GST: The Hype, Rules and Benefits of GST Returns in India

The historic moment of July 1, 2017, saw the controversial launch of the goods and services tax or GST. Slightly above 24 months, since the launch, GST has been tagged as the biggest tax reform since independence. It does follow a 'one nation one tax' approach but has been created a wave of rebellion amongst the business class.

But all is not wrong and controversial with GST, and to clarify this new adoption by the Government, here's our verdict:

What is GST Registration?

According to the GST regime, any business/company that is having an annual turnover of more than 40 lakhs is required to register as a taxable individual. It should be noted that for a few businesses, GST registration is mandatory and if GST policies go ignored, then the business is liable to suffer heavy penalties. According to the new policy, detailed by CBIC, the new threshold turnover is increased from 20 Lakhs to 40 Lakhs which has come under effect from April 1, 2019.

Who should register for GST?

1. Individuals that are registered under the Pre-GST law i.e. Excise, Service Tax, VAT, etc.
2. Agents of input and service distributor
3. E-commerce aggregators
4. Individuals that are responsible for paying tax under the reverse charge mechanism.
5. Companies responsible for distributing services/products overseas
6.  Non-resident taxable individual/Casual taxable individual

GST Registration Fees:

GST registration is an 11-steps long and tiring process that involves the submission of business details and other scanned documents (listed below).

Documents required for initiating submission of GST

1. Applicant's PAN card.
2. Applicant's Aadhar Card
3. Copy of business registration proof/business incorporation proof.
4. Address and Identity proof of Directors/Promoters with self-attested photographs.
5. Canceled Cheque and Bank Account Statement
6. Digital Signature
7. Board resolution for Authorized signatory/Authorization Letter

Advantages of GST Registration:

1. GST essentially diminishes the overall cascading effect of tax
2. Composition scheme derived especially for small businesses
3. Higher threshold for registration
4. The easy and simple online procedure
5. Less number of compliances
6. Definitive policies for E-commerce operators
7. Improvised efficiency of logistics

Additional Benefits of GST according to business type:

Normal Registered businesses:

1. Applicable for taking an input tax credit
2. Ability to make interstate sales without any restrictions

Composition dealers:

1. Less tax liability
2. Limited compliance
3. Higher working capital

Composition Scheme that comes under GST and when is it necessary to opt for it?

Businesses that have an annual turnover of 1.5 Crores and 75 lakhs for North-Eastern states can readily apply for the GST scheme. CBIC has increased the limit from 1 crore to 1.5 crores around February this year, and the rules have been applicable since April 1, 2019.

Composition dealers are required to pay nominal taxes i.e. based on the category of business that is defined under the law. Few details listed below:

1. Dealers that come under the composition scheme are required to file only one quarterly return. This is a relief as other taxable individuals/businesses submit monthly returns according to CBIC.
2. Composition dealers cannot issue any taxable invoices i.e. the collection of taxes from customers.
3. It should be noted that composition dealers/businesses coming under composition scheme will not be able to claim any input tax credit.

Please note that the composition scheme is not applicable to:

1. Inter-state sellers
2. Service providers
3. E-commerce aggregators
4. Non-taxable goods suppliers
5. Notified Goods manufacturers

Penalty for not registering under GST:

Anyone that has not registered under the GST will be liable to pay a penalty of 10% of the tax amount. In case the offender has deliberately delayed the payments, then he/she will have to pay 100% of the calculated tax amount. 

Disadvantages of GST:

1. Enhanced costs due to mandatory purchase of software
2. GST liability creates a sharp increase in operational costs
3. SMEs have to beat a higher tax burden
4. Due to the increase in GST, the retail cost of garments and costs have increased.
5. The aviation industry is the most to suffer. Service tax on airfares will increase which has earlier been only 4-9%.
6. According to the economist, GST in India has impacted negatively on the real-estate market and hence will reduce the requirement by a notable 12%.

Items that have become expensive due to GST:

1. Mobile bills
2. Premium Life insurance renewals
3. Investment and banking management services
4. WIFI and DTH services
5. School fees
6. online ticket bookings
7. Residential rent
8. Health care
9. Courier services
10. Metro charges
11. Aerated  drinks
12. Tobacco products and cigarettes

The Bottom Line: GST has indeed created a big dent in the economic setup of India and has greatly affected the financial setup followed by various businesses since generations. But on the brighter side, as many trade experts claim, that GST is a renewal of India's current standing in the world economic forum.