Post by Tanu Puri
After
Cumulative Efforts of both Central and State Governments, Goods and Service Tax
Acts have come up in applicability from 1st July, 2017. The GST has
subsumed in it the previous Indirect Taxes that are:
·
Basic Excise Duty
·
Additional Excise Duty
·
The Excise Duty levied under the Medicinal and Toiletries
Preparations (Excise Duties) Act 1955
·
Service Tax
·
Additional Custom Duty or Countervailing Duty
·
Special Additional Custom Duty
·
VAT/ Sales Tax
·
Central Sales Tax (CST)
·
Entertainment Tax
·
Octroi / Entry Tax
·
Luxury Tax
·
Purchase Tax
·
All the Cess if any, on the above taxes
The GST will bring “ONE
NATION ONE TAX” Regime.
The Start-ups under GST will
stand to enjoy the benefits of GST.
IMPACT OF
GST ON STARTUPS
HIGHER
REGISTRATION THRESHOLD
Under GST
regime the threshold limit for Registration is Rs. 20 lakhs thereby exempting
the
small
businesses including the start-ups to take registration under GST.
COMPOSITE
SCHEME
The
supplier of Goods having turnover of less than Rs. 75 Lakhs can opt for
Composite Scheme. There are many benefits available for dealers opting for
Composite Scheme like lower tax rate of 1%, 2% and 5%, lessen compliance
burden, etc. The Start-ups can also opt for Composite scheme in order to take
these benefits.
INPUT
TAX CREDIT
Under the
previous tax regime, there was a burden on producers that was subsequently
passed on to consumers under which taxes paid on inputs by the producer could
not be set off against the subsequent output VAT to be paid due to multiple
indirect taxes and a cumbersome regime.
This
problem has been addressed by GST under the Input Tax Credit Provision under
which smooth transfer of credit throughout the entire product chain from input
to consumption is possible. This means that start-ups and small businesses can
get input tax credit against taxes paid on office supplies, etc.
REDUCED
OPERATING COST
The previous
Tax regime had a series of problems that increased the Operating cost. For
example, much time was spent on Transportation of Good, Increased cost due to
Octroi and entry tax. It affected the interstate transactions and small
businesses and stat-up find it difficult to branch out and grow.
But, GST
has ensured that the interstate movement become cheaper, easy and less time
consuming by eliminating small border taxes and resolving check post issues.
This will inevitably reduce many costs connected with upholding high stocks, as
there will be a smooth movement of goods.
This will
enable the start-ups and small business to expand their business in different
States.
EASY
PROCEDURES
Under the
previous tax regime, start-ups need to first study a number of provisions. They
need to spend a lot of time and money to manage the countless taxes at countless
points. Understanding and then following limitless rules and regulations at
different States makes the whole process of setting up a
new business a very complex affair. GST not only simplifies the
process by assimilating all the taxes to be levied but also makes the entire
process of tax paying a whole lot simpler.
All in
all, GST will be a blessing for business start-ups and various other
sectors. It is expected to be huge savings for logistics, manufacturing and
retail companies. However, certain other sectors dealing with luxury products
like cars, tobacco products etc. will face higher tax rates between 27% - 40%.
Also, start-ups in the manufacturing sector will bear the brunt. Under the
existing excise laws, only manufacturing business with a turnover more than Rs
1.50 crore has to pay excise. However, with the implementation of GST, the
turnover limit has been reduced to Rs 20 lakh thus increasing the tax burden
for many manufacturing start-ups.
With the
Applicability of GST India will become one single market where goods can move
freely and there will much lesser compliances to deal with for start-ups.
GST is a
completely new tax regime already taking India by storm. Businesses, especially
start-ups, will face challenges in transition and application of GST.
GST
REGISTRATION
Every Business carrying out a
taxable supply and having turnover exceeding Rs. 20 Lakhs is
require to take registration
as a normal tax payer.
IMPORTANCE
GST Registration is important
for availing various benefits available under GST Regime. One such benefit is
that the registered person will be able to avail seamless input tax credit, and
also timely registration will help to avoid any type of interface with Taxation
Authorities.
GSTIN
All the registered person
will be given state wise PAN based 15 digits unique Goods and Service Tax
Identification Number (GSTIN).
Format of GSTIN is like
22 AAAAA0000A 1 Z 5
Ø First Two digit will
represent the State Code as per Indian Census 2011.
Ø The next 10 digits will
represent the PAN of the taxpayer.
Ø The 13th digit
will represent the number of entities for which registration is given.
Ø The 14th Digit
is alphabet “Z” by default.
Ø The last digit will be for
check code.
MIGRATION
All the
taxpayers registered under Excise, Service Tax, State Sales Tax or Value Added
Tax (VAT), Entry Tax, Luxury Tax and Entertainment Tax will migrate themselves
to GST. To migrate to GST, the taxpayer would be provided a Provisional ID and
Password by CBEC/ State Commercial Tax Department.
As assesse may not be
provided a Provisional ID in the following cases
1. If PAN associated with registration
is not valid.
2. The PAN is registered with
a State Tax authority and the Provisional ID has been supplied by that
authority.
3. There are multiple Central
Excise/ Sales Tax Registrations are on the same PAN in a State. In this case,
only 1 Provisional ID would be issued for the 1st registration in the
alphabetical order provided any of the above 2 conditions are not met.
The
assesses need to use this Provisional ID and Password to login to the GST
Common Portal
MULTIPLE
REGISTRATION UNDER GST
A person
carrying on business in different States have to obtain separate registration for
each State.
A Person
with multiple business verticals in a State can obtain separate registration
for each vertical.
INFORMATION REQUIRED FOR REGISTRATION WITH
GST PORTAL
·
Before
enrolling to the GST portal, one needs to ensure the availability of following:
·
Provisional
ID and password received from State/ Central Authorities.
·
Valid
E-mail ID
·
Valid
Mobile Number
·
Bank
Account Number
·
IFSC
code of the Bank.
DETAIL
OF THE ABOVE CHART
·
Verify details: First the applicant needs to create login account on
the GST website to initiate the registration process. The applicant needs to
submit the e-mail, mobile number and PAN on the GSTN portal. The PAN will be
verified online. The e-mail id and mobile number shall be verified by one time
password. These details are to be filled in part 1 of GST REG-01.
·
Submission of Application from: Once the basic details are verified, one
has to fulfil the registration form and complete all the related formalities
like uploading documents. Documents required for GST registration are as
follows:
- Photograph
- Constitution of taxpayer (Partnership deed, COI, etc.)
- Proof of principle place of business (electricity bill, NOC, rent
agreement)
- Bank Account details
The application if submitted
online through FORM GST REG – 02.
·
Verification by GST officer: Once the application is filled and
submitted, then it shall be forwarded to the proper officer who will then
examine the application and the documents attached. If everything is found to
be in order, then GST registration will be granted within 3 working days.
·
If any
deficiency is found in the application, then it shall be communicated to the
applicant within 3 working days in FORM
GST REG-03.
·
After
getting the deficiencies, applicant will have to respond within 7
working days through FORM GST REG-04.
·
Deemed Registration: If the officer does not respond to the
applicant either with deficiencies or approval then the application for grant
of registration shall be deemed to have been approved.
·
Registration
Certificate: When the
application is approved by the officer, then a certificate of registration in FORM GST REG-06 shall be issued through
the portal. The applicant can easily download the registration certificate from
the common portal using their log in id passwords.
·
Separate
registration for each branch: A
registered taxable person eligible to obtain a separate registration for
business verticals may file separate application in FORM GST REG-1 in respect of each such vertical.
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