Employer Identification Numbers (EINs) for Non-US Residents
1. Introduction to GST
The Goods and Services Tax (GST) is a comprehensive, indirect tax levied on the supply of goods and services in India, implemented on July 1, 2017. It replaced a fragmented system of multiple central and state taxes, including excise duty, service tax, value-added tax (VAT), and octroi, to create a unified tax structure. GST is a destination-based, multi-stage, value-added tax, meaning it is collected at the point of consumption and applied at every stage of the supply chain, with provisions for input tax credit (ITC) to avoid tax cascading.
GST is governed by the Central Board of Indirect Taxes and Customs (CBIC) under the Ministry of Finance and administered through the GST Network (GSTN), a digital platform facilitating registration, return filing, and compliance. The tax is categorized into four types:
- Central GST (CGST): Levied by the central government on intra-state supplies.
- State GST (SGST): Levied by state governments on intra-state supplies.
- Integrated GST (IGST): Levied by the central government on inter-state supplies.
- Union Territory GST (UTGST): Applied in Union Territories for intra-UT supplies.
2. Structure and Rates
GST operates under a slab-based rate structure, ranging from 0% to 28%, with additional cess on certain luxury and demerit goods. The standard rates are:
- 0%: Essential items like unprocessed food, healthcare, and education services.
- 5%: Basic goods and services, such as packaged food and transportation.
- 12% and 18%: Commonly used for most goods and services, including processed foods, electronics, and professional services.
- 28%: Luxury goods and services, such as high-end vehicles and hospitality services.
The GST Council, comprising central and state finance ministers, determines tax rates and policies, ensuring alignment with economic and fiscal objectives.
3. Key Features of GST
- A. Input Tax Credit (ITC)
ITC allows businesses to claim credit for GST paid on inputs (goods or services) used in producing taxable supplies, reducing the overall tax burden. ITC is available for CGST, SGST, and IGST, but it cannot be claimed for exempt supplies or personal use. Businesses must maintain proper invoices and comply with ITC conditions outlined in the GST Act.
- B. GST Registration
Businesses with an annual turnover exceeding ₹20 lakh (₹10 lakh in special category states) must register for GST and obtain a unique GST Identification Number (GSTIN). Voluntary registration is allowed for smaller businesses to avail ITC benefits. The GSTN portal streamlines registration and compliance.
- C. Return Filing
GST compliance involves regular filing of returns through the GSTN portal:
- GSTR-1: Details of outward supplies, filed monthly or quarterly.
- GSTR-3B: Summary return of sales, purchases, and tax paid, filed monthly.
- GSTR-9: Annual return consolidating all transactions for the financial year.
Recent updates, such as the GSTN’s decision on May 16, 2025, to keep Table 3.2 of GSTR-3B editable, address taxpayer concerns regarding inter-state supply reporting, enhancing compliance flexibility.
- D. E-Invoicing
Mandatory for businesses with a turnover above ₹5 crore, e-invoicing requires generating invoices through the GSTN’s Invoice Registration Portal (IRP). This ensures real-time tracking of transactions and reduces tax evasion.
4. Applicability to Goods and Services
GST applies to most goods and services, with specific exemptions and rates:
- Goods: Taxed based on the Harmonized System of Nomenclature (HSN) codes, with rates varying by category (e.g., 5% for essential goods, 28% for luxury items).
- Services: Taxed based on Service Accounting Codes (SAC), typically at 18% for professional and financial services. Exemptions include healthcare, education, and certain financial services like interest on loans.
The place of supply rules determines whether CGST/SGST or IGST applies, based on the location of the supplier and recipient.
5. GST VS VAT
| Aspect | GST | VAT |
|---|---|---|
| Applicability | Levied on both goods and services | Primarily imposed on goods |
| Tax Structure | Unified tax Structure with multiple slabs | Varied tax rates based on Product Classification |
| Input Tax Credit | Claim across goods and services | Limited to goods, excludes services |
| Threshold Limit for Registration | Uniform threshold for all states | Varies across States |
| Compliance | One Consolidated return | Separate returns for VAT and Service Tax |
Source – https://www.bajajfinserv.in/
6. Recent Developments
- Editable GSTR-3B Table 3.2: The GSTN’s May 2025 update allows taxpayers to edit Table 3.2 of GSTR-3B, facilitating accurate reporting of inter-state supplies and reducing errors in IGST calculations.
- Rate Rationalization: The GST Council is exploring rate simplification to reduce slabs and enhance compliance, with discussions ongoing as of May 2025.
- Anti-Evasion Measures: Enhanced scrutiny through e-invoicing and data analytics has curbed tax evasion, with stricter penalties for non-compliance.
7. Tax Laws Before GST
| Taxes Which are Subsumed by GST | Taxes which are still present post-GST |
|---|---|
| Central Excise Duty | Basic Customs Duty |
| Duties of Excise | Tax on Petrol and Diesel |
| Additional Duties of Excise | Tax on Tobacco and Alcohol |
| Additional Duties of Customs | Stamp Duty on Property |
| Special Additional Duty of Customs | Electricity Duty |
| Cess | Vehicle Tax |
| State VAT | Property Tax |
| Central Sales Tax | |
| Purchase Tax | |
| Luxury Tax | |
| Entertainment Tax | |
| Entry Tax | |
| Taxes on advertisements | |
| Taxes on lotteries, betting and gambling |
Source – https://cleartax.in/
8. How to Create a GST Invoice
A GST invoice is a mandatory document for claiming ITC and ensuring compliance. It must include specific details as per GST provisions.
Steps to Create a GST Invoice:
- Include Mandatory Details:
- Invoice number and date.
- Supplier’s name, address, and GSTIN (GST Identification Number).
- Recipient’s name, address, and GSTIN (if registered).
- HSN (for goods) or SAC (for services) codes.
- Description, quantity, and value of goods/services.
- Applicable GST rate (CGST, SGST, or IGST) and tax amount.
- Place of supply and total invoice value.
- Issue Within Time Limit: Invoices must be issued within 30 days of supply (45 days for banking/insurance services).
- Use E-Invoicing (if applicable): Businesses with turnover above ₹5 crore must generate e-invoices with an Invoice Reference Number (IRN) via the GST portal.
- File with Returns: Invoice details are auto-populated in GSTR-1 for the supplier and GSTR-2A/2B for the buyer, ensuring ITC eligibility.
9. Conclusion
The Goods and Services Tax has transformed India’s indirect tax landscape by creating a unified, transparent, and efficient tax regime. Despite challenges like compliance complexity and technological barriers, GST has facilitated seamless trade, improved revenue collection, and enhanced business transparency. Ongoing reforms, such as editable return fields and rate rationalization, reflect the government’s commitment to addressing taxpayer concerns. Businesses and individuals can leverage the GSTN portal for compliance, ensuring adherence to regulations while benefiting from the input tax credit mechanism.