Central Goods & Service Tax

The CGST rules have been made much simpler! Get the CGST registration done & enjoy all the incentives provided by the Central Government! Stay on the right side of compliance & enjoy absolute peace of mind!

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Central Goods & Service Tax

Central Goods and Service Tax or CGST refers to the tax levied by the central government on the transaction of goods and services. The tax that is collected under the head CGST will be payable to the centre. Hence, CGST is levied on the intrastate supplies of both the services and goods. It is responsible for the central government and will be governed by the CGST Act. The taxes that are levied on the intrastate supplies of goods and services but the percentage of the tax will not exceed 14% each. This section is mentioned in Section 8 of the GST Act.

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Benefits of CGST

Elimination of multiple taxes

Elimination of multiple indirect taxes is one of the benefits of CGST. All taxes that are levied will not be in the line, i.e prevailing taxes like sales tax, turnover tax, service tax, etc, will come under a general tax called GST (Good and Service Tax).

Saves money

CGST helps the common man save more money and reduce the price of goods and services. So, it is expected that the price of fast-moving consumer goods products, cinema tickets, small tickets, electrical products, etc will be reduced.

Ease of business

CGST brings together the tax concept for the whole country, and no separate concept is followed for states. So, this concept has the same format among all other states and is highly beneficial for interstate business.

Best in filing tax and documentation

Central GST is highly beneficial for businessmen. So, tax filing, compliance, and documentation tasks are very easy for business professionals. Additionally, return filing, tax payment, and refund process will be easy and trouble-free.

Reduction of cascading effect

  • GST is applicable for all stages of business from manufacturing to consumption. Further, it provides tax credit benefits at every stage. In GST, you will have tax credit advantage and tax will be handled on margin price only. Therefore, it decreases the cascading effect of tax thereby decreasing the cost of goods.
  • More employment

    It is expected that the demands of products will increase along with supply, as GST will reduce the cost of the product.

    Checklist requirements for CGST Registration

  • All the suppliers who manage their own business across India will need new GST registration.
  • GST registration must be applied for all companies, small startups, industries who make a value over the designated turnover limit in India.
  • They should register under the GST act to support single tax return rules.
  • Accurate Permanent Account Number(PAN).
  • Valid Indian mobile phone number.
  • Valid email address
  • Prescribed documents and data on all necessary fields of the registration application.
  • Place of business.
  • An approved signatory who is the citizen of India with real details, including PAN.
  • At least one proprietor/ director/ trustee/ karta/ member with a corresponding PAN card.
  • Indian Financial System Code (IFSC) number of the same bank and branch.
  • Correct India bank account number.
  • Jurisdiction details.
  • Features of CGST Act

  • CGST levy tax on all intra-state supplies of goods and services.
  • To expand the base of the input tax credit by making them available in taxes paid on the supply of goods or services.
  • It provides self-assessment for taxes that are payable by the registered person.
  • Moreover, it conducts audits for the registered person to verify compliance with the provisions of the Act.
  • The CGST Act recovers various tax arrears by using various modes that includes detaining and sale of goods, immovable and movable property of defaulting taxable persons.
  • The CGST grants the power of inspection and provides sudden changes.
  • Additionally, it makes provision for fines or penalties on the contravention of the proposed legislation.
  • Further, it provides the benefits of reduced tax incidence on goods and services or both the consumers.
  • It gives a detailed description of transitional provisions of the taxpayers to the goods and services tax regime.
  • Taxonomy of CGST Law

  • The CGST Act has 174 sections in 21 chapters and three schedules on supplies that are without consideration, and the treatment of activities as goods and services.
  • The Schedules are as follows
    • a. Schedule I: Activities to be carried out even if it is made without consideration
    • b. Schedule II: Activities to be considered as supply of goods or supply of services
    • c. Schedule III: Activities or transactions that are mentioned neither as the supply of goods nor services.
  • What is the CGST Act or the Central GST Act

    The Central Goods and Services Act was enacted for tax collection on the intra-state supply of goods and services. Hence, it is governed by the central government. The central GST Act is applicable all over India including the states of Jammu and Kashmir.

