Goods and Services Tax (GST) is a single, unified tax system that replaced multiple indirect taxes in India, such as VAT, service tax, and excise duty. It was introduced on 1st July 2017 with the aim of simplifying the tax structure and making it more transparent.
Before GST, businesses had to deal with different tax rules in each state, leading to confusion and compliance issues. With GST, the same tax rules apply across India, making it easier for businesses to operate smoothly, especially those involved in interstate trade.
For business owners, understanding GST is important because it affects pricing, billing, purchases, and overall cash flow. Being GST-compliant not only helps avoid penalties but also builds trust with customers and partners.
Types of GST in India
Under the GST system in India, there are four main types of taxes, each with a specific purpose based on the nature and location of the transaction. Understanding when each type applies helps business owners manage billing and compliance correctly.
1. CGST (Central Goods and Services Tax)
The Central Government collects this on intra-state (within the same state) sales. For example, if a business in Madhya Pradesh sells goods to a customer in Madhya Pradesh, CGST will apply.
2. SGST (State Goods and Services Tax)
This is collected by the State Government on the same intra-state sale. CGST and SGST are charged together and usually at equal rates. For example, if the GST rate is 18%, it will be split as 9% CGST and 9% SGST.
3. IGST (Integrated Goods and Services Tax)
IGST is collected by the Central Government on inter-state (between different states) sales. For example, if a business in Maharashtra sells to a customer in Gujarat, IGST applies. The collected tax is later shared between the Centre and the destination state.
4. UTGST (Union Territory Goods and Services Tax)
This is applicable when the transaction happens within a Union Territory (like Chandigarh, Lakshadweep, etc.). It is charged along with CGST, just like SGST is charged with CGST in states.
Who Needs to Register for GST?
GST registration is mandatory for certain businesses and optional for others, depending on their turnover and type of operations. Knowing whether your business needs to be registered helps you stay compliant and avoid penalties.
Registration Threshold Limits
- For Goods: Businesses with an annual turnover of more than ₹40 lakhs (₹20 lakhs in some special category states) must register for GST.
- For Services: The threshold is ₹20 lakhs (₹10 lakhs in special category states).
- These limits are calculated based on aggregate turnover across all branches under the same PAN in India.
Mandatory Registration Cases
GST registration is compulsory in the following situations, even if turnover is below the limit:
- Online service providers offering services in India from outside the country
Inter-state supply of goods - E-commerce sellers (like Amazon, Flipkart vendors)
- Casual taxable persons (temporary business setups)
- Non-resident taxable persons
- Input service distributors (ISD)
- Businesses liable to pay tax under reverse charge
- Agents supplying goods/services on behalf of others
Steps for GST Registration
Registering for GST is a simple online process. Whether you’re starting a new business or expanding an existing one, timely registration is important to ensure smooth operations and avoid penalties.
Documents Required for GST Registration
To complete the registration, you will need the following documents:
- PAN card of the business or individual
- Aadhaar card of the applicant
- Proof of business address (rent agreement, electricity bill, etc.)
- Photograph of the owner or authorised signatory
- Bank account details (cancelled cheque or bank statement)
- Business registration proof (partnership deed, incorporation certificate, etc., if applicable)
- Authorisation letter or board resolution (in case of company or LLP)
Online Registration Process
- Visit the GST Portal – Go to www.gst.gov.in
- Click on ‘Register Now’ under the ‘Taxpayers’ tab
- Fill Part A of the form – Enter PAN, mobile number, and email ID. You’ll receive an OTP for verification.
- Fill Part B of the form – After OTP verification, you’ll get a Temporary Reference Number (TRN). Use this to fill in details like business address, bank info, and upload documents.
- Submit and verify – Submit the application using DSC or Aadhaar-based e-verification.
- ARN Generation – After successful submission, you’ll get an Application Reference Number (ARN) to track your status.
- GSTIN Issued – Once verified by authorities, your GSTIN (Goods and Services Tax Identification Number) will be issued.
Input Tax Credit (ITC)
Input Tax Credit, commonly known as ITC, is a key benefit under the GST system. It allows businesses to claim credit for the GST paid on purchases used for business purposes. For example, if you pay GST on raw materials or services that help you run your business, you can reduce that amount from your final GST payable to the government. This helps lower your overall tax burden.
However, certain conditions must be met to claim ITC. You must be a registered GST taxpayer and must have received the goods or services. A proper tax invoice from a registered supplier is necessary, and the supplier should have filed their GST returns and paid the tax. Also, the goods or services must be used strictly for business activities, and you should file your own GST returns on time.
Many businesses make mistakes while claiming ITC. Common errors include claiming credit on personal expenses, not matching purchase invoices with the GSTR-2B report, or claiming ITC on blocked items like motor vehicles or club memberships. It’s also important to claim ITC within the allowed time limit either by 30th November of the next financial year or before filing the annual return, whichever comes first. Managing ITC properly helps save costs and maintain full GST compliance.
Final Thought
Understanding and following GST compliance is essential for every business owner. From registration to filing returns and claiming Input Tax Credit, each step plays a key role in keeping your business legal, smooth, and financially efficient. Mistakes in GST compliance can lead to penalties and unnecessary stress, which is why proper guidance is important.
At Satyanarayan Goyal & Co LLP, we help businesses stay GST-compliant with ease. With over 30 years of experience, our team provides reliable and customised solutions for GST registration, return filing, audits, and tax planning. Whether you’re a startup, trader, or a growing enterprise, we are here to support you with trusted expertise.
Need help with GST? Let us handle the compliance, so you can focus on growing your business.
