What is the Goods and Services Tax (GST)?
In India, GST stands for Goods and Services Tax. It is an indirect tax applied to transactions related to goods and services. This form of taxation is only applicable to items and services meant for domestic use.
It is a multi-level tax system that has replaced several indirect taxes. Examples include value-added tax, service tax, luxury tax, octroi, and excise duty. This system of taxation came into effect on July 1st, 2017. Since then, it has undergone lots of revisions and changes to reach its final form.
The GST is not uniform. It changes according to the nature of the goods and services. In the case of luxury items, the rate of GST is higher. Whereas, it is minimum when it comes to basic household items and necessities.
What are the types of GST?
Currently, four types of GST are applicable in India. They are –
- SGST or State Goods and Services Tax. At the state level, GST replaces taxes on sales, luxury, betting or gambling, entertainment, and purchases. The SGST tax applies to intrastate goods and services. The revenue from these transactions goes to the state governments. For instance, if the GST on a particular item or service is 18%, 9% goes to the state in the form of SGST. And the rest, 9%, goes to the center in the form of CGST.
- CGST or Central Goods and Services Tax. At the center, GST replaces central excise duty, additional excise duty, service tax, and more. The CGST applies to a transaction within the state. The central government of India collects the revenue generated from such transactions. The government implements the CGST along with the SGST in the states. For example, if a businessman is selling goods or services to a customer within the state, the GST levy is 20%. Out of the 20%, the SCGST and CGST are split equally.
- IGST or Integrated Goods and Services Tax. This system of taxation applies to interstate transactions or transactions between two states. The body responsible for the collection of IGST is the central government. The revenue that the central government collects, is split between the states involved.
- UTGST or Union Territory Goods and Services Tax. In union territories such as the Andaman and Nicobar Islands, Chandigarh, Lakshwadeep, etc., the UTGST replaces the SGST. Hence, in the case of transactions of goods and services within the Union territories, the government of the UT collects the GST. Here too, the GST tax comprises both UTGST and CGST.
When does an individual need to register for GST in India?
There are several occasions where GST registration is mandatory. Some of the instances are given below.
- Any business house whose annual turnover exceeds twenty lakhs. (There are exceptions, in certain states, the limit is Rs. 40 lakh.)
- A casually taxable person who takes part in the buying and selling of goods temporarily, and has no fixed place of business.
- A non-resident taxable person who supplies goods and services to a state within India. Similar to a casually taxable person, they do not have a fixed place of business in India.
- E-commerce operators who engage in transactions of goods and services over a digital platform.
- Persons involved in the supply of goods and services through these e-commerce operators.
- An individual/business involved in interstate transactions, and so on.
There are GST Registration Documents approved by the government of India. If an individual or a business wishes to register, it is mandatory that they have those documents in their possession.
What are the Documents Required for GST Registration?
The following is a list of GST Registration Documents that are required for different types of businesses, firms, and individuals –
- For a sole proprietor, the GST Registration Documents are an Aadhar card, a PAN card, address proof, bank account details, and photographs of the owner.
- For a partnership, the Documents Required For GST Registration are a photograph, a PAN card, and address proof of all partners and authorized signatories. In addition to that, a copy of the partnership deed, and address proof of the place of business are also necessary.
- For a public or private company (based in India or abroad), GST Registration Documents are a certificate of incorporation issued by the Ministry of Corporate Affairs, a PAN card of the company, a PAN and Aadhar card of the authorised signatory, proof of appointment of the authorised signatory, a PAN card and address proof of all directors, the address of the place of the business, and bank account details.
- For people who are only occasionally taxed, the GST Registration Documents needed are proof of address, the necessary documents for a bank account in India, proof of the business’s formation, a photo, and proof that an authorized signatory based in India has been named.
- For non-resident taxable persons based outside India but carrying out businesses within the country. The Documents Required For GST Registration are – a scanned copy of the passport and visa of the individual, document proof of a bank account in India, address proof, and a photo and proof of appointment of a signatory based in India.
Hence, any individual who is carrying out business in India or outside has to comply with the GST taxation laws. GST brings uniformity to India’s taxation system. It has also reduced taxation on certain goods, such as cars, mobile phones, and other gadgets. If you need more guidance on the documents required for GST registration, visit Piramal Finance. For more information on financial matters or about personal loans, credit cards, and financial management, check out more blogs on their website!