    The CGST Act can only start from a date that will be notified by the central government in the official gazette, which is from the fixed date. It is noted that different provisions apply to different states that are to be notified.

    The objective of the Central GST Act

    Under former taxation laws, the central government levied taxes on the manufacture of goods in the form of central excise duty, interstate sale of goods in the form of central sales tax, and certain services that provide in the form of service tax.

    Likewise, the state government levy tax on retail in the form of value-added tax, purchase tax, luxury tax, and entry of goods in the state. Moreover, there are multiple types of taxes that are levied on the same supply chain.

    CGST Rules

    Under GST management, taxes are levied on all-time sales. For intrastate deals, both central Goods and Service and state Goods and services will be levied. Inter-state sales are liable to integrated GST. There are many sections and scheduled rules and regulations of CGST. The common rules to be maintained in CGST are as follows:

  • If you are under GST registration, issue a tax invoice to all taxable goods and services.
  • Likewise, if the registration is under composition scheme, issue a bill of supply.
  • Ensure that you make a note of all the invoices in sequential order.
  • Additionally, make sure that your GST invoices have your name, address, GSTIN, and supply place.
  • The rule states that it has identical state purchases. That is, CGST and SGST are equally filed. For instance, the GST rate is 18%, then Central GST is 9% and the State GST is 9%.
  • Furthermore, for any sale that is out of state business, IGST has to be charged.
  • Keep records of every document you get and create. And, make sure that the details are correct.
  • Do not buy any products from the unregistered dealers.
  • Ensure that you are filing GST correctly for the same and different states.
  • Do not forget to add a unique serial number for each and every invoice.
  • A tax invoice should be issued on the sale of chargeable goods and services. In case your invoice is already given, do not cancel them. Instead, just issue a credit note.
  • It would be much better if you take a tax invoice on all purchases of goods. The products must not be shipped without the original invoice.
  • Ensure that your documents have GSTIN and the client’s GSTIN is applicable.
  • Therefore, submit all your invoices and GST reports on time to get rid of any penalties.
  • What are the steps involved in GST registration through Vakilsearch?

  • Step 1: We help you get a secure GST Identification Number.
  • Step 2: We make it easy for you to get your GST from the comfort of your own home.
  • Step 3: We will file your returns and complete all other compliances as and when required.
  • Documents Required for CGST registration

    Major documents required for CGST are PAN card, business registration proof, Identification cards, passport size photos, address proof of the individual, business address proof, and bank account records. Your bank statement can be used for verification. Further, verification includes a cancelled cheque or an extract from your passbook. Additionally, through address verification, electricity bill, rent agreement, purchase documents, property tax statement, etc can be verified.

    For People and Sole Proprietors

  • Owner’s PAN card
  • Owner’s Aadhaar card
  • Owner’s photograph
  • Proof of address
  • Bank account detail
  • For Partnerships and LLPs

  • Partnership deed
  • PAN cards of partners involved
  • Photographs of partners involved
  • Address proof of partners involved
  • Aadhaar card of any authorized signatory
  • Signatory’s proof of appointment
  • LLP proof of registration
  • Bank details
  • Business’ principal address proof
  • For HUFs (Hindu Undivided Families)

  • HUF’s PAN card
  • (Patriarch of the family) PAN card
  • Photos of owners
  • Account details of the bank
  • Address proof of the business
  • For Company

  • PAN Card of the company
  • Business certificate of the Ministry of Corporate Affairs
  • Record/ Reports of Association
  • Appointment record of the signatory
  • PAN Card of the signatory
  • Aadhaar card
  • PAN card of all executives
  • Residence proof of all executives
  • Account details of the bank
  • Address proof of the business
  • Society or Club

