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.
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.
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.
Every Business carrying out a taxable supply and having turnover exceeding Rs. 20 Lakhs is
require to take registration as a normal tax payer.
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.
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
- First Two digit will represent the State Code as per Indian Census 2011.
- The next 10 digits will represent the PAN of the taxpayer.
- The 13th digit will represent the number of entities for which registration is given.
- The 14th Digit is alphabet “Z” by default.
- The last digit will be for check code.
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
- If PAN associated with registration is not valid.
- The PAN is registered with a State Tax authority and the Provisional ID has been supplied by that authority.
- 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:
- 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.