Who needs to register for GST in India? 

GST registration may sound like a lot of work. But did you know it is not mandatory for all? Here are the situations that require GST registration:

• If your business’s turnover exceeds Rs. 20 lakhs in a financial year for normal category states. For individuals living in special category states, the limit is Rs.10 lakhs.
• You receive payment for services under OIDAR (Online Information and Database Access and Retrieval). OIDAR includes activities, such as internet advertising, cloud-based services, and intangible items, such as e-books, entertainment (music, movies, online gaming), software, and any other electronic data, such as video lessons.

Why is GST for freelancers important? What are its advantages?

Because the Goods and Services Tax (GST) is an indirect tax on the supply of goods and services in India, Indian freelancers must also pay GST when their turnover exceeds Rs. 20 lakhs in a financial year. 

As freelancers, you do not receive any specific advantages of registering for GST. The benefits of GST registration are the same for everyone. Under this new GST regime, you have the option to file tax returns online. All you have to do now is go to the GST Portal, create an account, log in, and begin filing your GST returns.

The main advantage is that if you register, you will be able to claim GST credit, which may be used to balance future GST liabilities, as well as seek a GST refund (subject to certain conditions). For example, if your firm runs ads on Google to attract new clients or customers, you have to pay 18% of the total amount as GST.

Documents needed for GST registration 

Here are the documents you will require to register for GST:

1. Your photo
2. A copy of your PAN and Aadhaar card
3. Identification and residence evidence
4. A recent bank account statement or a cancelled check
5. Your digital signature
6. Electricity or telephone bill
7. Office lease agreement
8. No objection certificate

What happens after GST registration?

After you have submitted all the documents required and completed all the required formalities, you need to ensure that you follow the process to be on the right side of the law. 

When raising an invoice, you need to add the GST amount to the overall billed amount. Thus, if your billed amount is Rs. 25,000 for one client, after adding GST at the rate of 18%, the total amount that your client needs to pay will be Rs. 29,500. 

After collecting GST, you need to deposit the GST amount to the government when you file your GST returns.  

Payments T&C for freelancers

There are many terms and conditions (T&C) related to payments that apply to GST-registered freelancers.

• Depending on the type of service you provide, GST rates on your services can be 0%, 5%, 12%, 18%, or 28%. If there is no specific percentage, you need to charge your clients GST at the rate of 18%.
• After getting your GST identification number, you have to file GST regularly, i.e., monthly and yearly. This is irrespective of your current annual turnover.
• You need to make all payments online. Every year, there will be 37 returns to file: three monthly filings and one annual form.
• If you do not deposit the GST proceeds on time, you might have to pay a fine.
• To ensure that GST is deposited on time, you can issue the invoice on the 1st of the following month. This will give you enough time to pay your monthly GST bill.
• After paying all the applicable taxes, you need to submit a monthly summary return under GSTR 3B.

Do freelancers need to register for GST if they raise invoices?

• If you are a freelancer, your clients will expect you to raise invoices. When you submit an invoice, your client may deduct 10% TDS from every invoice.
• If your income is below Rs. 20 lakhs or Rs. 10 lakhs (for special category states), it is not compulsory to register for GST even if you raise invoices.
• GST-registered freelancers need to file invoices according to the latest GST laws stated by the government.
• You need to include your name, address, GSTIN for freelancers, your client’s GSTIN, Service Accounting Codes (SAC), date, amount, and signature on the invoice.

To sum it up

As all your accounts are linked with PAN and Aadhaar, the best option would be to go for GST registration.GST filing may be a little intimidating for many freelancers. Hiring a chartered accountant (CA) who has experience working with freelancers and solopreneurs will help you ensure everything is in line with the latest applicable laws.

Also read: GST Registration Guide for Startups and Small Businesses

The post GST For Freelancers: Everything You Need to Know appeared first on PayU Blog.

As per Indian law, the Indian tax system has incorporated a scheme that collects income tax, and it is deducted automatically from the deductee’s bank account. Income tax is the direct tax which every earning individual is liable to pay to the government. Every individual earning an income has experienced this tax deduction in various formats. 

