“Beginner's Guide to GST in India – For Small Businesses and Freelancers”

What is GST?

 

GST (Goods and Services Tax) is a unified indirect tax levied on the supply of goods and services across India. It has replaced various indirect taxes like VAT, service tax, and excise duty.

Goods and services are divided into 5 different tax slabs for collection of tax: 0%, 5%, 12%, 18% and 28%. However, petroleum products, alcoholic beverages, and electricity are not taxed under GST and instead are taxed separately by the individual state governments, as per the previous tax system. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on several items like aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%; post-GST, most goods are expected to be in the 18% tax range.

The tax came into effect from 1 July 2017 through the implementation of the One Hundred and First Amendment to the Constitution of India by the Government of India. 1 July is celebrated as GST Day. The GST replaced existing multiple taxes levied by the central and state governments.

Who Needs to Register for GST?

 

You need to register for GST if:

 

* Your “annual turnover exceeds 40 lakhs” (for goods suppliers in most states)

* Your turnover exceeds “20 lakhs” if you're a “service provider”, or if you're in a “Special Category State” (see list below)

* You are involved in “inter-state supply”

* You sell “online through platforms” like Amazon, Flipkart, etc.

* You are a “freelancer or consultant” and your income crosses 20 lakhs annually

 

 Special Category States under GST

If your business is located in any of the following states, the GST registration threshold is reduced to “20 lakhs”, even for goods suppliers:

 

1. Arunachal Pradesh

2. Manipur

3. Meghalaya

4. Mizoram

5. Nagaland

6. Sikkim

7. Tripura

8. Uttarakhand

9. Himachal Pradesh

 

  Types of GST Registration

 

1. Regular Scheme

 

“Best For:” Medium & large businesses, service providers, inter-state suppliers

 

“Features:”

* Can claim “Input Tax Credit (ITC)”

* Must file “GSTR-1 & GSTR-3B” (monthly or quarterly)

* Requires “proper invoicing” and recordkeeping

* Can do “inter-state supply” and “e-commerce” “sales

 

Liabilities:

* Higher compliance burden

* Frequent returns and reconciliations

 

 

2. Composition Scheme

 

“Best For:” Small businesses with turnover up to 1.5 crore (traders/manufacturers) or 50 lakhs (service providers)

 

Features:

* “Lower tax rate:”

  * 1% for traders

  * 2% for manufacturers

  * 5% for restaurants

  * 6% for service providers

* No need to issue GST invoices — use “Bill of Supply”

* File “annual return” and “pay tax quarterly (CMP-08)”

* Simplified compliance

 

Liabilities:

* Cannot collect GST from customers

* Cannot claim ITC

* Cannot make inter-state sales or sell via e-commerce

 

 GST Returns You Must File

 

GSTR-1 – Details of Outward Supplies

* Report “invoice-wise details of sales”

* Due on “11th of the following month” (monthly) or “13th after the quarter” (QRMP)

* Mandatory for all regular taxpayers

 

GSTR-3B – Summary Return

* Summary of sales, ITC claimed, tax paid

* Due on “20th of the following month” (monthly)

* Under QRMP, due on 22nd or 24th of the month after quarter-end depending on your state group

 

IFF – Invoice Furnishing Facility

 

* Used by “Quarterly GSTR-1 filers” (under QRMP)

* Upload invoices monthly so B2B buyers can claim ITC early

* Voluntary, up to 50 lakhs/month

* Due on “13th of the next month”

 

 QRMP Scheme (Quarterly Return, Monthly Payment)

 

* For taxpayers with turnover ≤ 5 crore

* GSTR-1 & GSTR-3B filed quarterly

* Tax paid monthly via “Form PMT-06”

* Optional “IFF facility” to upload B2B invoices monthly

 Choosing Between Regular vs. Composition Scheme

 

Feature	Regular Scheme	Composition Scheme
Turnover Limit	No Limit	Up to 1.5 Cr (50L for services)
ITC Claim	Yes	No
Invoice Type	GST Invoice	Bill of Supply
Return Filing	Monthly / Quarterly	Annual (CMP-08 quarterly tax)
Inter-State Sales	Allowed	Not Allowed
E-Commerce	Allowed	Not Allowed
Complexity	High	Low

 

 

Conclusion

Understanding GST registration and return filing is essential to run your business legally and efficiently. Whether you’re a freelancer, trader, or service provider, choosing the “right scheme” and staying compliant with “timely returns” can save you from penalties and boost your credibility.

 

Stay tuned to “The SVibes” for more finance, tax, and business tips!