Understanding GST can be difficult, especially given its frequent revisions, numerous compliance standards, and impact on businesses of all sizes. Whether you’re a startup owner, an experienced entrepreneur, or an individual attempting to understand taxation, having the appropriate knowledge is critical. In this blog, Team Taxperts, the best financial advisor in Kerala, explains all you need to know about Goods and Services Tax (GST), from the fundamentals and registration to filing, benefits, and common mistakes to avoid. With clear insights and practical advice, this guide will help you stay compliant and make better financial decisions.
What is GST
GST (Goods and Services Tax) is a unified indirect tax levied on the supply of goods and services in India. It replaced various indirect taxes such as VAT, service tax, excise duty, and others, bringing them under one common tax system.
GST is intended to make taxation simpler, more transparent, and more efficient by removing the cascading impact of taxes. GST imposes tax at every stage of the supply chain, although firms can claim Input Tax Credit (ITC) for tax already paid on purchases.
When Was GST Implemented in India
GST was implemented in India on 1st July 2017. On this date, the Goods and Services Tax came into force, replacing several indirect taxes like as VAT, service tax, excise duty, and others, and establishing a unified tax system across the country under the notion of “One Nation, One Tax.”
How Many Types of GST
In India, there are four main types of GST:
- CGST (Central Goods and Services Tax): Collected by the Central Government on intra-state supplies of goods and services.
- SGST (State Goods and Services Tax): Collected by the State Government on intra-state supplies of goods and services.
- IGST (Integrated Goods and Services Tax): Collected by the Central Government on inter-state supplies and imports.
- UTGST (Union Territory Goods and Services Tax): Collected on intra-UT supplies in Union Territories without a legislature.
When combined, these types guarantee efficient tax collection and revenue distribution among the Union Territories, States, and the Center.
How GST Works
GST operates on a value-added tax system, meaning that although taxes are levied at every point of the supply chain, the final consumer bears the majority of the tax burden. Here’s how it works simply:
- Tax at Every Stage: GST is levied whenever value is added—right from the manufacturer to the wholesaler, retailer, and finally the consumer.
- Input Tax Credit (ITC): Businesses can claim credit for the GST they have already paid on purchases. This means they pay tax only on the value they add, not on the entire transaction amount.
- Single Tax Structure: Instead of multiple indirect taxes, GST combines them into one system, reducing complexity and duplication.
- Intra-state and Inter-state Supply
- For sales within the same state, CGST and SGST are charged.
- For sales between different states, IGST is charged.
- Final Consumer Bears the Tax: While businesses collect and deposit GST with the government, the final cost of GST is borne by the end consumer.
All things considered, GST guarantees transparency, prevents the cascading effect of taxes, and streamlines the tax system throughout India.
What is GST Number
A GST Number, also referred to as GSTIN (Goods and Services Tax Identification Number), is a distinctive 15-digit identification number provided to each organization or individual registered under GST in India.
Structure of a GST Number
- First 2 digits: State code (as per Indian Census)
- Next 10 digits: PAN of the taxpayer
- 13th digit: Entity number (based on registrations under the same PAN)
- 14th digit: Default alphabet “Z”
- 15th digit: Check code (for error detection)
Why a GST Number Is Important
- It allows businesses to collect and remit GST legally
- Mandatory for filing GST returns
- Required to claim Input Tax Credit (ITC)
- Helps in tracking transactions and ensuring compliance
How to Apply for GST Number
Obtaining a GST Number (GSTIN) in India is a simple online process. Here is an in-depth guide to help you comprehend how it operates:
- Check Eligibility: Before applying, ensure your business meets GST registration requirements based on turnover, type of business, or mandatory registration criteria.
- Visit the GST Portal: Go to the official GST portal and select the option for New Registration.
- Fill Part A of the Application
Enter basic details such as:
- Legal name of the business
- PAN
- Email ID and mobile number
- An OTP will be sent for verification.
- Fill Part B of the Application
After OTP verification, you will receive a Temporary Reference Number (TRN). Use this to complete the form by providing:
- Business address
- Nature of business activities
- Bank account details
- Details of promoters/partners/directors
- Upload required documents (PAN, address proof, photographs, bank proof)
- Submit Application with Digital Verification: Verify the application using DSC (Digital Signature Certificate), EVC, or Aadhaar authentication, and submit it.