A tax deduction system is wherein the amount of tax is deducted by the employer or deductor. This amount is deposited into the income tax department. The amount of tax deduction varies based on the age bracket and the income of the individual. The tax deduction is usually made by deducting a certain amount like rent, commission, salary, professional fees, etc., so it ends up reducing the big chunk of our salary.

According to the Income Tax Act, any company or a person can deduct tax at the source. The person who receives payment is also liable to pay tax. 

How Does TDS Work?

Tax deduction applies to all the taxable incomes. But it is deducted at a fixed rate. The rate depends on the type of income rather than the amount of the income, except in the case of salary. In the case of salary, the employer can evaluate the total expected income of the employee. 

Income Tax TDS Payment happens at the applicable slab rate, and it may change in the middle of the year based on appraisals and investments made. Therefore, it becomes essential for employed taxpayers to pay taxes at the beginning of the financial year to avoid losses at the last moment.

Example of Tax Deducted At Source

Under the income tax act, the TDS rate on rent payments applies to resident individuals and HUFs (Hindu Undivided Family). When the rent is more than 50,000/- month, the TDS rate is 5%. Thus, if the rent of a house is 70,000/- month, the TDS will be Rs 3500 per month. The tenant, therefore, will have to pay Rs 66,500 to the owner and deposit Rs 10,500 every quarter to the CBDT. Similarly, for a salaried employee, a firm may deduct TDS at 10%.

How To File Your TDS Online?

Online TDS payment, also known as Income Tax efiling, online is simple and can be completed in a couple of minutes. The step-by-step process for e-TDS payment by filing TDS Challan 281. Just follow the steps mentioned below:

• Visit the NSDL website and complete the process to E-Pay Income Tax.
• Click on ‘CHALLAN NO./ITNS 281’ under TDS/TCS section. After proceeding, the page will be directed to the e-payment page.
• You will have to fill in the following details which include the nature of payment, mode of payment and other information:
  • Under ‘Tax Applicable’ select ‘Company Deductees’ if the TDS deducted by you is while making a payment to a company. If not, select ‘Non-Company Deductees’.
  • TAN is mandatory. Therefore, enter TAN along with the Assessment Year for which the TDS is made.
  • Enter the Pin Code of your location and select the State from the drop-down.
  • Select between the two options: the payment made for TDS deducted and payable by you or TDS on regular assessment.
  • Select the ‘Nature of Payment’ and ‘Mode of Payment’ from the drop-down.
  • Click on the ‘Submit’ button.

• After submission, a confirmation screen will be displayed. If TAN is valid and confirmed, the full name of the taxpayer as per the data stored will be displayed on the confirmation screen.
• On confirmation of the details given, the net banking site as per the bank details given will be opened.
• Login with the User ID to the banking site and make the payment.
• After completion of the payment, a TDS challan online counterfoil will be produced that will contain the CIN, payment details and name. The TDS Paid Challan download file will be a proof of completion of payment.
• After payment of TDS, move on to file your TDS return. There is a simple process for Tax Return eFiling. 

Conclusion

TDS is an imperative obligation as it is levied at the source itself. Everyone who is earning an income must ensure that there is no tax evasion. Every individual must pay close attention to tax-paying because the late filing will lead to penalties and fines.

At the same time, proper documentation of all the online e-pay tax challans must be done. A proper check on updates in TDS provisions must also be paid attention to. An employer should ensure that the right amount of tax is deducted from salary income.

If you need a payments partner for your business, use PayU India

FAQs

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But to make a startup successful, you need to be aware of all the rules and regulations related to it. In other words, you need to understand the law on startups in India. In this article, you will understand the standard rules for startups in India.

Legal Basics For Startups

Some of the legal basics that every startup, as well as an entrepreneur in India, should be aware of before starting a business have been discussed below:

Deciding the Structure of Business and Prepare Founders and Co-Founder’s Agreement

As an entrepreneur, the first thing while planning a startup is to decide the type of business. You must be clear about your short and long-term goals and visions. Then decide about the company’s incorporation, i.e., sole proprietorship, public limited company, private limited company, LLP, etc. 

Once you are clear about what type of company you will incorporate, then understand the registration process for your company. You must research which kind of company will best suit your needs. A private limited company is the best option for a startup willing to raise funds as it can help you raise external funds. 