  • Club or society’s registration certificate copy.
  • PAN card copy of the club or society with that of affiliated associates or promoters.
  • Photograph of co-workers or promoters.
  • Bank account copy - record/crossed cheque/passbook’s first page.
  • Confirmation of certified office’s location, that can include utility bills, certificates of legal ownership/municipal khata model for bases owned by the organization or society.
  • Permission letter approved by approved signatory/signatories.
  • History of CGST

    Central GST is one of the 3 classifications under the Goods and Service Tax such as IGST, CGST, and SGST. It adheres to the concept of one tax one nation. CGST comes under Central Goods and Service Tax Act 2016.

    For a detailed understanding, when CGST was introduced, the current central taxes of central excise duty, Central Sales Tax (CST), service tax, further excise duties, additional customs duties, specific additional duty of customs of new additional payment will be discarded.

    CGST charges on the movement of goods and services of standard products and services can be improved from time to time by a separate body. The revenue collected supporting CGST is for the Centre. However, input tax credit on CGST is for states, and such input tax could be appropriated only against the payment of Central GST.

    FAQs on Central Goods & Service Tax

    What is an appropriate example of CGST?

    A dealer from one state is selling goods to another state worth Rs. 10000. The GST rate is 18% that includes a CGST (Central Goods and Service Tax) rate of 9% and an SGST (State Goods and Service Tax) rate of 9%. 9% of 10000 is 900.

    How are CGST and SGST calculated?

    GST calculation is done simply by multiplying the taxable amount by the GST rate. The CGST and SGST are calculated by both the amounts being half of the total GST amount.

    What are the taxes and rules levied on an intrastate supply?

    According to Section 9 of the CGST Act, 2017, intrastate state stocks or supplies are responsible for CGST. In terms of Section 7 of the UTGST Act, 2017, intrastate supplies moved by a taxable individual or person who is located in Union Territory will be taxable to the UTGST. In the case of intrastate supply, CGST, SGST, or CGST and UTGST will be applied respectively.

    What is aggregate turnover for CGST?

    According to Section 2(6) of the CGST Act, 2017, aggregate turnover is the aggregate value of all taxable supplies, exempt or cut off supplies. This is for the exports of goods and services and supplies within the state. Here, they must have the same Permanent Account Number, to be calculated on an all India basis. But, central tax, state tax, state tax, union territory tax, and integrated tax will not be taken into account.

    What is the relationship between the recipient and the supplier, for CGST?

    The relationship is determined based on the explanation of Section 15 of the CGST Act, 2017 that implies the term “related persons”.

    The following persons or individuals are considered as “related persons” GST

    • Such persons will be officer or directors of one another’s businesses
    • If they are legally known partners in business
    • The persons are employer or employee
    • Any person directly or indirectly owns, controls or holds 25 % or more of the prominent voting supply or shares of both of them
    • One person directly or indirectly controls the other one
    • Both of them are directly or indirectly controlled by any other third person
    • They are a part of the same family.

    Furthermore, people who are linked with the work of one other where one person is the sole agent or sole distributor of the other. Hence, they can be deemed to be related.

    What are the basic accounts required to be maintained by a person at the principal place of business?

    According to Section 35 of the CGST Act, 2017 with the CGST Rules, the following accounts are needed to be maintained on a true and accurate basis:

    • Manufacture of goods
    • Inside and outside supply of goods or services of both
    • Supply of goods
    • To assist input tax credit
    • Paid and payable output tax
    • Some other details as may be required

    Is there any specific set of records to be maintained by the provider of works contract service?

    Yes, as per the CGST Rules, the registered person providing works contract service can maintain the accounts showing-

    • The names and addresses of the persons
    • Description, quality, and quantity of the goods or services received for the execution of works contract
    • Likewise, description, quality, and quantity wherever applies to goods or services who got and utilized in the execution of each works contract
    • Payment received details concerning each work
    • The addresses and names of the suppliers from whom he/she got the goods or services

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