Impact of GST on traders

GST Impact on the Traders in India

The Goods and Services Tax will bring several changes in almost every industry in India. However, the manufacturers and traders will be affected by it the most.

The following are some of the most important changes that the traders will need to wrap their head’s around with:

Goods vs Services

One of the biggest reasons why the current tax regime is so complicated is because there are frequent disputes on certain transactions as to whether they should be categorized as goods or services. Creating invoices is also difficult for the traders for the same reason as two separate rates are charged for goods and services. However, since GST will consider both of these equally and levy the same charge on both, it will make doing business a lot simpler and easier.

Common Market

At present, goods are mostly sold within the state to prevent the CST and entry tax. However, once GST is implemented, traders will be able to sell their products to the farthest corners of the country without worrying about taxes, as there will be no entry tax or CST.

Entry Tax

The business industry has to deal with great losses in the current system because the trucks responsible for goods transportation waste a lot of time at the check-posts. In fact, it has been found that long-distance trucks are parked 60% of the time.

Since GST aims at eliminating the practice of tax collection at the borders, it will benefit the businesses in two ways:

  • They will save money on the border tax.
  • They will be able to deliver goods to their customers faster and thus improve business efficiency and also minimize transportation costs.

Rate of Tax

The GST regime will follow a four-tier tax structure of 5%, 12%, 18% and 28%, with lower rates for the essential goods and higher rates for the luxury goods. In fact, for the essential items such as food, a zero rate will be levied. On the other hand, luxury items such as tobacco and aerated drinks will be levied an additional cess apart from the base rate itself.

To extend relief to small traders, the Goods and Services Council has also settled for the rates 2%, 1% and 5% for small manufacturers, small traders, and small restaurants, respectively. These entities will come under the new Composition scheme, the eligibility criteria for which is an annual turnover of less than Rs.50 lakhs.

Input Tax Credit

One of the most anticipated reforms of GST is Input Tax Credit which allows the traders to claim the repeat tax paid by them. However, there are a few challenges to this system. For instance, if a trader has paid a repeat tax to their supplier then they can claim a refund (credit) only if the supplier paid the tax themselves. Since there is a chain of vendors, manufacturers, and traders in the process, they all have to comply with the GST law and pay taxes so that the eligible taxpayers can claim input credit.

GST will make invoicing, filing of returns, and registration electronic, and the traders will have to deal with these by entering information through their accounts via the Internet. Although some of the traders and small business owners might not be happy with the implementation of digitization in terms of the same, replacing the traditional way, it’s in their best interest to adapt accordingly.

GST impact on startups and micro enterprises

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 GSTR, due dates and their applicability

Types of GST Returns, and Their Applicability to your Business

The average taxpayer who runs a business has to deal with a number of taxes. If they are compliant under VAT, Service Tax, etc. then they have to file returns as per the law of their respective state (as these taxes vary from one Indian State to another). Apart from the returns, there are annexures and registers for all these taxes that are to be provided on a monthly, half yearly or yearly basis. Without a doubt, the process is tedious and complicated.

GST aims at making filing the returns easier and simpler as the compliant businessmen will need to file only the GST returns. The GST council has released the details of the all 11 types of returns which are to be filed electronically through the Common Portal. You may need to file only a few of these depending on your business type.

Regular Businesses

If you are a GST compliant business who has to pay the GST in the standard manner then your business will be considered as a regular business.

You will need to file three types of returns on a monthly basis, which are GSTR-1, GSTR-2, and GSTR-3. However, the returns GSTR-2 and GSTR-3 will be automatically created for you using the details from the GSTR-1 return.

The GSTR-1 is to be filed along with the details of the outward supplies made by you in the previous month. These details will result in the auto-population of the inward supplies, i.e. form GSTR-2A. You can confirm these details which will result in the creation of the form GSTR 2.

Once you have provided the details of goods/services bought and sold through the forms GSTR-1 and GSTR-2 respectively, the information will result in the automatic creation of GSTR-3. You can now approve this return or make changes if required.

You can refer to the table below to understand the timelines associated with all the returns:

Return Form Details to be filed Concerned Person Deadline
GSTR-1 Outward supplies that are taxable under GST Registered Taxable Supplier 10th of the next month
GSTR-2 Inward supplies that are taxable under GST Registered Taxable Recipient 15th of the next month
GSTR-3 Monthly GST returns that are based on the details of outward supplies and inward supplies Registered Taxable Person 20th of the next month
GSTR-9 Annual Return Registered Taxable Person 31st December of the next financial year

 

Composition Businesses

The government has issued a Composition Scheme to make GST compliance easier for small businesses. The scheme has various benefits for eligible businesses, such as lower GST tax rate, quarterly tax returns (as opposed to monthly), etc.