- GSTIN Allotment: Once the application is verified and approved by the GST department, your GST Number (GSTIN) will be issued, usually within a few working days.
GST registration is simple, but mistakes or missing information might cause delays or rejections. Consulting a skilled tax consultant in Kerala can assist in ensuring accurate filing, proper documentation, and seamless approval—especially for new and developing enterprises.
How to Calculate GST
Calculating GST is simple once you know the GST rate and whether the amount is exclusive or inclusive of GST.
GST Calculation on an Amount (Exclusive of GST)
Formula:
- GST Amount = (Original Price × GST Rate) ÷ 100
- Total Price = Original Price + GST Amount
Example:
- Original Price = ₹1,000
- GST Rate = 18%
GST = (1,000 × 18) ÷ 100 = ₹180
Total Price = ₹1,180
GST Calculation on an Amount (Inclusive of GST)
Formula:
- GST Amount = [Original Price × GST Rate] ÷ (100 + GST Rate)
- Original Price = Total Price − GST Amount
Example:
- Total Price (inclusive of GST) = ₹1,180
- GST Rate = 18%
GST = (1,180 × 18) ÷ 118 = ₹180
Original Price = ₹1,000
Common GST Rates in India
- 5%: Essential goods and services
- 12%: Standard goods and services
- 18%: Most goods and services
- 28%: Luxury and sin goods
How to File GST Return
All GST-registered firms in India are required to file GST returns. Sales, purchases, taxes collected, and taxes paid to the government must all be reported. Here is a simple step-by-step instruction to assist you in comprehending the procedure:
- Log in to the GST Portal: Visit the official GST portal and log in using your GSTIN, username, and password.
- Select the Relevant Return Form: Choose the applicable GST return based on your business type, such as GSTR-1 (outward supplies), GSTR-3B (summary return), or others as applicable.
- Enter Sales and Purchase Details: Upload invoice-wise details of sales and purchases. Ensure the data matches your records to avoid discrepancies.
- Claim Input Tax Credit (ITC): Verify the eligible ITC reflected in your account and claim it against your tax liability.
- Compute Tax Liability: The system will automatically calculate CGST, SGST, or IGST payable after adjusting ITC.
- Pay GST Due: If there is any tax payable, generate a challan and make the payment online through net banking, UPI, or other approved methods.
- File the Return: Submit the return using DSC or EVC and download the acknowledgment for future reference.
Accurate accounting is the backbone of smooth GST filing. Opting for professional accounting and bookkeeping services in India helps maintain correct records, avoid errors, meet deadlines, and stay fully GST-compliant.
What is Composition Scheme in GST
The Composition scheme is a streamlined GST program intended for small enterprises with a turnover below a particular threshold. It enables them to pay tax at a fixed rate of turnover rather than the standard GST rates, minimizing compliance and paperwork.
Eligibility:
- Businesses with an annual turnover of up to ₹1.5 crore (₹75 lakh for some special category states).
- Cannot be applicable for service providers earning more than ₹50 lakh (with some exceptions).
Tax Rates:
- Manufacturers: 1% of turnover
- Traders: 1% of turnover
- Restaurants (non-AC, no alcohol): 5% of turnover
(Rates are subject to change as per GST amendments.)
Simplified Compliance:
- File quarterly returns instead of monthly.
- No need to maintain detailed records like regular GST.
Restrictions:
- Cannot collect GST from customers separately.
- Cannot claim Input Tax Credit (ITC) on purchases.
What is CESS in GST
CESS under GST is an additional tax applied on specific goods and services in addition to the appropriate GST rate. Its main purpose is to pay states for any revenue losses brought on by the introduction of the GST.
Key Points About CESS:
- Purpose: To compensate states for any shortfall in revenue due to the transition from previous taxes to GST.
- Applicability: Mainly applied to luxury items, sin goods, or demerit goods, such as tobacco products, aerated drinks, or luxury cars.
- Collection:
- Collected by the Central Government along with GST.
- Businesses must pay CESS in addition to CGST, SGST, or IGST on applicable goods.
