Going to Start Your Own Business? Learn Everything You Need to Know About GST
Ready to start your business with a big idea? Great!
Owning your own enterprise could be overwhelming if you do not know the official rules and regulations to do so. To start on the right foot, you need to know all about GST to set things up with ease.
GST subsumes 17 different state and central taxes and came into effect from July 2017. Let’s check out everything about GST for your company to get started as planned.
What Is GST?
Goods and Service Tax is an indirect tax that is levied on goods and services sold for domestic consumption and utilisation. GST merges all the central and states taxes in the country and collects it as one single tax from the business.
Before GST was implemented, taxes were to be paid on the value of goods and services at every stage of the production process. With the implementation of GST, the taxes are now paid directly at the destination instead of every phase.
GST is ultimately paid by the consumers of the goods and services, but it is remitted to the government by the companies. The gst rates in india are divided into 4 slabs, as applicable to the goods and services.
Why Go For GST Registration?
Before GST was set into motion, businesses had to get VAT registration from the states’ sales tax department. Every state had different procedures and fees for this VAT registration.
But with GST, the procedure of obtaining registration has been centralised and standardised. Now, it is much easier for small-scale enterprises operating in different states to register and maintain compliance. You need a single GST registration across India for your establishment.
Who Should Register Under GST?
If your business turnover is exceeding Rs. 40 lakhs, then you are required to register as a normal taxable person under GST. This turnover limit for North Eastern and hilly states is Rs 10 lakh.
If your company falls into these categories, GST registration is mandatory, as applicable. This registration process can take anywhere between 3-7 days.
What Exemptions Are Present In GST For Startups And Small Businesses?
Under GST, if your organisation has a turnover of less than Rs.10 Lakh per year, then you will be exempted from GST registration. In case your business venture has a turnover between the bracket of Rs.10-50 Lakh, you will have to pay GST at the prescribed rate.
This exemption has proved a great relief for all up and coming enterprises, which will now have greater liquidity. This measure has relieved small establishments from complicated filing processes for GST returns.
Which Documents Are Needed For GST Registration?
The documents required will vary based on your industry and type of business. But the most important list of documents that you should be ready with is as follows:
- Passport-sized photograph of the owner of the enterprise
- Aadhar card, driving licence, or passport of the business owner
- Pan card
- Address proof of premises if it’s your own office
- Electricity or water bill from the owner in case of rented offices
- Rent Agreement or NOC from the owner of the premises
- All bank account proof
- Letter of authorisation or board resolution for authorised signatory
- Proof of business registration or incorporation certificate
What Is The Process Of GST Registration?
The GST portal will help you get your venture GST registered. It helps you obtain your Goods and Services Tax Identification Number (GSTIN) for your company. Registration is an 11 step process and involves filling up crucial business details and scanned documents, as mentioned above.
You can pay gst online without a hassle through the online GST portal. Once done with your GST registration, you can seek the advice of an accountant to comply with GST requirements if you are unable to do it yourself. You can even take the help of apps like Khatabook to manage your accounts.
What Are The Fees For GST Registration?
The Government of India does not charge any fee for the GST registration of Individual, business or entities. But you will be required to pay a fee for the services availed from professionals. This cost may vary any amount between Rs. 500- 5000.
Is There Any Penalty If Not Registered Under GST?
Yes, late GST registration will result in a penalty. In case you fail to register for GST or have deliberately not paid taxes, you will be considered a legal offender. In such a case, the amount of penalty on the offender will be 100% of the total tax.
In the case of genuine short payments errors, the amount of the penalty will be 10% of the tax amount with due subject to the amount of Rs.10,000, whichever is higher.
Strict measures in case of failure to register may include the following:
- Denial of Input Tax Credit (ITC) claims or transfers by the offender
- Detention of goods and services
- Confiscation of goods and vehicles
How Will GST Help Your Business?
- No taxpayer will have to pay taxes in advance for the supply of goods and services.
- The distinct rules for goods and services are removed under the new regime.
- Cascading of taxes will be reduced to a minimum.
- The invoice will be based on a single rate for the business, simplifying tax structure for your accounts.
- If you own a small enterprise or are engaged in sales or services, the complexity of tax calculation for different products at a different rate is gone.
- The need to follow VAT as well as Service Tax regulations is not present.
- Fixed tax rates and structure across all states in India will simplify your business uniformity.
- The issue of tax multiplicity and compliance costs is considerably decreased.
GST will significantly improve the ease of doing business in India. The new tax regime has proved to be a boon for all small and medium enterprises and streamlined their operation and accounts.
Following all the rules of GST may result in short-term troubles for entrepreneurs, but it will also garner long-term positive results for your venture. So it is better to know all rules and regulations if you intend to use it for the benefit of your and your organisation.