The year 2017 was revolutionary in terms of the structure of Indirect Taxes that was followed until then in India. It was in this year that the Goods & Services Tax or GST was introduced in the Indian economy after the Goods and Service Tax Act was passed in the Parliament in March. This moment marked the replacement of any other indirect taxes that were being levied by one uniform law across the nation.
Initially, it did cause some confusion, and since it was something very new, people could not adapt to it quickly. But, as time went by, people realised its convenience and how it stopped the imposition of different taxes on consecutive stages of the chain of supply. It’s been three years since, and people are now quite used to paying GST online.
Types of GST
Before getting into the different processes of GST registration, here is an overview of the types of GST that exist and the significance of each:
The CGST (Central Goods & Services Tax) is the tax collected by the Central Government on the transaction of goods and services within a state. This tax is universal and is a replacement for all other taxes imposed by the Centre such as CST, SAD and so on.
The state government of each state imposes the SGST or the State Goods & Services tax. This tax has replaced all the other taxes that were levied by the state such as Entertainment Tax, Entry Tax, VAT and the like. The state is the sole owner of the revenue collected from the imposition of SGST.
This refers to the application of the tax on the transaction of goods and services between two states. Known as the Integrated Goods & Services Tax, IGST is applicable when services or materials are transported from one state to a different one.
This particular tax is only meant for the five Union Territories in India. It has the same purpose and advantages as the SGST; the only difference is that it is applicable only in Chandigarh, Daman and Diu, Andaman and Nicobar Islands, Lakshadweep and Dadra and Nagar Haveli.
Different Processes of GST Registration and its Features
In any case, every business which provides certain services has to apply for GST registration online, regardless of its annual income. Moreover, any company which has a turnover of Rs. 20 lacs (Rs. 40 lacs or Rs. 10 lacs in the case of special category states) needs to register under the GST law. But, a regular taxpayer under Section 24 of the CGST Act 2017 has to opt for compulsory GST registration, irrespective of his income per annum.
There are primarily two types of GST registration processes which are followed throughout the country: Regular Scheme and Composition Scheme.
The regular type GST registration is where a legalised taxpayer is bound to collect a certain amount of tax from the purchaser of goods and services which will thereafter reach the government once the amount paid as GST on the input value is of goods and services is adjusted.
Under the regular registration of GST, the payment of tax is instant, which means that the customer has to pay the GST at the time of buying the product(s) and it needs to be collected from the client during the time of sale.
It is also important to note that every individual who falls under the regular scheme is under the compulsion to file GST returns every month and has to pay the collected tax every month. This scheme also has an added advantage which allows the scheme holder to sell his products beyond the boundaries of his state, and clients from other states can buy his products without any restrictions.
Now, under the composition scheme, there are few things which should be taken int account before applying for it. It is only meant for those businesses whose annual income is less than Rs 1.5 crore (Rs. 75 lacs in case of Himachal Pradesh and the states in the North East). As much as this scheme is beneficial especially for Small and Medium Enterprises (SMEs), there are quite a few factors which qualify as its features which sets it apart from the regular scheme of GST Registration:
- The Composite Scheme is beneficial for the local transfer of goods and services within a particular state. The suppliers that operate within a state are the ones who will be in an advantageous position. However, dealers whose work involves inter-state transactions need to opt for the regular scheme.
- If a taxpaying individual wants to apply for this particular scheme, he needs to do it voluntarily. But post-registration, if his yearly income goes beyond the threshold of Rs 1.5 crore or Rs 75 lacs, he will be automatically shifted to the regular scheme as he will no longer be eligible for the composition one.
- Under the composition scheme, the GST needs to be paid only for the taxable goods. Before January 1st 2018, it was compulsory to pay Composite GST even for the excluded goods.
- The authorities have the right to penalise any individual who deliberately shows incorrect data to register under this scheme. No foul play is tolerated here as this scheme is meant to uplift the state of small businesses.
- Here, the taxpayers are not required to raise any invoice. Instead, they only need to show their supply bill to the authorities.
Why should one register under GST?
With all the things mentioned above, it is safe to say that registering as a GST payer will provide a lot of benefits and advantages. Here are a few reasons which prove why it is beneficial to register for GST:
- It is a kind of legal proof which acknowledges an individual as a certified provider of goods and services.
- Automatically makes the individual eligible for all the other benefits and advantages that fall under the law of GST.
- The individual gets the legal right to collect tax from his customers and carry forward the credit of the paid taxes to his customers or suppliers.
- It is a uniform tax levied all across the country on goods and services, which makes it much more convenient to understand the entire indirect tax structure.
How to register for GST?
The process of GST registration online has quite a few simple steps which need to be followed. Upon reaching the GST site, an individual needs to select the ‘services’ option, followed by the ‘registration’ option and then ‘new registration’. Everything will be straightforward from then onwards.
There are a few documents that will be required during GST registration. For individuals, documents such as PAN Card, bank account statements, photograph, AADHAR Card and address proof are required. In case of any partnership business, the same documents will be required of all the partners involved along with additional documents like partnership deed, registration proof of LLP and the address proof of business principal.
Hence, registering under GST and paying GST online is a very advantageous position to be in. It is a process through which a common market is being formed throughout the country, which in turn will ensure the smooth functioning of the economy. It has also stopped the process of ‘cascading taxes’ by making it a rule to levy only one tax throughout the transaction of any goods and services. Hopefully, shortly, more people will recognise the actual value of being a registered GST payer and do the needful to be so.
Q. Can any kind of business apply for the Composite Scheme of GST?
A. No, only businesses with a turnover of which is below the amount of Rs. 1.5 crore or Rs 75 lacs in some cases are eligible.
Q. What is GSTIN?
A. The pre-existing Tax Identification Number (TIN) has now been replaced by the GSTIN (Goods & Services Tax Identification Number), which is a 15-digit unique code. Hence, GST registration is a part of the GST registration process that is followed.