GST Impact on Micro Enterprises and Startups

The GST law has been in talks for many years, but it’s only now that it’s finally going to be implemented in the nation from July 1. The business industry awaits this day, although there is still a lot of confusion and uncertainty.

Regardless of how everyone feels about the new taxation regime, one thing is for sure that it will be beneficial for the businesses and the consumers both. However, startups and micro-enterprises are going to be at a big advantage because of the following:

Starting Business Made Easy

Under the current system, the troubles for startups and small business owners begin from the first step itself, which is registration. The business owners have to pay a number of visits to the Sales Tax department for VAT registration. Also, if the business has multiple branches in multiple states, then getting VAT registration can easily become a nightmare due to different rules and regulations followed by different states.

GST is here to change all the problems mentioned above. It is a centralized system that will allow aspiring entrepreneurs to register their businesses online. They can also file returns, claim input tax credit, send invoices, etc. through their GST account. Thus, there will be less room for corruption and tax evasion.

One Big Central Market

A mobile phone of a particular model is today sold at a different price depending on which state you buy it from. This is because the rate of VAT and other taxes can vary in different states under the current system. The brick and mortar stores have thus suffered a lot due to this as they are unable to match the prices of the products sold in the states that have lower tax rates.

These businesses don’t only have to compete with other businesses that could afford to offer low prices but also with imports that often cost less due to the lack of cascading effect of taxes. Thus, GST will promote the growth of domestic companies and startups to do business without fearing the businesses based overseas.

For the most part, GST will be helpful for SMEs and startups. However, there will a few challenges too. For starters, businesses that supply both goods and services and have an annual turnover of less than 1.5 crores may have to face compliance issues due to the nature of their business and deal with both state and central administration. Also, the threshold level for GST registration is 10 lakhs for the North-Eastern States and 20 Lakhs for the rest of India. Although this is better from the previous 5 lakhs and 10 lakhs respectively, it will still cause startups and small businesses owners to pay a high tax.

All in all, while there are a few hardships that GST will bring to the table, it will be a welcoming change for the entire business industry nonetheless. The specifics of the law such as exact rate for different product and service categorized, however, will be finalized by the GST council soon.

Types of GST Returns, and Their Applicability to your Business

The Goods and Services Tax, i.e. GST is going to completely transform the Indian business industry. From improved transparency to the elimination of double taxes there is a slew of welcoming changes associated with the new regimen. However, not everyone is liable to register under then new GST scheme. If your annual turnover is below the threshold, then you don’t have to register for GST, but rather a separate branch under it, which is the composition scheme.

The following are some of the key points you must know about the GST composition scheme:

Eligibility

The GST council has released a threshold limit to decide which taxpayers should be allowed to come under the composite scheme. If your annual turnover is below this limit then you can opt for the composition scheme.

The following explains the threshold limit:

For North East India, Uttrakhand, Himachal Pradesh, and Sikkim: The aggregate turnover of all the business verticals that come under then same PAN should be above Rs. 10 lakh for the preceding financial year but not higher than Rs. 50 lakhs.

For the Rest of India: The aggregate turnover of all the business verticals that come under then same PAN should be above Rs. 20 lakhs for the preceding financial year but not higher than Rs. 50 lakhs.

Input Tax Credit

A businessperson under the GST composition scheme cannot claim Input Tax Credit. This is one of the biggest drawbacks under this scheme. So, the merchants who are registered under regular GST regime will be able to offer lower prices on the same goods as yours by being able to claim a portion of the tax paid by then though ITC.

Tax Rate

Now, this is where you will be able to get a benefit over the regular GST merchants. The rate of tax levied under then GST composition scheme will be less than normal GST. However, it will still be at least 1% of the turnover of a financial year. The actual rate is expected to fall within 1% to 3%.

Voluntary Registration

To avail the benefits of the GST composition scheme you will need to register yourself on a voluntary basis, and that too every year. If your annual turnover crosses the threshold i.e. Rs. 50 lakh during any financial year you will automatically become liable to register under then regular GST scheme.

Note: If you are already working under the current VAT composition scheme then also you need to register under the new GST composition scheme on a voluntary basis.

Nature of Supplies

Only those merchants who supply within the same State can avail the benefits of the GST composition scheme. Thus, if your supplies are inter-state based then you don’t qualify for GST composition scheme.

Frequency of Returns

Normal taxpayers under the regular GST scheme have to file monthly returns via forms GSTR-1, GSTR-2, and GSTR-3. However, since the main objective of the GST composition scheme is to provide simplicity and ease in tax calculation, as GST composition merchant you will just need to file returns on a quarterly basis i.e. once every four months in a financial year.

