Recently GST has become hugely discussing issue for taxpayers especially for business owners. GST Council has approved the order for the GST roll-out on July 1st this year. It is after each state has established their willingness and conformity in implementing of GST system. Thus starts the beginning of one country, one tax rule.
In the month of May’2017, the GST Council classified total 1200 products under the tax breakups of 5, 12, 18 and 28%, and the matter is now confirmed.
Now what about, freelancers and self-employed professionals, how they will prepare themselves for GST? How will they pay their taxes?
We try to offer a number of answers in support of following queries which may arise in the mind of small business owners.
1. To register under GST, what is the minimum annual revenue?
For businesses operating, the minimum annual revenue is Rs 20 lakh, once the limit crosses every business or service provider needs to be registered under GST. In North Eastern states, this limit is Rs 10 lakh.
2. Do small online business owner needs to register under GST?
Yes online business owner will be required to register under GST, even if their annual revenue is less than Rs 20 lakh, which is the minimum limit for businesses which are required to be registered under GST. Under Section 19 r/w Schedule-III of the Model GST Laws, every form of online business needs to be registered under GST, irrespective of the amount of revenues generated.
3. As per GST, what is an Ecommerce Business,?
Section 43B(d) of the MGL (Model GST Law) describes e-commerce business as “Electronic Commerce to mean the supply or receipt of goods and/ or services, or transmitting of funds or data, over an electronic network, primarily the internet, by using any of the applications that rely on the internet, like but not limited to e-mail, instant messaging, shopping carts, web services, Universal Description Discovery and Integration (UDDI), File Transfer Protocol (FTP) and Electronic Data Interchange (EDI) whether or not the payment is conducted online and whether or not the ultimate delivery of the goods and/or services is done by the operator.”
4. What will happen if doesn’t get registered under GST?
If you are working with various vendors, suppliers and customers, and most probably, they are registered under GST. Hence, if they are working with you, but if you are not paying taxes as per GST, then they will have to suffer, and pay additional taxes, on your behalf. They will accept for long time. Hence, if you are a freelancer and a self-employed personal, and even if your annual revenue is less than Rs 20 lakh, should get registered.
5. What if I am a stubborn businessman, and not registering under GST?
Under GST, Govt. will rate your business, which will be shown to the buyers and sellers of your business. Under Compliance Rating Score (CRS) under GST, Govt. will rate your business as per your GST taxpaying habits, and accordingly, your business can suffer. Hence, no GST means, no business for you.
6. How can I register my small business with GST?
It’s simple, actually. All you need to do is visit gst.gov.in, and start the process. Otherwise, there are several firms which provide professional services for registering your business with GST and subsequently file the returns as well.
7. How many returns will be required to file under GST?
For any business, there will be a total of 37 returns to be filed every year, which is 3 per month and one annual return. Note here, that this covers only one state. Hence, if your business is operating in three states, then the total number of returns filed shall be 111, and so on. And, everything has to be online, and digital. No paper ledger books and account books.
8. I have heard about presumptive tax? Will it work for my small business?
If a business’ annual revenue is less than Rs 50 lakh, then presumptive tax can be opted, under composition scheme. Under this, you will be required to pay only 0.5-2.5% ‘assumed’ tax for the goods and services sold. However, this is not open for all. Only manufacturing units and some services like restaurants can opt for this presumptive tax option.
9. I am eligible for presumptive tax. What are the drawbacks?
First of all, this shall only work in one state. If your business is operating in more than one state, then this exemption won’t work. Besides, the presumptive tax will stop you from availing inputs tax credit, as you cannot charge tax from your buyers.
10. Can service providers claim GST payment based on purchases made for the business?
Yes. If you are a freelancer and purchase a new laptop meant for your business, then you can claim GST paid on it as input credit while paying his outgoing GST liability.