Complete Guide to GST in India

GST rates in India 

How much is GST in India? 

The India GST regime, when reviewed in detail, represents one of the most complex and cumbersome indirect tax systems worldwide. The complexity of the GST mechanism is evident from the outset, particularly in addressing variations in the standard GST rates. 

In most countries that have implemented VAT or similar sales tax systems, the classification of different VAT rates generally follows a standard route: standard rate, reduced rate (s), zero-rate, and tax-exempt supplies. 

In India, the situation is quite different. There is more than one standard GST rate. The standard GST rate varies in India for taxpayers and is currently applicable at 0%, 5%, 12%, 18%, and 28%. Alongside the standard rates, there are also reduced GST rates such as 3% and 0.25%. There are also super-reduced GST rates that can be applied to a specific group of taxpayers. 

Before the introduction of the GST, services provided online by non-resident service providers were outside the scope of the service tax. Domestic taxable persons were obliged to pay service tax when they supplied electronic services to local recipients. This created unequal trading circumstances in which foreign providers profited largely. 

The introduction of the IGST contributed to the extension of the GST to the overseas providers of digital services. In India, the equivalent term for the EU’s electronically supplied services (ESS) concept is Online Information Database Access and Retrieval (OIDAR) services. 

This type of service is (according to the latest update of the definition) services whose delivery is dependent on the internet or similar information technology and are impossible to be provided in the absence of it. 

OIDAR services are subject to the 18% GST rate in India.

GST threshold in India 

Non-resident providers of OIDAR services have the option to register for GST under the simplified registration scheme. The simplified registration scheme for non-resident providers of digital services is available through the GST REG-10 registration template. 

The registration form should be submitted to the respective tax authorities via the online portal within 5 days before the commencement of the business activity. 

The  GST threshold in India for overseas providers of digital services/products is defined within the IGST Act, since the updates from 2017 that introduced the modern concept of taxability framework for digital services provided by non-resident providers. 

GST registration threshold for resident businesses: the registration threshold for domestic companies that provide services is INR 2 million, and for domestic companies that make the supply of goods is INR 4 million

GST registration threshold for non-resident businesses: GST registration threshold for non-resident businesses depends on the type of business activity and the recipient’s tax quality

GST registration threshold for foreign providers of digital services: No threshold

GST Taxable Activities in India

Types of taxable activities that trigger mandatory GST registration:

• Supply of goods and services for consideration;
• Exports;
• Imports of goods and services; 
• Overseas sales of low-value goods to customers in India
• Provision of digital services to customers in India

Tax Representative in India 

Non-resident providers of OIDAR services without a representative in India and without permanent establishment are mandated to acquire the services of a local tax agent for GST compliance duties. 

Tax registration 

Standard Registration 

Domestic or foreign taxable persons with physical presence in India that exceed the registration threshold must register for India GST, following the standard registration procedure. To address different types of registration procedures, depending on the applicant’s place of business or the type of business activity, the GST Council has published various templates and modalities through which the respective party can register. 

Simplified tax registration 

For non-resident providers of digital services (OIDAR Services), the GST Council has published a simplified registration scheme. The following scheme – GST REG-10, should be used by non-resident providers of digital services to end customers based in India.

The GST REG-10 registration form(or fully “Application for registration of persons supplying OIDAR services from outside India to an unregistered person in India”) has been in circulation since the end of 2017 and the introduction of the GST liability for overseas providers of digital services. 

To streamline the entire simplified GST reporting process for non-resident providers of digital services, the revenue authority has issued a simplified GST return template. Non-resident providers of digital services or their tax agents should use the GSTR-5A return template. (Return for Online Information and Database Access or Retrieval (OIDAR) services providers)

GST on Electronically Supplied Services in India 

Digital Services

The GST-registered non-resident providers of digital services are required to charge, collect, and remit GST on the supply of specified OIDAR services to end customers based in India. For B2C transactions, the obligation to collect and remit GST lies with the provider. 