Bill of Supply

The normal taxpayers under the regular GST scheme have to issue tax invoices. However, since GST composition dealers can’t claim tax inputs they have to issue a bill of supply instead.

Full Applicability

If you operate multiple businesses, then under the composition scheme you are not allowed to levy composition tax on some businesses and skip the rest. So, for instance, say you run a mobile store, a computer hardware store, and a snack bar, then the composition scheme will be applicable to all three of them. If the three businesses fall under then same business PAN they all shall be covered under the composition scheme whether they are being operated within a single state or interstate.

Moving from Composition Scheme to Normal Scheme, and Vice Versa

Situation 1: When you become a composition dealer from a regular dealer

If you are a composite tax payer then you need to pay tax at a rate not more than 0.5% for other suppliers of turnover, 1% for a manufacturer, and 2.5% for the restaurant sector. You also cannot:

  • Claim input tax credit of GST paid to you suppliers.
  • Supply goods through an aggregator (any e-com company such as Flipkart, Amazon. ).
  • Do business through a supply of services.
  • Manufacture some specific types of goods as notified by the GST council.
  • Supply goods that can’t be taxed under GST.
  • Collect tax on your outward supply of goods.

Situation 2: When you become a regular dealer from a composition dealer

When your annual turnover exceeds the threshold and you become liable to register under regular GST, you also become eligible to claim input tax credit.  However, you must claim it within 30 days from the date you become liable for GST registration to avail the benefit.

For a better understanding, consider the example below.

Let’s say that you are a manufacturer of blankets and have crossed the threshold limit for GST registration on 5th November 2017. You have raw wool in stock worth Rs. 2 lakhs and have paid a GST @ 18% i.e. Rs. 36,000 on it. So, you must apply for GST registration before 5th December 2017 (within 30 days) if you want to claim the ITC i.e. Rs. 36,000.

Returns to be Filed by a Composite Tax Payer

Filing returns is much easier and simpler for composite taxpayers in comparison to the regular taxpayers under then GST regime. In the former case, you just need to file an annual return and a quarterly return, or a total of five returns per year. The following table offers the details associated with these returns:

Return Form Frequency Due Date Details to be included
GSTR-4A Quarterly NA This form will be prefilled/auto-populated with the details provided by your supplier via form GSTR-1
GSTR-4 Quarterly 18th of the next month Details of all the outward supplies of goods and services along the prefilled details of the form GTSR-4A. If there are any changes required in the Form GSTR-4A then you can also add those in the Form GSTR-4.
GSTR-9A Yearly 31st December of the next financial year Combined details of all the quarterly returns along with the tax payment details.

 

 

Blog_GST

How will GST Affect the Small Businesses?

The Goods and Services Tax, which is better known by GST, is being advertised by the government as one of the biggest tax reforms in the history of the Indian economy. However, even though it seems promising with its simplification of the current taxation structure and elimination of double taxes, etc. it is important to know how it’s going to impact the SMEs of India.

Ease of Doing Business

Under the current system, every new business has to get a VAT registration from the sales tax department. Thus, if you are doing business in multiple states then it can be a big hassle to deal with the different registration process and associated fees, etc. of these states. Since the VAT applicable on a certain product can also vary from one state to another, it can also be a problem. So, say if you are selling mobile phones in different states, then it’s possible that you have to sell the same product at a different price depending on the state.

The Goods and Services tax will be the same for every state. Thus, you won’t have to worry about calculating different prices for your products. Plus, GST will also eliminate other indirect taxes such as central sales tax (CST), service tax, etc. Under the GST regime you will only need to pay only one tax for the state you are operating your business in, called SGST (State GST), and one for the central government, called CGST (Central GST).

GST will also allow you to offer your products at lower prices due to the elimination of double taxes. The repeat taxes applied on a product can be claimed by you in the form of Input Tax Credit if you are GST liable.

Preparing for GST

Unless preparation is done in advance, working under the GST regime can become really difficult for you as an SME. Thus, it’s better to get started as soon as possible.

The first thing you must do is ascertain whether you are liable to register for GST or not.

The government has linked the aggregate turnover of a business with the GST liability. So, if your annual turnover is higher than the threshold limit then you have to register for GST.

The aggregate turnover requirement for GST registration is given below:

 

 

Region Aggregate Turnover
Liability to Register Liability for Payment of Tax
North East India Rs 9 Lakhs Rs 10 Lakhs
Rest of India Rs 19 Lakhs Rs 20 Lakhs

 

However, getting your business registered is only the beginning. There are many things you need to make yourself familiar with, such as Input Tax Credit, the filing of returns, and issuing invoices.

