What is GST?
Taxpayers in India must pay various kinds of direct and indirect taxes every year. The Goods and Services Tax (GST) is an indirect, comprehensive, and multistage tax on value addition. It is a “multistage” tax because this indirect tax is charged at every stage of the supply chain.
The GST is also a destination-based consumption tax, as it is collected in the state where the finished product is consumed. This means if the raw material for a product comes from Haryana, it is processed and manufactured in UP, distributed from Maharashtra, and then bought by a consumer in Tamil Nadu, the GST will be collected in Tamil Nadu.
What businesses need to register for GST?
It is mandatory for the following entities to be registered under the GST.
- E-commerce aggregators
- Individual suppliers on e-commerce aggregators
- Individuals who pay tax as per the reverse charge mechanism
- Agents of input service distributors and suppliers
- Non-Resident individuals who pay tax in India
- Businesses that have an annual turnover more than the threshold limit
- Individuals who registered before the GST law was introduced
The updated threshold for registration which came into effect in April 2019 is as follows:
|Annual Aggregate Turnover||Category||Purpose|
|More than Rs. 40L||Normal state||Sale of goods|
|More than Rs. 20L||Special state*||Sale of goods|
|More than Rs. 20L||Normal state||Providing services|
|More than Rs. 10L||Special state*||Providing services|
*The Special State Category refers to states in the North-East of India and hilly states.
Learn what states full under the “Special State Category”
What is a GSTIN?
Before GST, every dealer registered under the state VAT law had a unique Taxpayer Identification Number (TIN), and every service provider was given a service tax registration number by the Central Board of Indirect taxes and Customs (CBIC).
Since July 2017, a single platform for indirect tax compliance for all taxpayers across India, the GST, overseen by a single tax authority, replaced this TIN-based tax regime.
So, your Goods and Services Tax Identification Number (GSTIN) is a 15 digit long, state-wise, PAN-based taxpayer identification number assigned by the CBIC, Department of Revenue, Ministry of Finance, Government of India (GoI).
- The first two digits of the GSTIN represent the state code as per the 2011 Census.
- The next ten digits are the PAN of the taxpayer.
- The thirteenth digits will indicate the number of registrations the taxpayer has within a state.
- The fourteenth digit is “Z” by default.
- And the fifteenth is simply a check code which can either be an alphabet or a number.
How do I get a GSTIN?
Getting your GSTIN is a part of the GST registration process. Once you’ve submitted your GST application and the GST officer approves your application, you will be allotted a unique GSTIN.
You can register for GST on the GST portal or at an offline GST Seva Kendra set up by the GoI.
Learn more about the GST Seva Kendras.
Here are step-by-step instructions to help you complete your GST registration online.
Why do I need to have a GST registration when I apply for an SME business loan?
In simple terms, having your GST registration makes it easier to get small business financing.
When you apply for an SME business loan, depending on the amount of money you request, the lender will ask you to submit your GST Returns (GSTRs) along with your other financial documents. Your GSTRs are used in their assessment of your business when they are making their lending decision. So, having a GST registration increases your creditworthiness with lenders as it shows them you are tax compliant.
Additionally, under GST norms, every business transaction must have a corresponding invoice. This invoicing system makes business transactions transparent, making it easier for lenders to track and assess your financials. This system also boosts your creditworthiness when you apply for an SME business loan.
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