GST for Startups: A Guide to Getting Started

Types of GST

There are different types of GST imposed on various sectors. Here is a range of GST you need to know:

1. Central Goods and Services Tax (CGST): The tax imposed on the supply of intra-state goods where the central government imposes tax. The CGST is a central tax imposed to replace the previous list of taxes such as customs duty, CST, central excise duty, etc.

2. State Goods and Services Tax (SGST): SGST is a tax imposed by the state on all goods and services. They are applicable on exempted goods and not if annual turnover is less than the given limit. Respective states do the implementation and collection of SGST. Taxes like entry tax, luxury tax, VAT, etc., are replaced by SGST.

3. Integrated Goods and Services Tax (IGST): The tax applied on the sale of inter-state products, which means if businesses transfer products from one state or union territory to another, IGST is applied. Under this tax, exports have to be zero-rated and shared between central & state governments.

4. Union Territory Goods and Services Tax (UTGST): UGST is implied by various union territories. The tax applies to intra-union territory supply of goods and services. The UGST falls under Jammu & Kashmir, Ladakh, Andaman and Nicobar Islands. Delhi and Puducherry do not apply UGST as they have their own government and legislatures.

Who should obtain the GST registration?

There are some GST rules for small business to comply with. If you sell goods within the same state or another with a turnover of more than 20 lakh, you must register for GST. Similarly, if you are a service provider within the same state and have an annual turnover of Rs 40 Lakh, you must register for GST.

Perks of GST for startups and small businesses

There are various advantages of GST for startups and small businesses, as follows:

Here are the major reasons why people opt for Trademark Registration:

1. Accessing Input Tax Credit Facility

Now, businesses buying equipment, buildings, machinery, raw materials for manufacturing, or any other business requirements have reduced GST. You do not need to pay heavy taxes every time you purchase for your business. However, there are certain conditions under GST.

2. Cost Savings in Transportation and Logistics:

Initially, every state had its tax structure and system, so transportation from one state to another added business costs. With one tax, the tax on transportation and logistics has been reduced.

3. Enhanced Opportunities for Business Growth and Scalability:

With one GST number applicable in the entire country, the growth and scalability of business from one state to another become easier.

4. Streamlined Taxation Mechanism

The tax system is more streamlined with this tax mechanism. Businesses only need to register for taxes occasionally whenever they sell goods and services in another state. One GST number applies to the entire country; you can sell and purchase goods and services with the same number.

5. Tax System Favorable to Businesses:

This tax system is more favorable to businesses than previous taxes. They do not need complexities and have a streamlined approach, making managing businesses easier.

6. Unified Taxation: One Nation, One Tax, One Market:

Tax is simplified with GST, earlier with VAT and other taxes, it was a long list that the government and businesses had to manage. With the introduction of GST, the long and complicated taxes are simplified.

Documents Required for GST Registration

The GST registration process for company or startup needs certain documents. You need to present these documents to obtain GST registration:

Aadhaar Card
Applicants PAN card.
Identity proof and address proof of directors or promoters with photographs.
Address proof of your registered office or business.
Bank account statement and official bank account of business.
Digital Signature.
Proof of business registration or incorporation of certificate.
Letter of authorization or board resolution for the authorized signatory.

Overview of GST Rate Slabs

GST council has categorized various goods and services into various GST rate slabs. Over 1300 goods and 500 services are under 5%, 12%, 18%, and 28% rate slab. Gold has 3% and other rough precious & semi-precious stones into 0.25%. Apart from that, some exempted goods fall under no tax.

Some goods and services under the 5% rate slab include branded paneer, coffee, cream, cashew nuts, fish filets, coal, revenue stamps, small restaurants, etc.
Goods and services under the 12% GST rate slab are packaged dry fruits, fruit juices, cellphones, toothpowder, ghee, butter, frozen meat, etc.
Under the 18% GST rate slab, goods and services include speakers, monitors, tissues, bamboo furniture, notebooks, ice cream, soup, pastries, etc.
Goods and services under the 28% GST rate slab include waffles, water heaters, shaving creams, automobiles, vacuum cleaners, sunscreen, deodorants, etc.

Note: These are some of the products; other products and services are listed on the official government website.

Special Provisions for Startups

There are some of the special provisions for startups where tax exemptions are allowed:

Startups incorporated between April 1, 2016, to March 31, 2021, can get tax exemption of 3 years in a 7-year block.
Startups are tax exempted on investments above fair market value.
Tax exemption on individual investment of long-term capital gain.

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