Depending on your business you will need to file GST returns on a monthly basis, and also keep a track of your stock and issued invoices to claim input tax credit.

How to Make the Transition Easier?

There is a slew of changes that the GST regime will bring in the current business industry. Dealing with them all can be extremely difficult on your own. Thus, it’s better to hire a good CA or tax consultant.

Another good thing that you can do is subscribe to an invoicing and expense management program that is GST compliant. It will help you create invoices that in line with the GST standards, and keep a track of your inventory and sales.

GST Registration india

GST Registration Process in India Explained

The much-anticipated GST is finally going to be implemented from 1st July 2017 onwards in India. It is expected to bring a major change in the business industry by eliminating multiple taxes and improving tax compliance standards.

If you run a business that’s based on the selling of either goods or services, then you are required to apply for GST registration if you want to collect GST from your customers or claim input credit, which is one of the biggest features of GST.

Although GST has its merits, not every business needs to apply for it. There is a turnover based liability criterion for GST registration that has been set by the GST counsel. According to this criterion the businesses in the North-East India, Sikkim, Himachal Pradesh, J & K, and Uttrakhand that have the annual turnover below Rs. 10 lakh do not require GST registration. For the rest of India, the threshold is Rs. 20 lakh.

Even if your turnover doesn’t exceed the threshold limit you may still need to register for GST as per paragraph 5 in Schedule III of MGL. It requires you to register for GST if you are a/an:

  • Casual taxable person
  • Person who is required to deduct tax under section 37
  • Input service distributor
  • Electronic commerce operator
  • Person who supplies goods and/or services on the behalf of other registered taxable persons
  • Aggregator who supplies service under this trade name of brand name

If you want to register for GST then follow these steps:

PHASE 1

  1. Go the official GST portal i.e. www.gst.gov.in and log in to your account using the provisional ID and password that’s provided to you by the VAT authority of your State.
    GST Registration india

 

  1. Enter your email address and mobile number.GST Registration india
  2. You will receive an OTP on your provided email address and mobile number for verification. So, enter the same in the appropriate sections and click the “CONTINUE” button. You can also click the “RESEND OTP” button if you have not received the OTP for some reason.GST Registration india
  3. Once verification is complete you can enter your new credentials and create a standard account. You need to provide a unique username which should be of 8 to 15 characters long and can contain numbers or a few certain special characters. You also have to provide a new password which again should be 8 to 15 characters long and must contain at least one alphabet, one number, one uppercase letter, one lowercase letter, and one special character.GST Registration india

 

  1. Answer a few security questions which can help you in the future in retrieving your password in case you forget it.

Once you are done you can click the SUBMIT button, after which you will be automatically logged out.GST Registration india

 

The next screen will be like this:GST Registration india

You can see a message on the top informing you that your username and password have been created. With this, the PHASE 1 is also completed.

PHASE 2

  1. Login with your new credentials by clicking the ”Existing User Login” button.GST Registration india

Once you have entered your login details you will get a message:GST Registration india

 

Click the “Continue” button.

  1. You will see your dashboard now. Click the “dashboard” menu.GST Registration india
  2. You need to upload your DSC (Digital Signature Certificate) now. For that, click on the Register/Update DSC command.

You will see the following screen now:GST Registration india

To register your DSC you have to download and install the DSC client installer from the DSC Registration page of the GST Common Portal first. Once it’s done you can select the PAN of the authorized signatory from the drop-down list.GST Registration india

 

  1. Mark the checkbox and click on “PROCEED”GST Registration india

The next screen will be like this:GST Registration india

  1. Choose the correct certificate and click the Sign button. You will receive a message on the display if the registration is successful.
  2. Go back to the dashboard and fill the sections provided under the Enrolment tab such as business details, promotor/partners, bank account details, etc.GST Registration india

You will need to provide the application reference number and upload a few mandatory documents which are as follows:

  • Constitution of Business- Registration certificate or a partnership deed.
  • Details of bank accounts- scanned copy of the passbook’s first page or a bank statement.
  • Recent Photograph
  • Proof of principal place of business- Any of the following: latest receipt of property tax, electricity bill, memorandum of association and articles, municipal khata copy, or any other certificate or document issued by the government that can serve as a proof of your business place. In case the property is rented you can also provide a rent or lease agreement.

Once you have completed all the sections you can see the last tab:GST Registration india

Mark the checkbox, choose the authorized signatory, enter the name of the place and finally submit with your DSC. The next screen should be like this:GST Registration india

You will also receive an ARM which can be used for future correspondence, so make sure you note it down somewhere.

  1. If your application is approved then a certificate of registration will be issued to you within 3 days of submission. You will be also notified of the same through the registered mobile number and email address.

