As GST or Goods and Services Tax has been implemented by the Government of India, it certainly impacting few things, especially businesses. Importers and exporters in India now have to obtain GSTIN for trading products from one place to another while paying applicable customs duties after GST. What this tax identification number is? How to register GSTIN? Let’s have an overview.
What is GST Identification Number or GSTIN?
Under new India tax structure, GSTIN is a 15-digit number, which has replaced the Tax Identification Number (TIN) that business entities were allotted while registering under a state’s Value Added Tax law. Such businesses also had to obtain several other identification numbers from various places. However, post GST; all such numbers are replaced by GSTIN.
All these parties now come under one single authority and different identification numbers are replaced by a single type of registration number known as Goods and Services Identification Number. This will ensure better administration of Indian trading activities and greater compliance by taxpayers and hopefully improve tax collection.
How does GSTIN Get Allotted?
GSTIN is allotted to all importers and exporters in India who trade products in different parts of the world. They need to get this number under GST regime for paying customs duties in India on goods and services. It is mandatory to get this registration number for trading commodities in India. Companies have to log on to the GSTN portal and provide details of their businesses such as place of business, details of directors and bank account information.
Once traders have applied for GSTIN on GSTN portal, they will be given Application Reference Number (ARN. Basically, ARN Status in GST means that a user can check the status of their GST Registration Application. The ARN is sent to the registered user’s mobile number and email address. There are five possible types of application status namely ‘Provisional’, ‘Pending for Verification’, ‘Validation against Error’, ‘Migrated’, and ‘Cancelled’.
What is the Structure of GST Identification Number?
Each taxpayer is allotted a state-wise PAN-based 15-digit Goods and Services Tax Identification Number. Here is the structure of GSTIN.
- The first two digits of GSTIN represent the state code according to Indian Census 2011.
- The next ten digits of GSTIN represent PAN number of taxpayer.
- The 14th digit is currently has no use and hence represent “Z” by default.
- The last digit in GSTIN is a check code, which is used for detection of errors.
Why is GSTIN Required?
Traders of every state and union territory in India have to declare their GST Identification Number under new taxation system. Before GST, all exporters and importers had to declare their IEC (Import Export Code). Now GSTIN is required for purposes of credit flow of IGST on import of commodities, refund or rebate of IGST related to export.
Obtaining GST Identification Number is mandatory for importers and exporters to trade products under new tax regime in India. So, get your GSTIN right away.
What are the Advantages & Disadvantages of GST in India?
The Goods and Services Tax or commonly pronounced as GST is one of the biggest fiscal reforms in India since Independence. All businesses whether small, middle or large sized are impacted by this new indirect tax regime. This tax structure is levied on both goods and services and has subsumed or replaced various taxes like Value Added Tax or VAT, excise and service tax that were charged earlier. Basically, GST is regarded as a single taxation system, which has simplified the tax structure of the country. Basic Customs Duty, Integrated Goods and Services Tax (IGST) and Compensation Cess are main parts of newly implemented taxation law. Let’s have a real picture of GST’s benefits and disadvantages here.
Advantages of GST in India
Removing Cascading Tax Effect
A significant benefit of Goods and Services Tax is removal of cascading tax effect. In simple words, it means a tax on tax. Earlier, CVD, SAD, Service Tax, Education Cess and other additional customs duties were charged apart from Basic Customs Duty (BCD) on goods imported into India from other countries in the world. Now these duties have been subsumed and calculation of customs duty involves rates of Basic Customs Duty (BCD), Integrated Goods and Services Tax (IGST), Compensation Cess and other applicable duties.
Higher Threshold under GST
Businesses with annual turnover of INR 20 lakh in India are exempted from the GST. For hilly and north-eastern states, this limit has been INR 10 lakh. Before GST, this limit was INR 10 lakh for entire country and INR 5 lakh for hilly and north-eastern states.
Easier Online Procedure
The entire GST process starting from registration to filling returns plus payment of GST tax is taken place on World Wide Web. Now start-ups don’t have to run up around tax offices for doing formalities regarding registration process.
Boost Efficiency in Logistics
Before GST, logistic companies had to maintain multiple warehouses across the states to avoid CST and state entry taxes while moving products from one state to another or any international territory. Most of the times, these warehouses were forced to operate below their capacity and thus their operating costs forced to rise. But after GST implementation, the restrictions of goods being moving from one state to another or international territory have become lessened. And many e-commerce players are planning to set up their own warehouses in strategic locations.
Regulation of Unorganized Sector
Certain industries in India like textile and construction, which were unregulated and unorganized earlier, will now be treated to avail input credit. This facility is provided only when the supplier has accepted the amount, thereby bringing accountability & regulation of these sectors.
Disadvantages of GST in India
Experts have also identified some disadvantages of GST implementation, which would cause a worry for some industries. Let’s discuss them.
Change in Business Software
Most businesses were working on accounting software or ERPs for filling tax returns, configured with VAT, excise and service tax earlier. However, now under GST regime, they have to modify their software and upgrade it with new GST-compliant software. This leads to rise in cost of purchasing this software and giving special training to their employees for working on it.
Rise in Operational Costs
Most small businesses in India had to file returns on their own to save costs and were not able to hire tax professionals. After GST implementation, they require to have skilled people who can give them professional assistance for filling returns under new tax system.
Many small businesses are not tech-savvy in India and so they are finding difficulty in filling returns under GST as entire process of this tax system runs online only. Even as rest of the nation gets ready to go digital, but businesses in small cities across the country face a huge technology problem.
Disruption to Some Industries
Some experts say impact of GST has been showing negatively in the real estate market. Even cloth merchants and drug shops are not happy with this new tax regime in India. Now we need to see both positive and negative impact of GST on different industries.
Under GST regime in India, businesses will experience larger competition. Certainly, this one tax policy has simplified the collection of customs duties from importers and exporters. However, market analysts have also identified few disadvantages in which there are worries for some industries. Exim File only provides import export data of all products. We don’t provide any type of GST services.