What Digital Entrepreneurs Need To Know About GST

  • AS Team
  • Dec 21, 2022
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GST, or goods and services tax, is becoming a primary concern for digital entrepreneurs. With the growth of digital businesses due to ongoing technological advancements, GST has become an increasingly important element of the business landscape as everyone tries to ensure that their organization succeeds and abides by the law. 


In India, GST obligations vary from state to state, and not all goods and services are taxed. Furthermore, GST requirements vary from one country to another. For example, in New Zealand, GST is charged at 15%, which is added to the price of goods and services, then collected by the seller and paid to the Inland Revenue Authority. And, since keeping up with your tax obligations and running a business in this country can be challenging to do at once, a GST Calculator for New Zealand can come in handy to easily add or subtract taxes from list prices.


This post discusses in depth the three types of GST and their benefits. But, before that, it’s important to know how it first came about, particularly in India.


Brief History Of GST


GST was first introduced in France in 1954 and has become a major source of revenue for many governments worldwide. In India, it was proposed in the year 2000 and was fully enforced in July 2017 with the implementation of the One Hundred and First Amendment to the Constitution of India. 


GST is intended to make the taxation system simpler, fairer, and more efficient. It’s a destination-based tax, meaning that the place of consumption is where the tax is collected. This helps prevent manufacturers from avoiding taxes by shipping goods to low-tax countries. 


GST is also designed to be revenue-neutral, meaning that it shouldn’t create additional revenue for the government. Instead, it should help shift the burden of taxation from individuals to businesses, who are more capable of absorbing the cost of taxation.


Types Of GST


Here are the three classifications of GST:


  1. CGST


CGST (central goods and services tax) is a tax levied by the government on the supply of goods and services within the country. The CGST rate varies from state to state and is determined by the local government. It’s collected by the central government to finance their expenditures.


As a digital entrepreneur, you’re liable to pay CGST on your taxable goods or services. You start by registering with the Goods and Services Tax Network (GSTN) to obtain a GSTIN (Goods and Services Tax Identification Number). The GSTIN is a unique 15-digit number used to identify your business in the GST system and file GST returns and make payments.


Be aware of the compliance requirements for CGST. Keep detailed records, maintain a proper accounting system, submit GST returns, and pay tax dues on time. Failure to comply with the regulations may result in penalties and other consequences.


  1. SGST


The second type of GST is SGST (state goods and services tax), which is an indirect tax that the government levies on the sale and purchase of goods and services within a particular state. It’s imposed in addition to CGST. The state government retains the revenues collected from SGST.


For example, if you’re in Maharashtra and sell a digital product to a customer in the said state, you’re required to pay SGST. The rate depends on the type of product you’re selling. You’re required to register for SGST to collect and pay taxes, which is a process that involves obtaining a GSTIN. Once you’re registered, you’re expected to file quarterly returns and make payments.


  1. IGST


The third type of GST is IGST (integrated goods and services tax). It’s a single tax on the interstate movement of goods and services, and is administered by the central government. It’s calculated on the value of the products you supply across state boundaries. 


For digital entrepreneurs, IGST is an integral part of the taxation system. When you do business in multiple states, charge the applicable IGST rate on each transaction. It’s upon you to ensure that such dealings are taxed, and the collections are remitted to the central government. IGST also applies to foreign transactions. 


Knowing about the different types of GST allows you to file and pay the right taxes, keeping you safe from legal consequences.


Benefits Of GST


Digital entrepreneurs benefit from GST in many ways. These include the following:


  • Previously, you had to deal with multiple taxes and complex filing processes. With GST, on the other hand, you can now file a single return. That makes it easier to manage taxes and reduces the cost of compliance. 

  • GST eliminates the cascading effect of taxes. Before its introduction, you had to pay taxes on taxes, resulting in a higher cost of goods and services. With GST, you can now pass on the tax to the customers, which positively impacts your business. 

  • GST allows you to claim input tax credits for the taxes you’ve paid on your goods and services. That reduces the cost of products, which can benefit your business, such as by increasing its profits. 

  • GST helps your business increase its customer base by giving it access to a larger market. This is because it’s made it easier to trade across states.

  • In the past, businesses were obliged to pay separate taxes on goods stored in multiple states. But, with the implementation of GST, you can now hold and transport products across the country without paying various taxes. That leads to lower inventory and warehouse costs and improved cash flow.

  • With the introduction of GST, you can access a single database to keep track of your business’s taxes, invoices, and other financial records. As such, your business will stay organized and compliant. Also, you’ll reduce the risk of fines and penalties.


These benefits can have a significant impact on the bottom line of digital businesses.


Summing It Up!


Since the existence of numerous companies leads to increased competition, many digital entrepreneurs are working towards ensuring their businesses perform well no matter what. One way of ensuring your business does well is by fulfilling GST requirements. With a detailed discussion of the three main types of GST and its benefits, there’s no reason for you not to stay compliant with your state’s or country’s tax laws and regulations.

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