Note: If additional information is needed then another form GST REG-03 will be provided to you. You can respond by submitting a filled-out Form GST REG-04 within 7 days after receiving the form GST REG-03.

GST has numerous benefits. It can allow you to offer reduced prices on goods and services to your customers, make invoicing simpler, eliminate entry tax, etc. Thus, it is in your best interest to register yourself as soon as possible.

GST Registration India

GST Composition Scheme: All you Need to Know

The Goods and Services Tax, i.e. GST is going to completely transform the Indian business industry. From improved transparency to the elimination of double taxes there is a slew of welcoming changes associated with the new regimen. However, not everyone is liable to register under then new GST scheme. If your annual turnover is below the threshold, then you don’t have to register for GST, but rather a separate branch under it, which is the composition scheme.

The following are some of the key points you must know about the GST composition scheme:

Eligibility

The GST council has released a threshold limit to decide which taxpayers should be allowed to come under the composite scheme. If your annual turnover is below this limit then you can opt for the composition scheme.

The following explains the threshold limit:

For North East India, Uttrakhand, Himachal Pradesh, and Sikkim: The aggregate turnover of all the business verticals that come under then same PAN should be above Rs. 10 lakh for the preceding financial year but not higher than Rs. 50 lakhs.

For the Rest of India: The aggregate turnover of all the business verticals that come under then same PAN should be above Rs. 20 lakhs for the preceding financial year but not higher than Rs. 50 lakhs.

Input Tax Credit

A businessperson under the GST composition scheme cannot claim Input Tax Credit. This is one of the biggest drawbacks under this scheme. So, the merchants who are registered under regular GST regime will be able to offer lower prices on the same goods as yours by being able to claim a portion of the tax paid by then though ITC.

Tax Rate

Now, this is where you will be able to get a benefit over the regular GST merchants. The rate of tax levied under then GST composition scheme will be less than normal GST. However, it will still be at least 1% of the turnover of a financial year. The actual rate is expected to fall within 1% to 3%.

Voluntary Registration

To avail the benefits of the GST composition scheme you will need to register yourself on a voluntary basis, and that too every year. If your annual turnover crosses the threshold i.e. Rs. 50 lakh during any financial year you will automatically become liable to register under then regular GST scheme.

Note: If you are already working under the current VAT composition scheme then also you need to register under the new GST composition scheme on a voluntary basis.

Nature of Supplies

Only those merchants who supply within the same State can avail the benefits of the GST composition scheme. Thus, if your supplies are inter-state based then you don’t qualify for GST composition scheme.

Frequency of Returns

Normal taxpayers under the regular GST scheme have to file monthly returns via forms GSTR-1, GSTR-2, and GSTR-3. However, since the main objective of the GST composition scheme is to provide simplicity and ease in tax calculation, as GST composition merchant you will just need to file returns on a quarterly basis i.e. once every four months in a financial year.

Bill of Supply

The normal taxpayers under the regular GST scheme have to issue tax invoices. However, since GST composition dealers can’t claim tax inputs they have to issue a bill of supply instead.

Full Applicability

If you operate multiple businesses, then under the composition scheme you are not allowed to levy composition tax on some businesses and skip the rest. So, for instance, say you run a mobile store, a computer hardware store, and a snack bar, then the composition scheme will be applicable to all three of them. If the three businesses fall under then same business PAN they all shall be covered under the composition scheme whether they are being operated within a single state or interstate.

Moving from Composition Scheme to Normal Scheme, and Vice Versa

Situation 1: When you become a composition dealer from a regular dealer

If you are a composite tax payer then you need to pay tax at a rate not more than 0.5% for other suppliers of turnover, 1% for a manufacturer, and 2.5% for the restaurant sector. You also cannot:

  • Claim input tax credit of GST paid to you suppliers.
  • Supply goods through an aggregator (any e-com company such as Flipkart, Amazon. ).
  • Do business through a supply of services.
  • Manufacture some specific types of goods as notified by the GST council.
  • Supply goods that can’t be taxed under GST.
  • Collect tax on your outward supply of goods.

Situation 2: When you become a regular dealer from a composition dealer

When your annual turnover exceeds the threshold and you become liable to register under regular GST, you also become eligible to claim input tax credit.  However, you must claim it within 30 days from the date you become liable for GST registration to avail the benefit.

For a better understanding, consider the example below.

Let’s say that you are a manufacturer of blankets and have crossed the threshold limit for GST registration on 5th November 2017. You have raw wool in stock worth Rs. 2 lakhs and have paid a GST @ 18% i.e. Rs. 36,000 on it. So, you must apply for GST registration before 5th December 2017 (within 30 days) if you want to claim the ITC i.e. Rs. 36,000.

