Understanding the Basics of GST for Small Businesses

Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services in India. Here are some basics of GST that small businesses need to understand:

1.       Registration: Small businesses with an annual turnover of more than Rs. 40 lakhs (Rs. 20 lakhs for businesses in North-Eastern states) are required to register for GST. Businesses can register online through the GST portal.

2.       Tax rates: GST is levied at different rates depending on the type of goods or services. The tax rates are 0%, 5%, 12%, 18%, and 28%. Small businesses should be aware of the tax rates applicable to their products or services.

3.       Input tax credit (ITC): Small businesses can claim ITC on the GST paid on inputs such as raw materials, goods, and services used in the production of their goods or services. This can reduce the overall GST liability of the business.

4.       GST returns: Small businesses are required to file GST returns periodically. There are different types of GST returns such as GSTR-1, GSTR-2A, and GSTR-3B, which need to be filed on a monthly or quarterly basis. The GST returns can be filed online through the GST portal.

5.       Late filing penalties: Small businesses should ensure timely filing of their GST returns to avoid penalties. Late filing of GST returns attracts a penalty of Rs. 50 per day (Rs. 20 for businesses with no tax liability).

6.       Composition scheme: Small businesses with an annual turnover of up to Rs. 1.5 crores can opt for the composition scheme. Under this scheme, businesses can pay a lower rate of GST (1% or 5%) and are not required to maintain detailed records.

7.       E-way bill: For the transportation of goods worth more than Rs. 50,000, small businesses are required to generate an e-way bill. This bill contains details such as the value of the goods, the GSTIN of the supplier and recipient, and the vehicle number.

By understanding these basics of GST, small businesses can comply with the GST laws and regulations and avoid any penalties or legal issues. It is recommended to consult a tax expert for specific advice on GST compliance.