- Usage: The collected CESS is deposited into the GST Compensation Fund and distributed to states to ensure they do not face revenue loss.
What is ITC in GST
ITC (Input Tax Credit) is a significant component of GST that allows businesses to lower their tax burden by claiming credit for GST paid on previous transactions. Essentially, it ensures that tax is paid only on the value contributed at each stage of the supply chain, thereby avoiding the tax cascade effect.
How to Cancel GST Registration
A company may have to cancel its GST registration under some circumstances. This could be due to a closure, a change in business structure, or a turnover that falls below the necessary GST registration threshold. Here’s a step-by-step guide:
Eligibility for Cancellation
You can apply for cancellation if:
- The business has ceased operations
- There is a change in the business constitution
- The taxable turnover falls below the threshold
- The business has moved to a composition scheme
- Log in to the GST Portal: Visit the official GST portal and log in using your GSTIN, username, and password.
- Apply for Cancellation: Go to Services → Registration → Application for Cancellation of Registration.
Select the reason for cancellation and fill in the required details.
Submit Required Documents
Attach supporting documents such as:
- Proof of business closure (if applicable)
- Details of assets and liabilities
- Copies of invoices for pending transactions
- Verification and Approval: The application is submitted to the GST officer for verification. Once verified, the GST registration will be cancelled, and a confirmation will be sent.
Important Note
- All pending GST returns must be filed before cancellation.
- Any outstanding tax liability must be cleared.
GST cancellation may require a number of compliance procedures and the right paperwork. Consulting a skilled tax consultant in Kochi guarantees that your GST registration is completed accurately, that fines are avoided, and that the process runs smoothly.
What Documents are Required for GST Registration
To register for GST in India, companies must provide various required documents to validate their identity, address, and business details. This is a comprehensive list:
- Proof of Identity (PAN Card): PAN of the business for proprietorship, partnership, company, or LLP.
- Proof of Address
Business address proof, such as:
- Electricity bill, water bill, or property tax receipt
- Rent agreement (if premises are rented)
- NOC from the property owner (if rented)
- Bank Account Proof
- Cancelled cheque or bank statement of the business
- The bank account should be in the name of the business or proprietor
- Photographs: Recent passport-sized photograph of the proprietor, partners, or directors
- Business Constitution Proof
- Proprietorship: PAN card of the proprietor
- Partnership: Partnership deed and PAN card of partners
- Company/LLP: Certificate of incorporation, Memorandum of Association (MOA), and Articles of Association (AOA)
- Digital Signature (for companies and LLPs): Class 2 or Class 3 DSC of authorized signatory for verification
- Additional Documents (if applicable)
- Authorization letter for the authorized signatory
- Import Export Code (IEC) for businesses involved in imports/exports
Final Thoughts
Understanding GST is critical for businesses and people to remain compliant, optimise taxes, and prevent excessive fines. Knowing the many forms of GST, how it works, claiming Input Tax Credit (ITC), submitting returns, and investigating programs like Composition all make tax management much easier.
Navigating GST requirements can be difficult, particularly for small firms and startups. To guarantee precision and make smart financial decisions, it’s wise to hire a financial advisor in India. With expert advice, you can optimize advantages, maintain compliance, and confidently concentrate on expanding your company.
FAQs
What is GST Council?
The GST Council is a constitutional body in India that makes decisions about Goods and Services Tax (GST) rates, rules, and regulations. It comprises the Union Finance Minister and finance ministers of all states and Union Territories, guaranteeing an integrated approach to GST implementation across the country.
How to Get GST Number for Business?
- Check Eligibility
- Visit the GST Portal
- Submit Part A
- Submit Part B
- Verification and Approval
How to Get GST Number for Individual?
- Check Eligibility
- Visit the GST Portal
- Fill Part A
- Fill Part B
- Verification and Approval
Is GST Applicable on Rent of Residential Property?
GST on renting residential property depends on how the property is used:
- For Personal Residence: Renting a house or apartment for someone to live in does not attract GST.
- For Business Use: If the property is used for commercial purposes, like an office, clinic, or service apartment, GST at 18% applies.
- Short-Term or Hospitality Rentals: Renting for less than 12 months or like a hotel may also attract GST.
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