Concerning the B2B transactions to GST-registered local businesses, the GST-registered non-resident supplier of digital services doesn’t have the obligation to include GST in its invoice. The supply will be tax-exempt based on the reverse charge mechanism. However, the supply will be reported under the GSTR-5A return for tax monitoring purposes. 

How much is GST in India for Electronically Supplied Services?

The GST rate India for supplies of most of the OIDAR services(digital and non-digital) is 18%.

Taxable Digital Services in India

The following types of digital services trigger mandatory GST India registration of non-resident providers:

• Website supply, web-hosting, and distance maintenance of programmes and equipment;
• Supply of software and updating thereof
• Supply of images, text, and information, and making available databases;
• Travel arranging services
• Supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events;
• Supply of distance teaching.

Marketplace and Digital Platform Operators Rules

Electronic marketplaces and digital platform operators, who directly or indirectly own, operate, or manage online platforms through which merchants or digital service providers can offer their goods or services to customers, have additional registration and reporting obligations. 

E-commerce platform operators that facilitate the supply of goods and services by third parties registered on the platform should register and collect so-called tax at source (“TDS”) at a rate of 1%.
The tax at source is collected based on the gross sales amount (including GST) that third-party suppliers should receive for their supplies. 

This deduction must be made at the time of payment to the underlying suppliers. It means that e-commerce operators are required to deduct the 194O TDS amount before making payments to underlying suppliers for the sale of their goods or services through e-commerce platforms.

The e-commerce operator is required to remit the collected TDS to the tax authorities using Form 26Q through the TDS Reconciliation Analysis and Correction Enabling System. 

Invoicing Rules

A GST-registered taxable person whose threshold is above INR 50 million in any financial year from 201/2018 is obliged to issue and report e-invoices for B2B transactions. However, there are some exceptions to this general obligation, which apply to specific types of transactions. 

A GST-registered non-resident supplier of digital services is required to issue a commercial invoice or receipt that meets the mandatory content requirements. For B2C transactions, the following represents the minimum content requirements:

General information 

• Date of invoice issuance 
• Transaction Reference Number
• Place of supply

Seller information

• Company name
• Full address(head office)
• Billing address if different from company address
•  GST number
• Shipping address 

Customer information

• Name 
• Full address
• GST number(if applicable)
• Billing address

Fiscal Information

• Tax amount for each type of goods or services supplied
• Net value per tax rate
• HSN code/SAC code
• Distinct line of gross value per tax rate or tax-exempt supply
• Total tax  amount 
• Invoice Total tax exclusive
• The rate of any discount
• Total invoice amount

Foreign Currency Invoice in India  

Issuing an invoice in a foreign currency is generally permitted. However, GST declarations should be submitted exclusively in the local currency.  

GST Return in India 

Standard Return 

Local businesses and foreign businesses with a permanent establishment in the country should follow the general reporting and accounting rules and are mandated to complete and submit the prescribed return template. Various types of return templates depend on, for example, the level of turnover and types of business activities.

Simplified return 

GST-registered OIDAR service providers should follow the specifically designated GST compliance rules for tax filing and remittance: 

• GSTR-5A Filing: Providers should file the monthly return within the 20th day of the following month
• Nil Returns: Similar to other forms of GST compliance, if no supplies were made, the nil return should be filed 

GST Simplified Return

Penalties for late reporting and omitted declarations 

Late GST return filing, payment, and registration are situations in which taxable persons are most likely to experience the unwanted expense of paying a fine, penalty, and/or interest for failing to comply within the prescribed timeframe. 

Fines and penalties according to the GST India Act:

PENALTIES FOR LATE PAYMENT AND FILINGS:

The nonpayment of tax, an incomplete tax payment, an incorrect refund, or incorrect use of input tax credit is liable to a penalty of INR20,000 or 10% of the tax due, whichever is higher. 

The late filing of periodic returns also attracts a penalty calculated daily with a maximum cap of INR 10,000.

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