The old system of indirect taxes in India was extremely complicated, with the Central and State Governments levying separate taxes on goods and services. To make the system less complicated for all taxpayers and to eliminate the cascading effect of tax, the implementation of a “one taxation” system has been a long-standing discussion.
In 1954, France became the first country to use GST. As of 2022, it has been implemented in 160 countries in the world. India adopted the dual GST model from Canada because of its federal framework, and it came into effect on July 1, 2017.
With this, all enterprises, big or small, need to pay GST. However, MSMEs get an advantage under this regime. Let us see how.
What are MSMEs?
MSME stands for Micro, Small, and Medium Enterprises. In India, MSMEs account for about 8% of GDP, 45% of industrial output, and 40% of exports. It’s hardly an exaggeration to call them the country’s “backbone.”
Various enterprises are classified as MSMEs on the following basis:
- Microenterprises: Entities with an annual turnover of less than Rs. 5 crores.
- Small enterprises: Entities with an annual turnover between Rs. 5 crore and Rs. 75 crore.
- Medium enterprises: Entities with an annual turnover between Rs. 75 crore and Rs. 250 crore.
Constituting a highly active Indian economic sector, MSMEs provide a wide range of products both for domestic and international markets. They have also played a significant role in the expansion and prosperity of the khadi and coir industries.
Their coordination and collaboration with the stakeholders and the relevant ministries and Governments have also helped in the development of rural communities, largely by creating jobs in those regions. In comparison to large industries, they have aided industrialization in rural areas at a minimal capital cost.
Moreover, the MSME sector has made a significant contribution to the country’s socio-economic growth by complementing the larger industries.
With the aptitude and capacity to create relevant indigenous technology, and provide tough competition in domestic and international markets as well as in technology-savvy sectors, MSMEs have aided in the growth of the country. By offering information, training, and skill up-gradation through specialized training institutes, they have also helped the creation of defence materials and the generation of new entrepreneurs.
What is GST?
The Goods and Services Tax (GST) is a national tax on the manufacturing, sale, and consumption of goods and services. All indirect taxes imposed in India, such as service tax, value-added tax (VAT), and central excise duty, have been replaced by the GST.
GST is charged on every transaction that occurs inside India’s jurisdiction and is levied on every supply of goods and services. Being a common tax, GST has transformed India into a single market.
GST has produced a transparent and corruption-free tax administration by reducing supply chain flaws, caused by multi-layered regulations. It is not just business-friendly, but it is also, to a large extent, consumer-friendly. As a result, company owners, entrepreneurs, manufacturers, merchants, and citizens must recognize that GST is unquestionably a necessity of the hour.
A firm with a turnover of more than Rs.40 lakh must register as a regular taxable entity, as per GST guidelines. Businesses in hilly states in North and North-Eastern states can do so with a turnover of Rs.10 lakh. The GST registration procedure may be concluded in as little as six business days.
The process by which the taxpayers get registered under the Goods and Service Tax (GST) Act is known as GST registration. Upon completion of the GST registration, the Goods and Service Tax Identification Number (GSTIN) is issued by the Government to the business. This GSTIN establishes that the business is required to pay the GST whenever liable.
Who is eligible for filing GST?
Businesses fulfilling even one of the following criteria are eligible for the GST Registration:
- With an aggregate turnover of Rs. 10 lakh in the financial year, when the business is located in North-Eastern and Northern hilly States and Rs. 20 lakh otherwise.
- Fulfilling the aggregate turnover criteria along with selling goods and services inter-state.
- Supplying goods through e-commerce platforms irrespective of their aggregate turnover in a financial year.
- Supplying goods seasonally or through temporary shops and stalls, irrespective of their aggregate turnover in a financial year.
- Any business entity can register for GST and may surrender the same anytime without any waiting period.
Different types of GST Registration
Businesses need to be aware of the various categories under which the businesses can be registered for GST. The following are the many forms of GST registrations:
- Normal Taxpayer: Most businesses running in India fall under this category. No advance GST deposit is required for the business registered under the normal taxpayer category. The GST registration under this category is valid for an unlimited time until surrendered.
- Casual Taxpayer: Businesses that are set up seasonally or for a limited time fall under this category. The validity for their GST registration is 3 months and must be renewed after that. Also, they are required to pay advance GST equivalent to their expected GST that will be accrued till the operations of the shop or stall continue.
- Composition Taxpayer: Businesses with a turnover of less than Rs. 1.5 crore can opt for becoming composition taxpayers. They pay taxes at a fixed GST rate and will be able to avoid complex GST compliances.
- Non-Resident Taxpayer: Businesses incorporated internationally but supply goods to Indian residents. They are also required to pay advance GST as expected during the tenure of the GST registration. The tenure for this category is 3 months, which can be extended or renewed on expiry.
Steps for Registering for GST
Steps for GST Registration for a business are as follows:
- Visit the official website of GST: www.gst.gov.in
- Under the taxpayer’s tab, there is a link for registration, click it
- New Registration is to be selected
- Select “taxpayer” under the drop-down menu of “I am”
- District and state selection
- Enter the business name
- Enter the business pan card number
- Enter active email ids and mobile numbers to be registered for the business. Note: A working number and e-mail is required as OTPs would be sent on this number.