Returns to be Filed by a Composite Tax Payer

Filing returns is much easier and simpler for composite taxpayers in comparison to the regular taxpayers under then GST regime. In the former case, you just need to file an annual return and a quarterly return, or a total of five returns per year. The following table offers the details associated with these returns:

Return Form Frequency Due Date Details to be included
GSTR-4A Quarterly NA This form will be prefilled/auto-populated with the details provided by your supplier via form GSTR-1
GSTR-4 Quarterly 18th of the next month Details of all the outward supplies of goods and services along the prefilled details of the form GTSR-4A. If there are any changes required in the Form GSTR-4A then you can also add those in the Form GSTR-4.
GSTR-9A Yearly 31st December of the next financial year Combined details of all the quarterly returns along with the tax payment details.
what is GST

GST: What is it? Why it Matters?

GST, or Goods and Services Tax is a new tax system that will combine different individual taxes such as VAT, Entertainment Tax, etc. into one single tax. This system is aimed at disincentivizing tax evasion, lowering prices over time, and most importantly- simplifying business operations.

The GST bill (One Hundred and Twenty-second Amendment Bill) was passed by the Rajya Sabha in August 2016 and will be effective in the country from 1st July 2017 (tentative), although it was proposed way back in 2014.

GST will significantly improve the business industry in India, as it will prevent unhealthy competition among different states of India, encourage tax payments, give a boost to Indian exports through tax benefits to small manufacturers, etc. In fact, it is also expected to increase the GDP as well (80 basis point rise according to HSBC). However, what is it exactly, and how does it work?

Before you learn about GST, it is important to first understand how our existing taxation system is structured.

what is gst,

Image Source

The taxes levied in the country are broadly divided into two categories- direct taxes and indirect taxes. The direct tax, which is also the Income tax, is paid by an individual. However, the indirect taxes are more diverse and further divided into two categories- state taxes and central taxes, collected by the state government and the central government respectively.

As you can imagine, the existing taxation system is quite complicated. More than that the individual taxes, when combined, can end up becoming a huge amount which affects businesses negatively. With GST coming into action all these different taxes will be combined into just one simplified tax.

Although GST is a unified tax structure, it has three components (three different GST taxes) which are:

  1. CGST, or Central GST: It will take the place of a variety of Central Govt. taxes such as service tax, surcharges on the supply of goods/services, Special Additional Duty of Customs, etc.
  2. SGST, or State GST: SGST subsumes state govt. taxes such as entertainment tax, VAT, purchase tax, central sales tax, luxury tax, etc.
  3. IGST, or Integrated GST: IGST applies to import and interstate transactions. It will be shared by both the central and state governments.

So, by now it must be quite clear to you how GST simplifies the current taxation system. But how does it benefit a business and otherwise? Let’s consider an example.

GST works in three steps- from manufacturing to wholesale, and finally retail. Let’s discuss all these 3 one by one:

Step #1: Manufacturing

Let’s say a manufacturer of instant coffee buys raw coffee beans at Rs. 1000 per kg from a supplier. However, this price already contains a 10% tax:

10% of Rs. 1000= Rs. 100 (tax 1)

 

After producing the instant coffee, the manufacturer adds Rs. 200 to the price, making the final amount 1200. Once again tax is to applied on the price, which at 10% becomes:

10% of Rs. 1200= Rs. 120

Now, the manufacturer has already paid a tax of Rs. 100 when he bought the raw beans. So, according to GST he will only need to pay:

Rs.120- Rs. 100= Rs. 20 (tax 2)

Step #2: Wholesaling  

The wholesaler buys the coffee pack at Rs. 1200. He adds an additional amount of say Rs. 100 for profit, making the final price at Rs. 1300. Again, at 10% tax that shall be applied on it the amount would be:

10% of Rs.1300= Rs. 130

However, since Rs. 120 has already been accounted for from the step 1, the effective tax applicable here is:

Rs. 130- Rs. 120= Rs. 10 (tax 3)

Step #3: Retailing

Coming to the final stage, the retail will buy the coffee at Rs. 1300. Since he also has to make a profit on the sale, he adds Rs. 100 to the buying price, making the final rate Rs. 1400.

At 10% rate of tax the tax amount becomes:

10% of Rs. 1400= Rs. 140

Now, since Rs. 130 is already accounted for from the previous two stages, the actual applicable tax is:

Rs. 140- Rs. 130= Rs. 10 (tax 4)

Taking a look at all the three steps, the combined final tax levied would be:

tax 1+ tax 2+ tax 3+ tax 4= Rs. 100+20+10+10= Rs. 140

Thus, a lot of tax money is saved by this system as the redundant taxes are dropped. Calculations have also become simpler this way as there are less numbers to take into account. This is how GST will make doing business a lot easier and simpler.

