If your Shopify store operates in India, this comprehensive guide will help you properly set up taxes in accordance with the latest tax regulations.
Since July 1, 2017, the Goods and Services Tax (GST) has been mandated for all goods and services offered by online stores in India. GST consolidates taxes previously collected by the Central and State governments into a single, unified tax system. This streamlines the tax process, making it easier for businesses to manage and comply with tax laws.
As a federal country, India still has both the Central and State governments collecting GST. The GST comprises three distinct taxes: State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Integrated Goods and Services Tax (IGST).
Understanding SGST, CGST, and IGST:
- State GST (SGST) refers to the GST collected by the State for intra-state sales. This tax is imposed when transactions occur within a single federal state (e.g., Maharashtra).
- Central GST (CGST) is the GST gathered by the Central government for intra-state sales. This tax is also applied to transactions happening within the same state.
- Integrated GST (IGST) is the GST levied by the Central government for inter-state sales, as well as on imported goods and services. Inter-state sales take place between states (e.g., selling from Maharashtra to Goa).
For instance, a store in Maharashtra selling items taxed at 18% will charge:
- SGST 9% + CGST 9% for a customer in Maharashtra (intra-state).
IGST 18% for a customer in Goa (inter-state).
- Online stores based in union territories (e.g., Delhi) should charge Union Territory GST (UTGST) instead of SGST for intra-state sales.
There are four tax rates (tax slabs) under GST: 5%, 12%, 18%, and 28%. The applicable rate depends on the type of products you sell. For example, essential goods and services typically fall under the lower tax slabs, while luxury items and services are taxed at higher rates. It is essential to understand which tax slab your products fall under to ensure accurate tax collection and compliance.
Additional topics covered in this article include:
- GST overview in India: This section provides an in-depth look at the history of GST, its implications, and how it affects businesses in India. It also discusses the advantages and disadvantages of implementing GST in the country.
- How to file GST: This part of the article offers a step-by-step guide on filing GST returns, the documentation required, and the deadlines for submission. It also covers the various types of GST returns and their respective filing frequencies.
- GST registration: Learn about the process of registering for GST, the eligibility criteria, and the necessary documentation to complete the registration.
- Input tax credit: Understand how the input tax credit system works under GST, its benefits, and how to claim credits for your business.
- GST compliance: This section delves into maintaining compliance with GST laws and regulations, including record-keeping, tax invoicing, and filing GST returns on time.
By following this guide, you will be better equipped to navigate the complexities of India’s tax system and ensure your Shopify store remains compliant with the country’s tax regulations.