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 Details to be filed Concerned Person Deadline
GSTR-4 Quarterly return for compounding taxable person. Composition Supplier 18th of the next month after each quarter
GSTR-9A Annual return Compounding Taxable Person 31st December of the next financial year

 

Other Businesses

There are a few businesses that are not covered in the previous categories. These belong to non-resident foreign taxable persons, electronic commerce operators, etc. Their returns along with the timelines are given in the table below.

Return Form Details to be filed Concerned Person Deadline
GSTR-5 Return for Non-Resident foreign taxable person Non-Resident Taxable Person 10th of every month
GSTR-6 Return for Input Service Distributor Input Service Distributor 13th of every month
GSTR-7 Return for authorities deducting tax at source. Tax Deductor 10th of every month
GSTR-7 Taxable supplies of an e-commerce operator, and the overall tax collected E-commerce Operator/Tax Collector 10th of every month
How GST Affect the Small Business

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.

Integration That We Provide, To Make Your Life Easier

Integrations That We Provide, To Make Your Life Easier

Managing money, accounts, finance and other monetary issues for your venture is crucial and needs to be given ample importance. As the size of the company increases, accounting entangles and hence, you might find yourself distracted. If that has ever happened to you, this article is specifically for you!

Online vs. Offline Cash Flow Management

When it comes to comparing offline and online cash flow management, managing online is always easier and a go-to option. When something can be done in 2 minutes, why invest 2 hours in doing the same?

Online accounting and invoice creation is not only a cakewalk to create but also takes a jiffy to look back.

numberz, always at your service

We at Numberz, not only have created a trouble-proof way of managing your accounts, invoices, and expenses but also provide various other features to make your life easier. Hence, we have integrations as a path to smooth accounting.

The integrations, and how to use them!

 

  1. Excel at your fingertips!excel invoice

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Creating invoices in bulk is a tedious task, but is supposed to happen every month.

So, what do you do when you need to create bulk invoices?

Fill each one manually? Or scratch your head to find certain better ways of managing invoices?

Let’s save up some time for you. Creating excel sheets are easier as you can copy paste easily. Right? You can use that for creating invoices in Numberz as well. Just create an excel sheet and upload into your debtor list here. You can reach this page by going to the invoice section and selecting ‘Import invoices’ from the dropdown at the top right corner (near ‘add invoice’ button).

Not only can you import invoices through excel, you can do same for expenses. Just navigate to expenses, from your dashboard and click on ‘Import Bills’. In case of any confusion, there is always a ‘guide me’ section to help you.

 

  1. The Tally Integrationinvoices on tally

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We understand that almost every accountant is in love with Tally and when you’re onboard for using numberz, you don’t need to hassle enough to get into your next favorite platform. Follow the given simple steps to integrate numberz and Tally smoothly.

Note: You’d need three things for this integration.

  1. Chrome plugin that you can find here
  2. Registration on numberz
  3. Tally on your system

For using Tally integration and for syncing all the invoices and debit notes to Tally, follow the steps as given here.

  1. Banking integration

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The payments of the invoices are done through bank accounts, and creating invoices but not syncing with the bank account, might cause balance mismatch. To overcome this issue, we have ‘Banking Integration’. By using bank reconciliation you can easily associate your bank transactions with your invoice line items.

For syncing your bank transactions and your invoices, follow the steps given here.

  1. Partners integration

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Partners integration is the term that we have given to our tie-ups with NBFC and various other banking organizations, for providing a credit line to help businesses from running out of money.

The easy integration and well-defined ways of using them are all meant for making cash flow easy and invoice management even easier. We at numberz understand that it is important to make accounting smooth, but we also know that it is even more important to be comfortable with a software, to use it frequently, and that’s why we have these integrations and much more in the pipeline for the coming releases. We hope you’d find them useful.

Doubts? Problems? Confusion? Need help? Get in touch, anytime!

Numberz is now on android play store and iOS store

numberz goes mobile: Introducing Android and iOS apps for your smartphone

We at numberz understand that cash flow management is much more than just tracking your receivable and payables on Excel sheets, and doing it on a wide desktop screen, more so. It has been our constant endeavor to enrich your interaction with us in a simpler way.

Towards reaching the above el-dorado, we are taking a BIG step! This April – we are going mobile.

The numberz you love has a soulmate. Our ritzy app is now available on Android and iOS. Now carry your business with you while we take care of all your numbers. Use the app to create and send invoices on the move. Spend and record your expenses instantly. And much more!

Discover the many benefits & features of our app. Your beloved product comes with the same functionality found in website version, nothing is different – yet everything has changed!

Simplified Dashboard – An overview of all your business insights in one place

  • All your critical business data in one place.
  • Glance your business numbers – invoices, expenses and loan data on the move.

Faster Payment Options – Anywhere, anytime

  • Create, send and track invoices so you always know who owes you and who has paid you.
  • Go cashless using numberz “pay now” feature. Get paid by your clients using credit/debit cards & net banking. Easily follow up on invoices using phone, SMS and of course email.

Smart Expense Tracker – An umbrella for all your rainy days

  • Create quick bills and prioritize your payments by getting deeper insights on expenses.
  • Track vendor and tax level details by creating vendor bills.

