casual taxable person (supplier of taxable goods/services in a taxable territory where he does not have a fixed place of business), or a non-resident taxable person (businesses that are supplying goods or services or data retrieval services from databases located outside India)
How do you register?
- Visit the GST portal https://www.gst.gov.in.
- Fill Part-A in the registration form 1.
- The user will receive an application reference number on mobile and email.
- Fill the second part of the form and upload the needed documents depending on the type of your business.
- Get a registration certificate from the GST portal.
- Submit the required documents within seven working days.
- Service providers can necessarily help with any issue regarding the GST registrations.
Required documents to register for GST:
- PAN of the applicant
- Bank account statement
- Address proof of the place of business
- Proof of registration or Incorporation Certificate
- Identity and address proof of promoters / Director
- Aadhaar card
- Digital Signature
- Letter of authorization or Board Resolution for the Authorized Signatory
What is the penalty for not registering under GST? An offender who breaches any of the offenses under GST (not paying tax / making short payments) is liable to pay a penalty of 10% of the tax amount subject to a minimum of Rs. 10,000/-. In case it is found that tax payment has been deliberately evaded, the penalty will be at 100% of the tax amount due.