Does GST Apply to Me?

If you are an Indian small and medium business owner or a startup founder, you might be wondering whether GST applies to you. GST stands for Goods and Services Tax, which is a tax on the supply of goods and services in India. It was introduced in India on July 1, 2017, and replaced a complex system of indirect taxes.

The answer to whether GST applies to you depends on several factors, such as your turnover, the type of goods or services you supply, and your location. In this article, we will explore these factors in detail to help you determine whether GST applies to your business.

What is GST?

GST is a value-added tax that is levied on the supply of goods and services in India. It is an indirect tax, which means that it is collected by businesses on behalf of the government and passed on to the final consumer. GST is levied at every stage of the supply chain, from the manufacturer to the wholesaler to the retailer. It is based on the value added at each stage of production or distribution.

The main objective of GST is to simplify the tax system and make it more transparent and efficient. It replaces a myriad of indirect taxes such as excise duty, service tax, value added tax (VAT), central sales tax (CST), and octroi or entry tax.

Who is liable to pay GST?

Under the GST regime, every business that supplies goods or services is liable to pay GST if their turnover exceeds the threshold limit. The threshold limit is determined by the turnover of the business in the previous financial year. Currently, the threshold limit for GST registration is Rs. 20 lakhs for most states in India, and Rs. 10 lakhs for special category states such as the northeastern states.

If your turnover exceeds the threshold limit, you are required to register for GST and obtain a GST registration number (GSTIN). Once you have a GSTIN, you are required to file regular GST returns and pay the applicable tax.

What are the types of GST?

There are four types of GST in India:

CGST (Central GST): This is the tax collected by the Central Government on the supply of goods and services within a state.
SGST (State GST): This is the tax collected by the State Government on the supply of goods and services within a state.
IGST (Integrated GST): This is the tax collected by the Central Government on the supply of goods and services between different states.
UTGST (Union Territory GST): This is the tax collected by the Central Government on the supply of goods and services in the Union Territories.

The rate of GST varies depending on the type of goods or services supplied. There are four GST slabs – 5%, 12%, 18%, and 28%. Some goods and services such as petroleum, alcohol, and real estate are exempt from GST.

When is GST not applicable?

There are certain cases where GST may not be applicable. These include:

Small businesses with a turnover below the threshold limit.
Businesses that supply exempt goods or services.
Businesses that supply goods or services outside India.
Businesses that supply goods or services to SEZs (Special Economic Zones).
Businesses that supply goods or services that are exempt from GST.

If your business falls under any of these categories, you may not be liable to pay GST.

Conclusion

GST is a tax on the supply of goods and services in India. It is applicable to businesses that have a turnover above the threshold limit. The type of GST applicable depends on the type of goods or services supplied and the location of the business. However, there are certain cases where GST may not be applicable. Understanding the applicability of GST is crucial for small and medium business owners and startup founders.