Goods and Services Tax (GST)
Before implementing GST (Goods and Services Tax) in the country, the government taxed all product vendors and service providers under VAT (Value Added Tax) at each point of sale of the product. Additionally, sellers of goods were issued a unique TIN (Taxpayer Identification Number) number by the tax authorities in the state, and service providers were issued a service tax registration number by the customs board (CBIC).
Goods and Services Tax Identification Number (GSTIN)
On the passing of the Goods and Service Tax Act in Parliament in the year 2017, all registered taxpayers were only compliant to a single form of the tax authorised by a single governing body. This regime made it easier to consolidate and manage all the various sales structures within the country. Every business or organisation operating inside the state under this regime is assigned a unique number called the GST number or GSTIN (Goods and Services Tax Identification Number).
The GST number is obtained when the governing body approves the GST registration of an organization. It is provided in the registration certificate under REG-06. The certificate acts as a record of the company’s registration under the GST Act, while the unique GSTIN serves as the proof.
GSTIN Structure
The format of a GSTIN is structured in a state-wise fashion. It is comprised of a 15 digit, alpha-numeric key:
- The first two characters are used to designate the state code or UT (state abbreviation) code. The following ten characters are directly derived from the registrar’s Personal Account (PAN) Number.
- The following two characters represent the entity code. The 13th character represents the particular union or territory, while the 14th character is “Z” by default.
- The final (15th) character is a checksum; it may be an alphabet from A to Z or a number from 0 to 9.
Advantages of GST
Having wholly reformed how tax is levied in the country, GST has various merits. Some of the advantages of GST are as follows:
- GST removes numerous taxes(i.e. tax on tax) – It serves as a singular platform for the cumulative of all types of value-added tax levied onto a product or service.
- It allows for a higher registration threshold – Businesses with revenues over Rs. 20 lakhs need to register under GST but, businesses in Special category states need to register from 10 lakhs. Any organisations with a turnover less than Rs. 20 lakhs are exempt from the tax under GST.
Update: The government has updated the threshold for normal category states to Rs. 40 lakhs and Rs. 20 lakhs for the Special Category states to businesses supplying goods.
- Benefits small businesses – Tax under GST allows for decreased taxes for small businesses by utilising the composition scheme. This has increased full payment compliance and reduced the financial burden on smaller establishments.
- Easy to register– The procedure to register for GST and filing returns is a simple process using the GST portal.
- Single return– Unlike the numerous filings under VAT, GST only requires a consolidated return to be filed accounting for the entire payment.
- Unique treatment for E-businesses – Provisions for online business under GST are separate and easy to understand.
- Better logistics– Inter-state movement of goods and services have been made easy under GST.
- Better organisation – The overall prime of taxation is simpler to follow and regulate under GST.