With GST likely to be implemented from 1st July, it is important that you prepare for the changes. You will need to calculate taxes differently and may also have to change the cost prices and selling prices of your goods and services. That being said, now is a really good time to go digital. With online invoicing and expenses management services you can greatly reduce the overhead and also increase accuracy in the business records. You will be able to track your cashflow

GST

GST and its implications for small business.

GST stands for good and service tax. GST implementation is said to be landmark reform in terms of taxation in India. While small business owners think as after Goods and Service Tax (GST) they need to deal with one tax inspector instead of many as in today’s scenario. GST will raise the bar for minimum turnover from 5L to 10L also it will lower the taxes whose turnover will lie in the range of 10-50L. Hence it will come as a big relief to small business owners. After demonetization and implementation of GST, Small businesses are forced to move on digital currency and stay away from heavy cash dealings. Also, it will allow them for better reporting and transparency. It will improve their chances to get access to credit from primary financial institutions instead of raising fund from the secondary market. After demonetization lending rate offers are bound to go down by financial institutions. Registering and expansion policies will be easier in Goods & Service Tax (GST) regime as India will become one market. Hence now selling goods across states becomes easier as intrastate transactions because cross-border taxes are being eliminated.

Also once small business gets Goods & Service Tax (GST) registration, it needs to generate GST based TAX invoice for compliance. This comes as a big challenge for small business owners as they don’t have enough budget to support the infrastructure required for meeting all the compliances in this digital era. But once all the invoices and cash flow actually move on to cloud solution and then it gets automatically reconcile with the master database of Indian government for Goods & Service Tax (GST) filing. Cloud-based solutions will play an important role in letting these small businesses file their GST with ease, both in terms of efficiency and monetary benefit. Security of these cloud-based solutions is the key issue for any small business out there as they have very specific customer segment and they play in the niche market with their product or services. Hence for any SMB to adopt one of many cloud-based solutions is going to be a key decision for data security. SMB needs a single platform where it can manage its own cash flow, raise invoices, manage expenses, file GST and get easy credit facility. Considering all these factors in mind we have created an awesome cloud based solution numberz, which actually helps in all these services with high security of data encryption. All data is stored on cloud only and is easily accessible from any device anywhere. It makes your business on the go and one can avail any of these facilities from one’s mobile handset or tablet. The idea is to reduce friction among all the agents involved and keep complete transparency among all parties involved.

GST Registration

Invoicing Under GST: Everything you Need to Know

Almost every kind of indirect tax in India requires the preparation of an invoice. This is because not only it serves as a proof of a sale but also provides information on every other form of supply such as exchange, transfer, barter, etc.

With the implementation of GST however, the way invoices are created will be changed. According to the GST regime two types of invoices have to be issued either before or on the occurrence of a particular event within a certain period. These invoices are tax invoice, and bill of supply.

Tax Invoice

If you are a registered taxable person under the GST regime who is supplying goods or services, then you are required to issue a tax invoice for all the supplies involved.

Bill of Supply

If you are supplying goods or services that are exempted from GST, or if have opted for the composition levy scheme (provided under the GST regime itself) then you will need to issue a bill or supply rather than the tax invoice for the supplies. Plus, you can’t use the bill of supply to claim input tax credits.

What are the Differences Between a Tax Invoice and a Bill of Supply?

  • A tax invoice is to be issued to a taxable supplier liable under GST regime, who is supplying good and/or services that are taxable. A bill of supply, on the other hand, is to be issued by the supplier of goods and/or service that are exempt from GST, or in case the supplier is a composition taxpayer.
  • You can claim Input Tax Credits with a tax invoice, but not with a bill of supply.
  • Reverse charge (in which a tax paid is by the recipient of goods/services instead of the supplier) in allowed for the registered GST sellers. However, taxpayers under the composition scheme have to pay the taxes themselves.

How to Issue a Tax Invoice?

If you are a registered taxable person under the GST scheme, then you need to issue a tax invoice either before or at the time of when you have to:

  • Remove goods, in case the supply includes movement of goods.
  • Issue several statement accounts in succession.
  • Deliver goods to the receiver, in case the supply doesn’t include the movement of goods.

