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GST Registration Overview

Launched on July 1 2017, the Goods & Services Tax (GST) applies to all Indian service providers, traders and manufacturers. A variety of Central taxes like Service Tax, Excise Duty, CST and state taxes like Entertainment Tax, Luxury Tax, Octroi, VAT are absorbed in one tax – GST, implemented on 01.07.2017. GST is to be charged at every step of the supply chain, with full set-off benefits available. The procedure for GST is entirely online and requires no manual intervention.
 
Every product goes through multiple stages along the supply chain, which includes the purchasing of raw materials, manufacturing, sale to the wholesaler, selling to the retailer and then the final sale to the consumer. Interestingly,  GST will be levied on all of these 3 stages. Let’s say if a product is produced in West Bengal but is being consumed in Uttar Pradesh, the entire revenue will go to Uttar Pradesh.
 
Also, taxpayers with a turnover of less than Rs.1.5 crore can choose composition scheme to get rid of tedious GST formalities and pay GST at a fixed rate of turnover.

What are the components of GST?

GST have 3 tax components, which includes a central component (Central Goods and Services Tax or CGST) and a state component (State Goods and Services Tax or SGST) where centre and state will levy GST on all entities, i.e. when a transaction happens within a state. Inter-state transactions will attract the Integrated Goods and Services Tax (IGST), to be levied by the centre, i.e. when a transaction happens one state to another.

What is the input tax credit?

Input tax credit lets you reduce your tax you have already paid on inputs and pay the remaining amount at the time of paying tax.
You pay taxes on the purchase when a product is purchased from a registered seller, and when you sell the product, you too collect the tax. With input credit, you can adjust  the taxes paid at the time of purchase with the amount of tax on sales (output tax) and pay the balance liability of tax, i.e. tax on sale minus tax on the purchase.

GST Applicability

For sale of goods:
 
 Aggregate Turnover
 Registration Requirement
 Exceeds Rs. 40 Lakh
 Yes, for normal Category States
 Exceeds Rs. 20 Lakh
 Yes, for Special Category States *
 
For sale of services:
 
 Aggregate Turnover
 Registration Requirement
 Exceeds Rs. 20 Lakh
 Yes, for normal Category States
 Exceeds Rs. 10 Lakh
 Yes, for Special Category States*
 
* Special Category Sates: Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand.
* Aggregate Turnover: Total turnover calculated at a PAN level in a financial year that includes taxable sale value, Exempted supplies, sales under reverse charge mechanism, Exports of goods & services and Interstate supplies by its sister concern under same PAN. It does not include tax part.

What are the GST tax rates?

1. Items that are considered basic necessities come under exempt list i.e. they are not taxed.
2. Household necessities and life-saving drugs etc. are taxed at 5%.
3. Products like computers and processed food are taxed at 12%.
4. Hair oil, toothpaste and soaps, capital goods, industrial intermediaries and services are taxed at 18%.
5. Luxury items are taxed at 28%.
 
You can see the tax rates for all the products here: https://cbec-gst.gov.in/gst-goods-services-rates.html

GST Return

A GST Return is a document containing details of income that is required to be filed as per the law with the tax authorities. Under the GST law, a taxpayer has to submit two returns on a monthly basis and one such return annually. All returns have to be filed online. Please note that there is no provision for revising the returns. All invoices for the previous tax period that went unreported must be included in the current month.
 
Under GST, a registered dealer has to file GST returns that include: Purchases, Sales, Output, GST (On sales) and Input tax credit (GST paid on purchases).

Mandatory documents for Online GST registration

The list of documents required for registration of GST for various business are as follows:
 
Proprietorship
 
✓  PAN Card and address proof of proprietor
 
LLP
 
✓   PAN Card of LLP
✓  LLP Agreement
✓  Partners’ names and address proof
 
Private Limited Company
 
✓  Certificate of Incorporation
✓  PAN Card of Company
✓  Articles of Association, AOA
✓  Memorandum of Association, MOA
✓  Resolution signed by board members
✓  Identity and address proof of directors
✓  Digital Signature
 
The following can be shown as proof of address of a director:-
 
✓  Passport
✓  Voter Identity Card
✓  Aadhar Card
✓  Ration Card
✓  Telephone or Electricity Bill
✓  Driving License
✓  Bank Account Statement
 
One can use a PAN Card, Aadhar Card as identity proof. For address proof, any of the director’s can show their voters ID, passport, telephone bill, electricity bill and telephone bill.

GST Return Filing

A GST Return Filing is a return document that contains details of the income of the taxpayer. It has to be filed with the GST administrative authority. The document is used tax authorities to calculate the tax liability of a GST taxpayer. A GST Return Filing form has to include the following details.
 
1. Output GST (On sales)
2. Sales
3. Input tax credit (GST paid on purchases)
4. Purchases
 
For filing a GST Return, you need to have GST compliant sales and purchase invoices attached.

What is Composition Scheme?

Composition scheme is an optional alternative method designed for small taxpayers whose turnover is limited up to Rs. 1.5 Crore (CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores). This scheme helps small taxpayers in reducing the compliance cost (Limited compliance of GST returns, maintaining books of account & tax invoices), tedious formalities under law & limited tax liability. The eligible taxpayer opting this scheme shall be required to pay tax quarterly at a defined percentage of his turnover. Summary is given below:
 
✓  Optional Scheme
✓  Business having turnover upto 1.5CR for traders & manufacturers and 50 Lakh for service providers
✓  Only for intra-state dealers
✓  Not ITC is available
✓  Tax under RCM is required to be paid and no ITC is available for that
✓  Tax invoice is not required to be issued
✓  Annual return GSTR – 4
✓  Cannot collect tax from the buyer
✓  Can opt-out from composition scheme in next year
✓  Cannot opt-out anytime during the year
 
GST Rate Applicable under Composition Scheme
 
 Business
CGST
SGST
Total
 Goods Manufacturers and Traders
0.5%
0.5%
1%
 Restaurants (Not serving Alcohols)
2.5%
2.5%
5%
 Service Providers
3%
3%
6%

Benefits of GST registration Number

Become competitive in Market: Interstate trading is impossible without having a GST number. It is possible only after registering the business under GST.

Expansion of business online: You must acquire a GSTIN if you are willing to compete with big brands like Amazon, Flipkart, Paytm on ecommerce platform or through your own website.

Get GST Input Tax Credit: If you have a GST Number, you can avail Input Tax Credit while filing for GST return.

Interstate sales without restrictions: You can sell your products in other states only after obtaining GST registration number.

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FAQs

GSTIN is a unique identification number given to each GST taxpayer. To verify a GSTIN number a person who has a GST number can log onto the GST portal.
GSTN is a one-stop solution for all your indirect tax requirements. GSTN is responsible for maintaining Indirect Taxation platform for GST to help you prepare, file, rectify returns and make payments of your indirect tax liabilities.
No, the Composition dealer is not allowed to avail any input tax credit of GST on purchases made.

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