India is a developing nation and one of the largest economies in the world. Being a federal country, the power of authority and governing law has been distributed between the state and the center. Earlier, the traditional tax structure was full of complexities, with numerous tax hierarchies between the center and the state.
Sometimes, a tax gets implemented twice and this creates turbulence in the tax mechanism. There were multiple layers of direct and indirect taxes throughout the supply chain. To solve this issue, the government of India came up with a single tax system known as GST.
Goods and Service Tax (GST) is a single tax levied on the supply chain of goods and services, right from the initial manufacturer to the consumer. Its main purpose is to bind India into a single tax thread and unify the Indian market.
It came into effect on 1st July 2017 and has brought uniformity to the Indian tax structure by removing multiple layers of indirect taxes.
What is GSTIN?
Post-tax reforms in 2017, every business entity is required to be aligned with the rules and norms of Goods and Service Tax and will be provided with a unique identification number known as GSTIN (Goods and Service Tax Identification Number).
It is a 15 digit distinct alphanumeric identification number assigned to taxpayers registered under GST. The number is actually prepared meticulously, and each digit has its unique purpose or meaning. The process of obtaining or registering for GSTIN is absolutely free of cost.
Further, no business entity can conduct any sort of business without having a proper GSTIN. It is mandatory and also helps in recognizing a business and its jurisdictions. According to the CGST 2017 act in the following conditions, it is mandatory for a person must get assigned or registered under GST and obtain GSTIN:
- In the case of goods, business entities or individuals whose aggregate turnover exceeds 40 lakh rupees.
- Individuals and entities who have an aggregate turnover of more than 20 lakh rupees in case of services.
- In the case of hilly areas or the Northeastern region, entities or individuals whose aggregate turnover is more than 20 lakh rupees in the supply mechanism of goods.
What is the Basic Structure of GSTIN?
Each digit/letter of GSTIN has its unique significance and is assigned according to a proper set of patterns. Let us understand the format of GSTIN and its break-down analysis:
- It is a 15-digit alphanumeric number provided after formal registration under GST.
- The first two digits of the GSTIN represent the GST state code according to the Indian census 2011. Each state has a unique GST state code.
- The following next digits represent the PAN number or TAN number.
- The thirteenth digit is allocated based on the number of registrations within the specific state.
- The fourteenth digit denotes the nature of the business. It is Z by default.
- The last or the fifteenth digit is the check code. It can be a number or an alphabet.
The GST is considered the greatest tax reforms of modern India.
What is GST State Code?
Every business entity is assigned a designated code when registered under GST. This is done primarily to make it simpler to know where a taxpayer or business entity is from. Each state and union territory has been provided with a state code.
It is a two-digit numeric code and the directory of such a static number for the Indian states and union territories constitute the GST state code list of India. Generally, the following codes are fixed/permanent and small, so there are minimal chances of any error in the preparation of invoices and filing of GST returns.
Moreover, the GST portal accepts only a defined list of state codes, thus you should be prudent and identify the correct GST state code. These codes are particularly used in the following cases:
- GSTIN- The first two numeric digits of the GST Identification Number represents the GST State Code, in which the entities or individuals have obtained GST registration.
- CGST, SGST, IGST- In the case, the state code of the supplier is similar to the state code of place of the supply, SGST, and CGST are charged. On the other side, if the state code of the seller is different from the place of supply, IGST is charged.
Know Your Jurisdictions
You must be equipped with proper knowledge about your jurisdictions while registering under GST for a hassle-free procedure and to avail facilities. The government has categorized jurisdiction based on geographical location, PIN codes of locality, and different districts. You can find your jurisdiction:
On the CBEC Portal
If you want to know your jurisdiction, before registering yourself on the GST portal, you can go to the CBEC site. Follow the step mentioned below:
- Visit the CBEC homepage
- Choose the state where your business or operation is
- Select the zine, division and range
- Shortly, your jurisdiction will appear on the screen
On the GST Portal (Post Registration)
- Once you have registered yourself on the GST portal, visit the GST homepage
- Click on the “search” tab and select the “taxpayer” option
- Enter your GSTIN. After that, all the relevant details, along with central and state jurisdiction will be displayed properly on the website page
Every business entity needs to be GST compliant to facilitate smooth business operation. It helps in evaluating accurate data on the supply of goods and services within the geopolitical boundaries of the country.