You have to issue a tax invoice in accordance with the following timelines:

  • Within 30 days under normal circumstances.
  • Within 30 days from the date of due payment, if there is a continuous supply of services and the due date is ascertainable.
  • Within 30 days from the date of payment, if there is a continuous supply of services and the due date is unascertainable.
  • At the time of cessation, if there is a continuous supply of services and the contract expires/made to nullify.
  • Within 45 days from the supply of service, if you are a bank on NBFC.

The following are the details to be included in your tax invoice:

  • Your name, address, and the GSTIN number or registration number.
  • A consecutive serial number that doesn’t contain any special symbols (alphabets and numbers only) and is different for every financial year. For instance, for the financial year 2017-2018, you can use 2017NameOfCompany.
  • Issuing date.
  • Description of the goods and services involved.
  • The total value of the goods and services.
  • Rate of tax levied (CGST, SGST, or IGST)
  • Place of supply along with State name, if it’s an interstate

If you are an exporter then you need to include some additional information in the invoice, which is:

  • Name of the country along with the address you are exporting the goods to
  • The statement “Supply meant for export on payment of IGST” or “Supply meant for export under bond without payment of IGST”, depending on the case
  • Your name and address
  • Number and date of ARE-1, which is the application for removal of goods for export

If you are a goods transport agency then the invoice issued by you should have the following information:

  • Gross weight of the shipment
  • Name of the consignee and consignor
  • Registration number of the carriage used for transportation
  • GSTIN of the taxpayer
  • Details of the shipment, such as the address of origin and destination

How many copies of tax invoices have to be issued?

If you are supplying goods then you are required to create three copies of the invoice:

  • Original Invoice: This is the original invoice marked as “ORIGINAL FOR RECIPIENT” which you have to issue to the buyer of the goods.
  • Duplicate Copy: This is the second copy of the original invoice marked as “DUPLICATE FOR TRANSPORTER” which you have to issue to the delivery boy (the one transporting the goods). However, if you have an invoice reference number then the delivery boy needn’t carry the duplicate invoice.
  • Triplicate Copy: This is the final copy of the tax invoice (marked “TRIPLICATE FOR SUPPLIER”) that you have to keep with yourself for record purposes.

In case you are supplying services then you need to create just two copies of the invoices:

  • Original Copy: This one is marked “ORIGINAL FOR RECIPIENT”.
  • Triplicate Copy: This one is marked “TRIPLICATE FOR SUPPLIER”.

How to Issue a Bill of Supply?

If you have opted for the GST composition scheme then instead of tax invoice you have to issue a bill of supply, as you are not allowed to collect the tax.

The bill of supply should include the following:

  • Your name, address, and GSTIN
  • Date of issue.
  • A consecutive serial number that doesn’t contain any special symbols (alphabets and numbers only) and is different for every financial year. For instance, for the financial year 2017-2018 you can use 2017NameOfCompany.
  • Description of the goods and services involved.
  • The total value of the goods and services.
  • HSN code (in case of goods) or Accounting code (in case of services)
  • Your Signature (either digital or non-digital).

Also, if the total value of the goods supplied is less than Rs. 100 then you are not required to issue a bill of supply, unless the receiver insists.

GST Registration

How Will GST Impact the e-com Industry in India?

The e-com industry is booming ever since it ventured into the Indian business industry. Unfortunately, it has to deal with a very complicated taxation system. There are all kinds of indirect taxes levied by both the State and the Central government. The digital payment systems such as e-wallet and credit card/net-banking, etc. also add more woes for the dealers/operators. However, this will change soon.

From 1st July(tentative), the government is going to replace the current taxation regime with a new GST regime. This is expected to bring a number of significant changes that will not only make tax calculations easier but also bring transparency in the entire system.

If you are a merchant who is selling goods/services online, then you are required by the GST law to get your registered irrespective of your turnover. But there’s more.

In this post, we will learn about how the GST will impact the e-commerce industry specifically.

Elimination of Tax Arbitrage Advantage

In the current taxation system, the rates of several taxes such as VAT vary from one state to another. For instance, the rate of VAT on mobile phones in Goa is 12.5%, but in Kerala, it is a modest 5%. So, the merchants based in Kerala can offer low prices to their customers on the e-commerce portals and have an arbitrage advantage over others.

With the implementation of GST, however, all the states will have to levy the same tax all across India. Thus, no merchant will be able to get an unfair advantage on the pricing over others.

Faster Delivery of Shipments

The supply chain of the e-com industry is today crippled by a variety of regulations and compliances that not only make transportation of goods complicated but also lead to huge delays. However, with GST the process is expected to become a lot smoother. E-com operators will be able to deliver the goods to their customers faster, mainly because of the elimination of tax collection at the check posts which cause long queues today.

