Goods and Services Tax (GST) is a unified indirect tax in India that replaced multiple taxes like VAT, excise, and service tax.
It was introduced on July 1st, 2017 across India after more than half a decade of negotiations between the Centre & State regarding loss of revenue and compensation.
GST introduction is meant to simplify the taxation process and ensure transparency by taxing value addition at each stage.
Who Should Apply for GST Registration?
- Businesses dealing in goods must register if their annual revenue exceeds ₹ 40 lakhs, while service providers have a threshold of ₹ 20 lakhs (₹10 lakh in special category states)
- E-commerce sellers or aggregators
- Businesses involved in inter-state trade (between different states)
- Entities requiring voluntary registration to claim input tax credit
- Those dealing in taxable goods or services
Who Should Not Apply?
- Businesses with turnover below the threshold limit and operating intra-state (within the state only)
- Agriculturists providing only unprocessed goods (raw harvested crops and vegetables)
- Exempt service providers (e.g. healthcare, education)
Advantages of GST Registration:
- Legitimacy: Enhances credibility among suppliers and customers
- Input Tax Credit: Allows businesses to claim tax paid on purchases
- Market Expansion: Facilitates interstate trade without additional taxes
- Simplified Tax Structure: Eliminates cascading effects of taxes
Downsides of GST Compliance:
- Complex Filing: Requires regular tax filings and adherence to timelines
- Increased Costs: Small businesses may incur expenses for hiring tax professionals
- Penalty Risk: Non-compliance can lead to heavy penalties
For new entrepreneurs, registering under GST ensures better compliance and operational ease in the long run, despite the initial learning curve and compliance requirements.
Hope you find this helpful in taking a call linked to whether to apply or not for a GST Number.
You can read other helpful articles:
- Understanding Digital Payments in India
- What is ‘Jan Dhan-Aadhar-Mobile’ (JAM) Approach used in India?
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