A Goods and Service Tax (GST) is a tax levied in all countries worldwide. It is a major indirect tax in India. The Indian GST ensures a level playing field in the market and is the most important tax reform the country has seen in a long time.
When evaluating the GST bill’s advantages and disadvantages, it is important to bear in mind the advantages it will provide in the long run. This article aims to shed light on six aspects of GST that every business owner needs to be familiar with.
In India, the Goods and Services Tax (GST) registration is mandatory for any business with a turnover higher than or equal to the following thresholds:
- In case products are sold: If sales top Rs 40 lakh
- In case services are rendered: If sales top Rs. 20 lakh
A company that has applied for GST will be given this unique 15-digit number, called a GSTIN.
2. Rate of tax for goods or services (HSN code or SAC code)
After registering for GST, the next step is determining the tax rate levied on goods and services. Visit the GST India portal to get the numbers.
- The tax rate on goods is listed alongside their HSN Code (Harmonious System of Nomenclature).
- The tax rate on services is listed alongside their SAC Code (Service Accounting Code).
India’s Goods and Services Tax (GST) system has five distinct tax brackets. These brackets are 0%, 5%, 12%, 18%, and 28%, respectively.
3. Charging GST on every invoice – CGST, SGST, IGST
After successfully registering for Goods and Service Tax, the tax must be included in the invoice together with the relevant GST number. Everyone who provides taxable services needs to provide their GST number on the bill.
On each invoice, the seller is required to charge
- CGST and SGST/UTGST for intra-state supplies
- IGST for inter-state supplies made outside of the states.
4. Payment of GST and filing of returns
Large and small businesses will be required to pay and submit their tax returns on the GST portal, regardless of their size. At the end of each month, you must complete this last task.
For businesses with revenue of up to Rs. 5 crore, there is a special provision that allows them to submit their tax reports quarterly, even if they are required to make their tax payments monthly.
5. Benefits of claimable Input Tax Credit (ITC)
Under the former tax structure, some taxes paid on purchases couldn’t be deducted from the output tax obligation.
Under the GST India regime, input tax credits (ITC) can be claimed on almost all commercial products and services, with the exception of a few items on a negative list, such as a motor vehicle or immovable property.
In order for the organisation to be able to claim the input tax credit for the purchase that was made or for the services that were paid for, it is required to give the vendor its GST number.
6. Compliance requirements and their benefits:
As a small company owner, it may be tough to employ tax experts. Goods and Service Tax has brought a simplified compliance process for the taxpayer’s benefit and convenience. You have the ability to personally guarantee that you are in compliance with the law by using the Self Assessment Model in the GST portal. Business loans may be easier to obtain if your firm is in conformity with GST regulations, which can help your company develop in many ways.
Timely payment of GST also ensures that your business has high credibility, making it easy for you to qualify for a business loan.