Easier Identification of non-Complaint Merchants

Once GST is implemented, it will become almost impossible for the merchants to misrepresent their sales. This is because they will need to report their sales online through a common portal. They will need to file the report on a monthly basis along with the GSTIN of their aggregator (owner and manager of the online portal such as Flipkart, Snapdeal, etc.). Even the aggregators will have to disclose their sales and returns along with the details of their merchants.

Another major change that GST will bring is the implementation of public compliance rating. Through these ratings, the aggregators will able to easily identify the merchants who are irresponsible with their tax filings and detach them from their platform for a better customer experience.

Tax Collection at Source (TCS)

According to GST every e-commerce aggregator has to collect a 2% tax called the TCS on the total value of the taxable goods supplied on their platform.  Consider the example below to get a better idea how this works:

Let’s say E-biz is an online shopping portal, and MobileZone is a seller on this portal. So, if MobileZone sold goods of the total value of Rs. 100,000 in a day, then E-biz will collect Rs. 2,000 from it in the form of TCS. The same follows for all the other sellers on the platform.

GST is to bring many major changes in the Indian business realm, and e-commerce is no different. While the existing online sellers may find it troublesome to adapt according to the new regime, they are likely to benefit in the long run.

Everything You Need to Know About Filing GST Returns

The GST Council recently released the final draft of the laws governing CGST (Central GST) and IGST (Integrated GST), and efforts are in full swing as we get closer to the implementation date i.e. 1st July 2017.

According to the GST regime, every taxable person has to submit their Tax details online through the GST portal at https://www.gst.gov.in.

There are in total 4 types of forms that every normal taxpayer will have to fill and submit in the new GST regime. These are:

Return Form What to file? By Whom? By When?
GSTR-1 Details of the outward supplies that are taxable under GST Registered taxable supplier 10th of every month
GSTR-2 Details of the inward supplies that are taxable under GST Registered taxable recipient 15th of every month
GSTR-3 Monthly GST returns that are based on the details of outward supplies and inward supplies Registered taxable person 20th of every month
GSTR-9 Annual Return Registered taxable person 31st December of the next financial year

GST filing

Image Source

Details to be added in the returns:

GSTR-1

  • Your business name, GSTIN, and the period for which the return is filed.
  • Details of the invoices issued in the previous month along with the taxes paid on them.
  • Details of the advances paid for a supply to be delivered in the future.

GSTR-2

GSTR-2 will be prefilled based on the details provided by you through GSTR-1. You will need to just go through it, and make changes if required.

For instance, if you have bought raw material from a certain company A. Then company A will file a GSTR-1 form and put your name as the buyer in it.  As you will check your GSTR-2 form, you will find these details already filled. You will just need to verify the auto-populated details of the purchases made by you.

GSTR-3

GSTR-3 is just GSTR-1, and GSTR-2 put together. Just like GSTR-2 the GSTR-3 form is also auto-populated from the information received. You just have to approve the details provided in it, which are:

  • Details of the cash ledger, liability ledger, and ITC ledger.
  • Tax payment details of different taxes- SCGT, CGST, and IGST.
  • The option of claiming a refund for excess payment.

GSTR-9

GSTR-9 sums up the transactions and tax payments made in a financial year. So, you need to fill all the details of all the monthly returns along with the collective tax payment details.

Composition Businesses

The government has issued a Composition Scheme to make GST compliance easier for small businesses. If your annual turnover does not exceed Rs. 50 lakhs then you can opt for GST payment under the composition scheme. By doing so, you have to file returns in the following manner:

Return Form Frequency Due Date Details to be included
GSTR-4A Quarterly NA This form will be prefilled/auto-populated with the details provided by your supplier via form GSTR-1
GSTR-4 Quarterly 18th of the next month Details of all the outward supplies of goods and services along the prefilled details of the form GTSR-4A. If there are any changes required in the Form GSTR-4A then you can also add those in the Form GSTR-4.
GSTR-9A Yearly 31st December of the next financial year Combined details of all the quarterly returns along with the tax payment details.

 

How to file GST Returns?

Since GST returns can only be filed online in a digital form, you need to login in the GST portal with your credentials. Otherwise, you can also prepare the returns yourself and submit the same through a facilitation center or a tax return preparer (TRP).

Every business will be assigned a unique identification number called the GSTIN number. You will be filing your returns against the very same number.

GST has also proposed to impose an automated late fine for those who don’t file the returns on time. This is to discourage non-filers. For each day of delay, you will have to pay a fine of Rs. 100 (tentative), with a maximum limit of Rs. 5,000. In the case of annual return again the fine is Rs. 100 per day, but the maximum limit is 0.25% of the aggregate turnover. Thus, be sure to file the returns on a timely basis.