In a nutshell, the Goods and Services Tax (GST), introduced in 2017, is a single indirect tax that providers of goods and services are required to pay. This tax was introduced to replace the previous tax structure that incorporated a variety of taxes like entertainment tax, service tax, and many more. If you are a business under the GST regime, you are going to want to continue reading.
What are the different types of GST?
The Goods and Services Tax is primarily of three types – Central Goods and Service Tax (CGST), State Goods and Service Tax (SGST), and Integrated Goods and Services Tax (IGST).
The Central Government collects this type of tax in the case of an intra-state transaction. If you were to make a sale to someone in another city within the same state, you would have to pay CGST.
Similarly, the State Government collects tax for an intra-state sale. This tax is called SGST.
If you were to make a transaction between different states, you would have to pay IGST to the Central Government.
What are the advantages of GST?
The GST bill has several advantages. Here are some of the primary advantages of GST:
- Unlike previous tax structures like the Value Added Tax (VAT) tax structure, GST subsumes the collection of indirect taxes. The calculation of taxes under the previous regime was too complicated, which is not the case with the GST regime.
- Additionally, the GST implementation has resulted in eliminating the cascading effect of taxes prevalent under the previous tax structure. Some of these taxes were inter-state tax, logistic fees, production costs, and so forth. As a result of these taxes, consumers would spend significantly more on the goods and services they were interested in. However, the overall cost of said goods and services has come down, thanks to the implementation of GST.
Apart from the benefits mentioned above, GST has a bunch of other advantages to its credit, including:
- Well-defined rules and treatment for E-commerce
- Efficient logistics
- A composition scheme that smaller businesses can benefit from
What are the Disadvantages of GST?
The Goods and Services Tax has some disadvantages. Here are a few:
Hike in expenses because of software purchase
Given how GST applies to all businesses, companies will have to spend a lot of money and time either updating their current account software to comply with the GST rules or buying software that is GST-compliant.
Increase in Operational Expenses
GST’s implementation has caused a lot of confusion that business employees will have to navigate. To speed up this process and ensure the business is GST-compliant, the company will have to spend money and get tax professionals onboard to make sure everything runs smoothly.
What is a GST Identification Number?
Simply put, a Goods and Services Tax Identification Number (GSTIN) refers to a 15 digit number that is unique and exclusive to every business that registers for one. With the implementation of GST has come a compulsion for every company to complete a GST online registration.
This number will help keep transactions transparent, help file GST returns, confirm the legitimacy of the company in question, and prevent tax evasions. As you can see, GSTIN is crucial. Be sure to head over to the GST home page and register yourself for a GST number.
What if I do not complete the GST Registration Process?
If it is determined that you unintentionally did not complete the GST registration process, you can get away with paying a fine of 10% of your taxable amount, or Rs. 10000, depending on which is more.
However, if it turns out that you deliberately avoided completing the GST online registration, you could be charged for fraud and forced to pay up to 100% of the tax amount you are liable to pay.
The consequences of avoiding GST registration are dire, as you may have gathered. Now that you know what to expect, you can save yourself the trouble and visit the GST portal to complete the GST registration for your business and have a GST number assigned to you along with a GST certificate.