Getting started on numberz is quick & hassle free. Create your account on numberz website and use existing credentials to login in your app.

Download links

iOS:https://itunes.apple.com/in/app/numberz-invoicing-cashflow/id1208042638?mt=8

Android: https://play.google.com/store/apps/details?id=com.numberz.app

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.

Ease prioritizing with numberz

Stress vs. Growth, Team Up With numberz

With the growth of digital age, and the advent of social media, the marketing has changed a lot for everyone, for every sector, and hence the competition has become tremendously perplexing. The existence of your venture needs to go through a lot. If you want to grow, you need to pull yourself out of the entangled and vicious cycle of this deadly competition.

 

While the competition might be a lot for calling forth problems to the ventures, it is not the only stumbling block on the way of success. Once you place yourself on the path of becoming a businessman (or a businesswoman), the options multiply and so do the problems. But do you have apt resources to cope with your problems? Do you have enough time to invest into the important and more important stuff?

You ask what problems? Well, let’s look at them one by one! (And we’ll elaborate how you can cope with each one of these, very smoothly)

 

Translating your cash gap

We, have come up with the credit line for businesses, in which we get basic data from you and after calculation of your turnover and your CIBIL score. You get your cash gap, also known as ‘valley of death’, filled and hence your business grows better than ever. We bridge your cash gaps and hence help your venture prosper!

 

With a 4 step process, you get the credit line, and hence the cash management becomes better than ever. Your contact details, your financial data (just the basic one), and BOOM, you get a way to fill up your cash gap!

 

Ease prioritizing payments, with numberz

The expense is one thing that needs to be managed very efficiently. numberz makes it easy to get real-time insights upon your cash-flow, and hence you decide what must go, where, and how much? Your bank accounts, your expenses, and your business, all stays in pace, according to you!

 

Paperwork is a headache to manage, and with numberz, you don’t need to entangle yourself into that! You can create new bills online and can upload or import old bills using Excel. As easy as, single click.

Similar to your invoices, your expenses need reconciliation too. But why to do that manually, when we can do that for you? Your bank account will always be in sync with your expenses and invoices, no matter what!

When you are able to see your business cash flow, the payments will be easily prioritized, and with prioritizing, the horizon of growth expands immensely.

Integration, for a smooth working pattern

Most of the data flow related to finances is saved and pondered upon in Tally and Excel. We understand that your systems must not be hampered. Hence we provide integrations with both of these. The flow, the integrations and the finance, all appear to be a very important set, that must be taken care of.

We help you manage your invoices, your expenses, your advances (on invoices), your account collaboration, we help you be in sync with your bank, and we integrate Tally and Excel for your smooth workflow.

 

Don’t let invoicing vex you

When you are continuously involved with your work and you need to look into various factors, missing a payment is something that can happen. But, you can NOT miss a payment. Right?

Well, we at numberz, make sure you do not miss any of them!

How? You ask?

You can create effectual invoices, in a jiffy, and can accept online payments quickly. This means you’d get paid faster. Your invoices can be estimated and created effortlessly, within a few clicks. You’ll have e-mail integrated, and hence you can send payments and reminders via e-mail. The invoices will be tracked and balance your cash gaps when you receive payments.

 

Advantages of invoicing with numberz

Your business will be GST ready, and hence deadlines won’t startle you!

Have you heard someone say, “Looks do not matter”? Well, that person was wrong. Why? Looks matter, and hence your invoice must be professional enough. For this, we provide already created templates, which can be e-mailed instantly.

Cash nuisance is something that irritates most and hence, Numberz provides you with a platform where clients can pay you via online options, be it net banking, online wallets, credit cards or debit cards. No more wrangles over payments!

Delay in payments is something that every business has to go through, but now you can send reminders and hence can quickly follow-up upon the payments.

Invoice reconciliation consumes a lot of energy on the part of accounts, but why waste time when your invoices can directly be matched with your bank accounts. No more manual intervention required!

 

 

With all these features at hand, what is important is accessibility. All the expenses, invoices and every other feature that you’ve loved about Numberz, are accessible everywhere you go, and on every device you use. The power of the Internet has emerged to be a vital factor that is ruling the world when you can, why don’t you use the internet as your helper?

 

Growing beyond horizons and expanding your venture in the direction of your dreams requires a lot of tough decisions and a lot of efforts. Entwining yourself amid the selection of the tool to use and investing your energy only on your finances, you might get distracted from your real passion. Your passion is the sole reason for your venture’s existence, and it must be given sufficient value. We, at numberz, understand this and hence have made the process of receiving payments, deciding expenses, and getting pre-approved loans, so smooth that you need to invest only a few clicks to your accounts and finance. Retain your energy for the real you, the real cause that your venture stands for; and we have the accounts issue resolved for you!

Let us know about the problems you are facing at hello@numberz.in

Composition scheme under Goods and Service Tax

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,

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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