An entrepreneur should also prepare a Founders and Co-Founder’s Agreement. This agreement will help define the roles, responsibilities, exit clauses, operative clauses, and executive compensation of the company’s founders. The founder’s agreement reduces the chances of disputes in case of any disagreements between the founders.

Apply For All Important Licenses Related To The Business

The best method to start a business is to get appropriate business licenses. Different types of permits are applicable in India, depending on the size of the business. Failure to obtain requisite business licenses can lead to unwanted lawsuits. Registrations and agreements of a company also rely on business licenses. Government agencies can shut down businesses running without licenses. Some standard licenses include Shop and Establishment Act, FSSAI Registration, GST Registration, etc. Business licenses also vary from industry to industry, and you must understand how to register your business legally.

Get Clear Knowledge About Accounting And Tax Laws

Taxes are an integral part of any business. There are many types of taxes, such as state tax, central tax, etc. The Government of India has introduced many exemptions for startups, such as tax exemptions, for three years. Businesses can also get tax exemptions from investments and capital gains above the Fair Market Value. To avail of the given benefit, businesses need to qualify the conditions mentioned below:

• From its incorporation date, the startup should not be more than 7 years old, 10 years for biotech.
• It should be registered as a Partnership firm, LLP, or a Private Limited Company.
• The turnover of the company should not exceed 5 crores.
• The startup must not be a result of the splitting of an existing business.

Startup businesses must also ensure that proper books of accounts are maintained. This will help in the timely payment of taxes as well as will protect against accounting discrepancies.

Maintain The Labour Laws And Codes As Specified

Every startup business needs new employees. Labour laws cover every employee-employer relationship. Breaching these laws can harm the reputation of your business as well as cost you a hefty amount. 

Companies that have been incorporated under the startup India program have to make a self-declaration to be exempt from the labour inspection under nine statutes.

Protection of Trademark, Designs And Other Intellectual Property Rights

If you have discovered an algorithm in this high-tech world, you first need to apply for protection under the Patent Law. A startup can benefit from the ‘Scheme for Startups Intellectual Property Protection’ as per the Startup India program.

• This scheme will protect and commercialise all your intellectual property.
• The panel of facilitators empanelled by the Controller General of Patents, Trademarks and Design also provide advisory services to assist you in filing and disposal of the patent application. This will be done at a minimum charge in addition to other services.

Management Of Business Contracts

Contracts are crucial for any business. To ensure that the business functions smoothly, you need to check on the various aspects of contract management. According to the Indian Contract Act, 1872, all agreements will be considered contracts provided it is made with lawful consideration for a lawful object and is not declared as void.

While venturing into a business, you need to enter into a contract with your vendors, new employees to reduce risks in the future.

Businesses must also draft a non-disclosure agreement or NDA to protect the organization’s privacy while disclosing any information with outsiders. This will help protect your business ideas.

Clarity About Winding Down, Exit, And Other Rules Of The Startup Business

It is complicated for any entrepreneur to shut down a company. While shutting down a business, a startup must inform the vendors, stakeholders, employees, and investors in advance. You need to plan the whole winding-up process to make a smooth exit for everyone.

There are three ways to shut down a startup business:

• Quick exit mode
• Court as well as tribunal route
• Voluntarily closing the business

Conclusion

Compliance with the law is essential for any business. If you are an entrepreneur willing to start a small business in India, you must understand and adhere to all the applicable laws for its smooth operation and functioning. The best method to secure your company and avoid legal problems is to get professional advice and services. At PayU, we offer advice, monitor your organization’s needs, and keep legal documents safe as a partner to your firm.

The post Law Basics Every Startup Owner Must Know appeared first on PayU Blog.

But with GST coming into the scene, the Union Budget only spoke of import duty and no other indirect taxes. So today, the budget presentation focuses more on direct taxes and their implication on corporations and individuals.

This article discusses direct and indirect taxes for corporations in India.

What are Direct and Indirect Taxes?

Even though payable by the organization, direct and indirect taxes are vastly different from each other.

Taxes are mainly classified into two categories – direct and indirect.

