What is the GST?
GST, the Goods and Services Tax, is an indirect tax in India. As the name suggests, the tax is levied on the sale of goods as well as services in the country.
GST is known as a comprehensive tax because it has replaced most other indirect taxes like service tax, value added tax (VAT), central excise duty, additional customs duty, surcharges and octroi. Unlike these previous taxes, GST is collected at the point of consumption and not at the point of origin.
GST is imposed at every step in the process of production of a particular good or service. This tax came into force on 1 July 2017. The aim of GST was to simplify the indirect taxation process in India and increase the ease of running a business within the country.
Being an early stage startup founder is probably the toughest job in the world.
Shailendra J Singh | Managing Director, Sequoia Capital (India) Singapore
Being an early stage startup founder is probably the toughest job in the world.– Shailendra J Singh, Managing Director, Sequoia Capital (India) Singapore
GST tax slabs
GST has been dividend into the following slabs – 0%, 5%, 12%, 18% and 28%.Certain products and services like petroleum products, alcoholic drinks and electricity do not come under GST. These products and services are taxed by the individual State Governments, as per their tax policies.
The rules and regulations that form GST are governed by a government body called the GST Council. This council is made up of the finance ministers of the Central as well as different State Governments.
The Council is chaired by the Union Finance Minister and is tasked with revisions, regulations and rates that may apply to the GST law.
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GST HSN and SAC Codes
All businesses that are registered in India have to file GST returns every month, quarter and/or year. The type of returns that need to be filed vary from business to business. A GST return is typically a document that carries details about the income earned by the business.
The return has to be filed with the Income Tax Department. What is important here is that to file GST returns, a business needs to have GST-compliant invoices of their sales and purchases. Such GST-compliant invoices can be generated easily using Razopay Invoices.
There are different types of GST returns that need to be filed either every month or every quarter. For example, GSTR-1 has to be filed every month with the details of outward supplies of goods or services. On the other hand, GSTR-4 is a quarterly return that needs to be filed by a business that is registered under the composition scheme.
- Supply from an unregistered dealer to a registered dealer
- Supply of specific goods listed by CBIC
- Services through an e-commerce company
GST rules for startups
GST offers a wide range of benefits to start-ups. Some of these include the following:
- 01. Simple tax processes: As start-ups have tight budgets and tighter deadlines, they cannot always afford to spare resources to oversee a myriad of tax compliances that fall under VAT, excise, service tax, CST, and so on. With GST in place, most of these taxes are eliminated, making it much easier for them to be on top of filing their taxes and returns. Furthermore, start-ups that deal with services and goods together just need to file a single tax instead of different ones.
- 02. Simple online procedures: Gone are the days when people had to run around tax offices, waiting in lines day in and out only to be told to come back the next day. Now, the procedure occurs online, making it not only simple, but also extremely quick. If you keep all your documents in perfect order, then filing your taxes becomes a task that’s reduced to a few simple clicks.
- 03. Ease of business for ecommerce sites: With ecommerce services being a big sector in India, the implementation of GST has been a huge boon. Let us say you are an online marketplace that delivers goods all over the country. With different VAT laws in different states, you were required to file various tax documents accurately and on time. With GST, this issue is totally eliminated