Top 5 things every entrepreneur should know about GST

Last Updated at: January 03, 2020
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Top 5 mandatory things every entrepreneur should know about GST

GST Registration

GST Registration is mandatory if the business turnover in an FY exceeds Rs.40 lakh (in case of the supply of goods) and Rs.20 lakhs (in case of the supply of services). 

Once a company registers for GST, the entity will be allotted a 15 digit unique number called GSTIN. GSTIN has replaced the TIN (Tax Identification Number) which was allotted to all service and goods provider registered under VAT.  In GSTIN, the first two digits range from 01-35 indicating state codes, the next 10 digits are PAN number of the entity, 13th digit indicates the count of other GST registered entities with the same PAN, the 14th digit indicates the default letter Z as specified by the Government. The 15th digit is a random number for check code.

Also, a business entity can opt for voluntary registration of GST. However, once opted the GST should be compulsorily charged unless exempted.

Rate of tax for goods or service (HSN code or SAC code)

Once the entity is GST registered, the next step is to identify the rate of tax which needs to be charged on the goods or services which are to be supplied. You can do this by visiting the GST website.

The tax rate on goods is mentioned along with its HSN Code, where HSN (Harmonious System of Nomenclature) is a code given to that particular good or class of goods.

Similarly, for services, the tax rate is mentioned along with its SCN code. For an accurate levy of GST rates, correct HSN or SAC Code (Service Accounting Code) is necessary during Return filing.

Register for GST Now

Charging GST on every invoice – CGST, SGST, IGST

Once GST registered, the GST should be charged on the invoice issued along with the GST Number. The GST number has to be mandatorily mentioned by every taxable person providing the taxable services.

In case of supply within the state (aka Intra-state supplies) the supplier has to charge CGST & SGST/UTGST, and in case of supplies outside the states (Inter-Sate Supplies) on the respective invoice.

Providing GSTN number for every purchase to claim ITC

In order to claim the Input tax credit for the purchase made or for the services paid, the entity has to mandatorily provide its GST number to the vendor.

Payment of GST and filing returns

The last step is to pay the tax and file the returns on the GST portal. All taxpayers shall file returns monthly and pay taxes monthly. However, in case of small taxpayers (turnover of up to Rs. 5 crores) can file the returns quarterly however the tax payment has to be made monthly. 

Under the New Return System, there will be one main return GST RET-1 and 2 annexures GST ANX-1 and GST ANX-2. 

Top 5 things every entrepreneur should know about GST

613

GST Registration

GST Registration is mandatory if the business turnover in an FY exceeds Rs.40 lakh (in case of the supply of goods) and Rs.20 lakhs (in case of the supply of services). 

Once a company registers for GST, the entity will be allotted a 15 digit unique number called GSTIN. GSTIN has replaced the TIN (Tax Identification Number) which was allotted to all service and goods provider registered under VAT.  In GSTIN, the first two digits range from 01-35 indicating state codes, the next 10 digits are PAN number of the entity, 13th digit indicates the count of other GST registered entities with the same PAN, the 14th digit indicates the default letter Z as specified by the Government. The 15th digit is a random number for check code.

Also, a business entity can opt for voluntary registration of GST. However, once opted the GST should be compulsorily charged unless exempted.

Rate of tax for goods or service (HSN code or SAC code)

Once the entity is GST registered, the next step is to identify the rate of tax which needs to be charged on the goods or services which are to be supplied. You can do this by visiting the GST website.

The tax rate on goods is mentioned along with its HSN Code, where HSN (Harmonious System of Nomenclature) is a code given to that particular good or class of goods.

Similarly, for services, the tax rate is mentioned along with its SCN code. For an accurate levy of GST rates, correct HSN or SAC Code (Service Accounting Code) is necessary during Return filing.

Register for GST Now

Charging GST on every invoice – CGST, SGST, IGST

Once GST registered, the GST should be charged on the invoice issued along with the GST Number. The GST number has to be mandatorily mentioned by every taxable person providing the taxable services.

In case of supply within the state (aka Intra-state supplies) the supplier has to charge CGST & SGST/UTGST, and in case of supplies outside the states (Inter-Sate Supplies) on the respective invoice.

Providing GSTN number for every purchase to claim ITC

In order to claim the Input tax credit for the purchase made or for the services paid, the entity has to mandatorily provide its GST number to the vendor.

Payment of GST and filing returns

The last step is to pay the tax and file the returns on the GST portal. All taxpayers shall file returns monthly and pay taxes monthly. However, in case of small taxpayers (turnover of up to Rs. 5 crores) can file the returns quarterly however the tax payment has to be made monthly. 

Under the New Return System, there will be one main return GST RET-1 and 2 annexures GST ANX-1 and GST ANX-2. 

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.