As the name suggests, direct taxes are paid by the companies to the government directly. Even, the taxes can’t be passed on to other entities. Income tax is the direct tax on the earnings of a company. These are not passable and will be borne by the entity liable to pay. In most cases, domestic companies are responsible for paying a flat 30% along with a surcharge (if applicable) on their earnings. In comparison, foreign companies have to bear a more stringent tax rate of 40% on their income along with a surcharge (If any).

On the other hand, indirect taxes are charged on the sale of any product or service. These won’t come into the picture if you do not sell anything deemed taxable by the government. Previously, VAT and Service Tax were charged on the sale of goods and services, respectively. With the inclusion of GST, there is a single tax for a majority of offerings.

Difference Between Direct & Indirect Tax

While the responsibility of paying indirect and direct taxes lies with the corporate house, there are some stark differences between these two:

• Even though direct and indirect taxes are levied on all eligible entities, the end consumer bears indirect tax, whereas each entity is eligible to pay its share of direct taxes.
• Direct tax is a single-stage tax applicable on certain transactions or income of the company. In contrast, indirect tax is a multi-stage tax levied on each stage of production and distribution of the offering.
• Direct taxes are non-transferable, whereas indirect taxes are transferable. Therefore, the entity that pays indirect tax for buying an offering can claim it as input tax in most cases.
• A corporate house can generate income tax benefits by investing in tax saving instruments or fulfilling specific criteria established by the government. But there is no way to evade indirect taxes or reduce its liability.

Types of Direct & Indirect Tax

There are a plethora of direct and indirect taxes applicable to companies operating in India.

Types of Direct Taxes

Corporate direct tax is taxable on income by the company in India. It includes the following:

• Profits and gains from business and profession
• Capital gains
• Earnings from house property
• Earnings from other sources

Types of Indirect Taxes

In addition, companies are also liable to pay the following indirect taxes (if applicable):

• Securities Transaction Tax (STT) on the sale of securities listed on the stock exchanges in India. It includes shares, stocks, scrips, derivatives, Equity Linked Savings Scheme, and more.
• Dividend Distribution Tax (DDT) on payment of dividends to shareholders
• Minimum Alternate Tax (MAT), if the entity is a zero tax company opting to pay taxes under the MAT structure.

As for indirect taxes, GST (Goods and Services Tax) is the major contributor for entities. It subsumed a host of indirect taxes that prevailed before. India follows a dual structure where the center and the states or union territories can share the inflow pre-decidedly.

GST is levied on a taxable event, such as sale, transfer, disposal, rent, etc., of offerings for consideration in cash or kind and requires state-wise registration. While some essentials are under the 0% tax slab, there are four primary tax slabs for GST calculation and return – 5%, 12%, 18%, and 28%. It is a far cry from implementation by most other countries that have a uniform rate to ensure a seamless tax structure for a business.

In addition, companies are also liable to deduct professional tax from the salaries of their employees. The amount depends on information about professional tax applicability and the gratuities received by each salaried individual.

If any business is into importing or exporting goods, they are liable to pay customs duty to the government as an indirect tax. India follows the universally acknowledged harmonized nomenclature (HSN) classification rules that state the duty payable.

The final indirect taxation prevalent in India is known as VAT (Value Added Tax). It is only applicable today on liquor and tobacco or the product’s price and paid by the companies dealing with such offerings.

Conclusion

India has a deep-rooted structural issue where it has failed miserably in ensuring a clutter-free tax regime for corporations. The introduction of GST was a golden opportunity to set things right. On the other hand, ample rates for it brought about the same ambiguity which was quite prevalent earlier.

So, we often experience corporates, especially MSMEs, suffering from tax fatigue or the inability to handle their tax liabilities well. Therefore, there is a need to implement robust IT solutions, such as a tax-integrated payment gateway, that would enable them to handle their tax more efficiently.

PayU India offers a fully integrated, powerful payment solution provider for your offline and online presence. Moreover, it is GST-ready, so our omnichannel solution seamlessly handles most of your indirect tax needs.

Click here to get rid of your tax hassles by imbibing PayU India for your daily transactions.

The post Decode Direct and Indirect Taxes for MSMEs in India appeared first on PayU Blog.

Table of contents

What is goods and services tax (GST)?