- Enter the captcha image
- Click “Proceed”
- Enter OTP that is sent to the registered email id and phone
- After entering click “proceed”
- Note the temporary reference number (TRN)
- Visit the GST website again
- Under the taxpayer’s tab, click on the “Registration” link
- Select “temporary reference number”
- Enter TRN
- Enter the captcha image and then click “proceed”
- Enter OTP that is sent to the registered email id and phone
- After entering click “proceed”
- On the application status page, click on “Edit” on the right side
- Fill in relevant details amongst the 10 sections along with submitting the necessary documents.
- After submitting the documents
- Click on “verification” and check the declaration
- Using any one of the three methods submit the application:
- Using a Digital Signature certificate for submitting the application for companies
- Using the e-sign method by entering the OTP sent to the mobile number linked to the Aadhaar card
- Using the Electronic Verification Code (EVC) which will be sent to the registered number.
- Application is successfully sent once the success message is seen on the screen
- Application Reference Number (ARN) will be sent to the registered mobile number and email id. This ARN can be used to track the application on the GST website.
Documents Required for Registering for GST
The list of documents that will be required for the GST Registration of the business is as follows:
- PAN Card of the business and individual
- Adhaar Card of the individual
- Address proof for the business
- Canceled cheque and Bank Account Statement of the current account of the business
- Business Registration Proof of Incorporation certificate
- Digital Signature
- Owner / Director / Promoter’s Id proof
- Owner / Director / Promoter’s address proof
- Owner / Director / Promoter’s photograph
- Letter of Authorisation or authorization form signed by the authorized signatory
- Taxpayer’s constitution
Documents required for MSMEs:
- MSME registration certificate
- Registration details under the old indirect tax regime
- PAN and Aadhaar details of the owner
- Enterprise’s bank account details
- Enterprise’s business address and a proof of it
Benefits extended to MSMEs under the GST regime
- Exemption/reduced rates for certain goods manufactured specifically by the unorganized MSME sector:
Under the GST regime, rates charged on electric switches, pipelines, plastics, and more have been reduced to 18% from the earlier 28%. Moreover, goods produced in the cottage sector, such as jute, also get the benefit of a lower GST rate of 5% as opposed to the previous 12%. Hooks used by fishermen while fishing also sees a decline in the rate from 12% to 5%.
- Increased turnover limit to opt for the composition scheme under GST:
Businesses with turnover below Rs. 1.5 crore are eligible to apply for the composition scheme under GST. This limit was Rs. 1 crore earlier. Moreover, those MSMEs supplying services can also get the benefits under the composition scheme, provided their turnover is less than Rs. 50 lakh. Opting for the composition scheme makes compliance with the GST norms simpler and more straightforward.
- Special provisions for filing returns:
Return filing has been made easier for MSMEs. As per the provision, enterprises under this category can choose to file their returns on a quarterly basis. They can do so using Form GST–01, within 18 days from the end of a particular quarter. Moreover, MSMEs can seamlessly file a NIL return via a simple one-step procedure.
- No need for a compulsory audit:
MSMEs with an annual turnover of less than Rs. 2 crores also get an exemption from getting an audit done through a CA, which is otherwise compulsory for all businesses.
Why choose KYSS GST Software?
Taxation is the Government’s primary source of revenue. A consolidated all-India Goods and Services Tax has now been imposed to ease the challenges experienced by businesses and to improve business conditions.
Every good and service has been explicitly categorized into one of five tariff slabs and is taxed in the same way across the country. However, businesses having branches in different states have to apply for different GSTINs for every state they operate in.
This process becomes tedious when the finance professionals and CAs employed by businesses start the registration process for various companies. The KYSS GST software provides hassle-free and quick GST registration for your business.
The KYSS GST Software also helps busy business owners as well as financial professionals in seamless GST billing and return filing, thus overcoming the GST challenges. The software also helps in accessing the account from anywhere at any time. You can save your precious time and resources by calculating the tax liability of the taxpayers accurately, making the account reconciliations cost-effective and stress-free, and helping with the auto-matching of invoices and returns.
The GST software automates data validation, easy GST billing, and return filing. Moreover, it allows easy migration from tally and other accounting software without causing loss of data. The software is encrypted which ensures data safety and security. However, most importantly, this software helps in handling multiple companies according to your business requirements.
- Are there any charges for GST Registration?
No, the GST registration is a tedious process, however, there are no charges involved in the GST registration process.
- Can the GST registration number be surrendered?
Yes, the GST Registration number can be surrendered at any time. Earlier, the regular taxpayer had to wait for a year before surrendering the GST but now they can surrender the GST at any time.
- Why should I buy KYSS GST software and not use the Government Website for GST registration?
The Government website is not entirely user-friendly and can make the process cumbersome. On the other hand, the KYSS GST software is easy to understand and extremely user-friendly.
It helps in automatic reconciliation, is user-friendly, and aids in the maintenance of accounts for multiple clients.