The Goods and Services Tax (GST) is an unified indirect tax system introduced by the Indian Government on 1st July 2017 to replace a multitude of indirect taxes like sales tax, VAT, excise duty, etc. The GST regime aims to simplify the indirect tax structure in India with the help of a 15-digit alphanumeric Goods and Services Tax Identification Number or GSTIN. In this article, we discuss a few key aspects of GSTIN that every business owner should know to better handle tax compliance.
Understanding GSTIN: Meaning, Structure, and Format
Every taxpayer with a GST registration is assigned a unique identification number called GST Identification Number or GSTIN. Before the introduction of various types of GST, all dealers were issued unique TIN numbers by the respective state authorities. Business entities registered under the GST regime are now offered with a unique GSTIN instead of this TIN number.
GSTIN is a unique 15-digit unique identification number composed of the respective state code and the PAN details of the business entity. As a business owner, you should be aware of the GSTIN structure and format since each digit conveys a specific piece of information. To this end, here’s a comprehensive breakdown of the GSTIN format you can review:
- The first 2 digits represent the state code as per the Indian Census 2011.
- The business entity’s PAN constitutes the next 10 digits of a GSTIN.
- The 13th digit represents the number of registrations made by the business using the same PAN in the same state.
- The 14th digit is the letter ‘Z’ by default.
- The 15th digit of the GSTIN is a check code (number/alphabet) used to detect errors.
How to Apply for GSTIN
A unique GSTIN will be assigned to your business once your GST registration application is approved. Here’s a quick -by- guide to help guide you through the process:
1. Log onto the online GST portal and go to the ‘New Registration’ tab.
2. Select ‘Taxpayer’ from the drop-down menu. Fill in Part A of the registration form with basic details like the name of your business, state, district, email address, mobile number, and PAN details of the business.
3. Enter the OTP received on your registered mobile number/email to verify your actions.
4. Once the GST portal completes the verification process, you will receive a 15-digit Temporary Reference Number (TRN) on your registered phone number and email ID.
5: Go back to the GST portal and select ‘Temporary Reference Number’ under the ‘New Registration’ tab to fill in Part B.
6: Enter the TRN and captcha code to proceed. Verify with the OTP sent to your registered phone number.
7: Click on the Edit icon to fill-in the 10 sections of Part B carefully.
8: Complete your GST registration by uploading scanned copies of necessary documents like proof of address, business registration documents, bank account details, etc.
9: The GST authorities will check the application and documents to verify and approve your application within the next 3 days. Once verified, a unique GSTIN will be issued to your business.
Benefits of Getting a GSTIN
Your GST identification number plays a vital role in leveraging the benefits of the GST regime. As a business owner, you should be aware of these benefits:
Legal Recognition
Completing your GST registration and obtaining a GSTIN offers legal recognition to your business. A valid GSTIN essentially recognises your business as a supplier of goods and services and can be used to verify your business’s credentials. A legally recognised business has better chances of attracting more customers and boosting sales.
Input Tax Credit Benefits
Businesses with a GSTIN can claim input tax credit on their purchases. If you own a business with GST registration, you can use input tax credit to off-set your tax liability on outputs, thereby reducing your overall tax liabilities.
Interstate Transactions
According to the rules of the GST regime, GSTIN is mandatory for businesses engaged in interstate transactions. GSTIN helps seamlessly track the movement of goods and ensure tax compliance across states. As a small business owner, if you wish to widen the market for your products, you must obtain a GSTIN.
Increase Market Share Through E-Commerce Sales
Registering your business on e-commerce sites can help boost sales, unlock new markets, and target new customers. However, e-commerce platforms require sellers to provide GSTIN details before listing their products since GSTIN helps verify sellers and gauge their authenticity. Therefore, obtaining a GST number can help you enhance the scope of your business.
Compliance
Obtaining a GSTIN for your business ensures compliance with the existing GST laws and regulations. It also makes it easier for your business to file tax returns and ensure transparency and adherence to GST-related provisions.
Who Needs a GSTIN?
As a small business owner, you may be wondering if GSTIN is mandatory or not. According to the rules of the GST regime, if your business is engaged in the supply of goods and services and has an annual turnover of Rs. 20 Lakhs or more (Rs. 10 Lakhs or more for certain states), you must obtain a GST registration and corresponding GSTIN. Additionally, if your business is involved in inter-state transactions, you need to obtain a GSTIN irrespective of your annual turnover.
Conclusion
In a nutshell, GSTIN is a unique identification number issued to every registered business entity under the GST regime. Apart from providing legal recognition to the business, GSTIN also ensures seamless tax compliance, complete transparency, easier interstate transactions, and potential to expand your market reach. As a business owner, you should be aware of these benefits to understand why GST registration is compulsory for businesses over a certain turnover threshold.