It is a tax reform that came into existence on 29th March 2017 by an act of parliament and has replaced many indirect taxes such as VAT, excise, service tax, etc.

A comprehensive destination-based tax, GST is levied on the supply of goods and services at every point of sale. For example, you are a wholesale merchant and sell goods to Mr X, a retailer, who further sells it to Mr Y, the consumer. At first, the tax is levied on the purchase made by Mr X from you. Then, the tax is further levied on the purchase made by Mr Y from Mr X.

A unique number called GST registration number is allotted to every business registered under GST.

Types of GST

In India, there is a dual GST system in which the central and state governments levy taxes simultaneously with a common tax slab. However, GST is mainly categorized in three simpler terms:

State Goods and Services Tax (SGST) – taxes levied by the state government or union territory (UT) on goods and services manufactured or sold within state or UT boundaries.

Central Goods and Services Tax (CGST) – taxes levied by the central government on any intra-state transactions for goods or services.

Integrated Goods and Services Tax (IGST) – taxes levied by the central government when a transaction of goods or services takes place within two different states. The state and central government share the tax levied equally.

Advantages of GST registration for startups and small businesses

GST for small business and startup provides these advantages:

• If you file your return under GSTR-1 and GSTR-3B, no late fee will be charged as per the 31^st GST council’s declaration to boost Startups and SMBs.
• Starting a business in India is now a lot easier. SMBs and startups can go ahead with only GST registration. Earlier, the process was a bit complex.
• Simplified indirect tax system to one uniform system. Ever since GST came into existence, a lot of indirect and direct taxes have been subsumed such as excise, VAT, etc. This has made the tedious process of filing and managing taxes much simpler.
• Easy compliance and requirements
• Paperwork efficiency and ease of logistics towards dense locations of client

Exemptions under GST for startups and small businesses

There are no complex criteria for eligibility for GST registration. In fact, businesses with a turnover of under Rs. 40 lakhs per year don’t need to register under GST. As a result of this exemption, many startups and small businesses that fall under the category of Rs. 5 lakh – Rs.40 lakh income can grow without having to worry about filing GST returns.

How to register a startup or small business under GST

Wondering how to register a small business in India? It’s quite simple to register your business under GST online. There are a few GST registration requirements. Just follow the steps given below:

• Go to the GST portal at https://www.gst.gov.in/. Click on ‘Services’ and then select ‘New Registration’ under ‘Registration’.

• Generate a temporary reference number (TRN) by filling in the details given below such as PAN, email ID, and mobile number, and click on Proceed.

• Enter the OTP received on the given mobile number or email ID and validate it. 

• Once you validate your number, a TRN will be allotted. Use it to log in again to complete the GST registration process and requirements. 

• Login to the portal using the TRN, enter the captcha and complete OTP verification. Click on the pencil icon below ‘Action’. 

• Enter all the information about your business such as trade name and composition scheme. Click on ‘Save & Continue’. 

• On the next screen, provide information about all the promoters and directors of your business. Or you may enter the details of the proprietor in case of proprietorship. You can enter the details of up to 10 promoters or partners on the portal. Then, click on ‘Save & Continue’. 

• Enter the details of the authorized signatory nominated by the promoters to file GST returns of the business. 

• Submit the details of the principal place of your business such as an address, official contact details (email, phone no., etc.), nature of possession and others. Upload relevant proofs of the same and click on Save & Continue. 

• Enter additional place of business details. For example, if you have an eCommerce business and use Amazon’s warehouse then the details of the warehouse must be given in this section.  

• Provide the details of the top five goods and services you supply. Fill in the HSN code for goods and SAC code for services. 

• Verify the details submitted. Once it’s completed, select the verification check box and e-verify the name of the authorized signatory. 

• After the signature verification, a success message will appear on the screen, and an Application Reference Number (ARN) will be generated. Use it to track the status of your application. Once the process is complete, you will be informed about the allotment of a GST number. 

Conclusion

GST registration process for startups and small businesses is much simpler now. Just as a startup becomes successful when the idea behind it is properly executed likewise if GST is implemented properly, it helps a lot in achieving the financial goals easily.

The post GST Registration for Startups and Small Businesses in India | A Quick Guide appeared first on PayU Blog.