Gst Return - Crivva

The Goods and Services Tax (GST) system in India offers two different schemes for businesses: Regular GST and the Composition Scheme (Composite GST). These schemes differ primarily in tax rates, filing procedures, and compliance requirements. Below is a breakdown of the key differences between them.

1. Eligibility:

Regular GST: Applicable to businesses whose annual turnover exceeds ₹40 lakh (₹20 lakh for special category states). Any business that wants to register voluntarily can opt for this, irrespective of their turnover.
Composite GST: Designed for small businesses with an annual turnover of up to ₹1.5 crore (₹75 lakh for special category states). Businesses with higher turnover cannot opt for this scheme.

2. Tax Rate:

Regular GST: The tax rate varies based on the nature of goods or services supplied. GST rates are generally 0%, 5%, 12%, 18%, or 28%, depending on the item or service.
Composite GST: The tax rate is much lower but fixed based on the type of business:
- 1% for manufacturers and traders of goods.
- 5% for restaurants (without alcohol).
- 6% for service providers under specific conditions (effective April 2019).

3. Input Tax Credit (ITC):

Regular GST: Businesses can claim input tax credit on purchases, reducing the tax payable on sales by the amount of GST paid on purchases.
Composite GST: Businesses under the Composition Scheme cannot claim ITC. They pay a lower tax rate but are not entitled to credit for taxes paid on purchases.

4. Filing of Returns:

Regular GST: Requires filing of multiple monthly returns, including GSTR-1 (details of outward supplies) and GSTR-3B (summary return for tax payment). The filing process is more frequent and comprehensive.
Composite GST: Simplified compliance with quarterly filing through GSTR-4 and an annual return (GSTR-9A). The reporting is less detailed compared to regular GST.

5. Invoicing:

Regular GST: Businesses must issue GST-compliant tax invoices, which include details like GSTIN, tax breakup, and mention of CGST, SGST, or IGST.
Composite GST: Businesses under the composition scheme cannot issue tax invoices with GST. Instead, they issue a bill of supply since they do not collect GST from customers.

6. Collection of GST from Customers:

Regular GST: Businesses collect GST from customers on the sale of goods or services and remit the same to the government.
Composite GST: Businesses cannot collect GST from customers. The tax is paid from the business’s pocket at the reduced composite rate.

7. Scope of Business:

Regular GST: Businesses can operate across India and engage in both inter-state and intra-state supplies without restrictions.
Composite GST: Businesses under the composition scheme cannot engage in inter-state supply of goods or services. They are restricted to intra-state supplies (within the same state).

8. Who Should Opt for Each Scheme?

Regular GST: Ideal for medium to large businesses, or businesses that engage in B2B transactions where input tax credit is an advantage. Businesses that deal with inter-state supplies or exports must opt for regular GST.
Composite GST: Best suited for small businesses like retailers, manufacturers, and small service providers who operate within a state and do not wish to deal with the complexities of regular GST filings and higher tax rates.

Summary of Key Differences:

Feature	Regular GST	Composite GST
Eligibility	Annual turnover above ₹40 lakh	Annual turnover up to ₹1.5 crore
Tax Rate	0%, 5%, 12%, 18%, or 28%	1%, 5%, or 6% (based on business type)
Input Tax Credit (ITC)	Allowed	Not allowed
Returns Filing	Monthly/Quarterly (multiple forms)	Quarterly (GSTR-4) and annual
Invoice Type	Tax invoice with GST mentioned	Bill of supply (no GST collection)
GST Collection	Collects and remits GST	Cannot collect GST from customers
Scope of Supply	Inter-state and intra-state allowed	Only intra-state supply allowed

Conclusion

The Regular GST scheme is suitable for businesses with higher turnover, those involved in inter-state transactions, or those who want the benefit of the input tax credit. The Composition Scheme (Composite GST) is a simplified tax option for small businesses with lower turnover, offering lower compliance and tax rates but without the benefit of input tax credit and with restrictions on the nature of business operations.

Related Topic: Overview of GST Return Filing

Starting a new business is an exciting endeavor, but one of the most important steps is ensuring proper startup registration. The startup registration process involves several steps, from choosing a business structure to complying with legal requirements. This blog will guide you through the essential steps needed to successfully register your startup.

Why Is Startup Registration Important?

Registering your startup is a crucial step in establishing your business as a legal entity. It provides legitimacy and allows you to operate within the legal framework of your country.

Establishes legal recognition of your business.
Protects your business name from being used by others.
Provides access to government schemes and benefits.
Allows you to open a business bank account.
Helps with raising capital and securing investors.
Ensures compliance with local tax regulations and laws.

Choosing the Right Business Structure for Your Startup

Before beginning the startup registration process, you need to decide on the legal structure of your business. The structure impacts taxes, liability, and compliance requirements.

Sole Proprietorship: Ideal for small businesses with one owner.
Partnership: Suitable for businesses with two or more owners.
Limited Liability Partnership (LLP): Offers limited liability for owners.
Private Limited Company (PLC): A popular option for startups looking to raise funds.
One-Person Company (OPC): Suitable for a single individual who wants to limit personal liability.
The choice of structure impacts the entire startup registration process and determines the documents needed.

Reserving Your Business Name

A key step in startup registration is selecting and reserving your business name. This ensures that no other company can use your business name legally.

Check the availability of your business name with the Registrar of Companies (RoC).
Ensure the name complies with the legal requirements of your jurisdiction.
Consider registering a trademark for your business name to protect your brand.
If the name is available, you can reserve it for a set period before final registration.
The chosen name should reflect your business identity and vision.
AMpuesto can assist in checking the availability and reserving your business name as part of the startup registration process.

Preparing Documents for Startup Registration

The startup registration process requires submitting various legal documents to the relevant authorities. Proper documentation is key to successful registration.

Memorandum of Association (MoA) and Articles of Association (AoA).
Proof of identity and address for all directors and shareholders.
Director Identification Number (DIN) for all directors.
Digital Signature Certificates (DSC) for authorized signatories.
Proof of the registered office address for the business.
A declaration by the directors regarding compliance with legal requirements.

Filing for Startup Registration with the Registrar of Companies (RoC)

Once the necessary documents are prepared, the next step is to file them with the Registrar of Companies. This step formalizes your business.

Submit the incorporation forms (like Form INC-32) along with supporting documents.
Attach the reserved business name approval, MoA, AoA, and other required documents.
Pay the applicable fees for startup registration.
Once the documents are verified, the RoC will issue a Certificate of Incorporation.
This certificate legally confirms that your startup has been successfully registered.
AMpuesto provides expert support to ensure all documents are correctly filed during the startup registration process.

Acquiring Your Permanent Account Number (PAN) and Tax Registration

After completing the startup registration process, it is essential to register for taxes and obtain a Permanent Account Number (PAN) and Goods and Services Tax (GST) number if applicable.

Apply for a PAN, which is mandatory for tax filing.
Register for GST if your startup’s turnover exceeds the specified threshold.
Ensure compliance with other applicable taxes like Professional Tax or VAT.
Proper tax registration enables smooth business operations and avoids legal issues.
AMpuesto helps startups navigate the complexities of tax registration and compliance.
Timely registration ensures you can focus on business growth without tax-related interruptions.

Conclusion

Registering your startup is a critical step toward building a successful business. From selecting the right structure to complying with industry-specific regulations, each stage of the startup registration process requires attention to detail. AMpuesto’s expert guidance helps entrepreneurs navigate this process efficiently, ensuring compliance and setting the foundation for future success. With proper startup registration, you can focus on growing your business with confidence.