COUNTRY GUIDES / India

India tax guide for businesses

VAT Rate
18%
E-Invoicing
B2B Mandatory
Real-Time Reporting
Mandatory
Digital Service Tax
Yes
Products supported
Lookup
Tax ID validation
Tax
Tax amount calculation
Invoicing
Compliant invoice generator
Reporting
Real-time transaction reporting

Compliance And Rates

GST Number Format In India

GST number is also known as a GSTIN (GST Identification Number).


Indian GST number contains 15 digits, followed by the rules:

  • The first two digits represent the state code (e.g., the state code of Karnataka is 06)
  • The next 10 digits are derived from the PAN (Permanent Account Number) of the business entity
  • 13th digit is based on the number of registrations done by the business entity within a state
  • 14th character is the letter "Z"
  • The last character is the check code (number or letter)

GST Rates In India

The standard GST rate in India is 18%, with reduced rates of 12% and 5% on certain goods and services and a higher rate of 28% on some goods and services. Some goods and services are exempt from Indian GST, like postal services, existential food, and books.

  • 28% (Higher) – Luxury goods (cars), air conditioning, cement, chocolate
  • 18% (Standard) – Applies to all taxable supplies, with certain exceptions
  • 12% (Reduced) – Some foodstuffs (frozen meat and dried fruit), restaurants without air conditioning, construction, mobile phones, and some accommodation  
  • 5% (Reduced) – Some foodstuffs (sugar, tea, cooking oil), advertising
  • 0% (Zero) – Some existential foodstuffs, books, newspapers and periodicals, postal services

GST Payments And Returns In India

The general type of GST return consisted of 2 annexures called GST ANX-1 and GST ANX-2. A tool prototype is available for download in the GSTN portal for future users to get familiar with its functionalities and share feedback.


GST Returns Frequency In India

Returns generally need to be filed monthly. Small taxpayers are allowed to file it quarterly (Small taxpayers are considered as the ones earning up to INR 10M).


As the system changes, deadlines are subject to CBIC notifications.

Penalties in case of late filings or misdeclarations

In the case of the late filing of VAT returns and payments, the Indian government prescribed the penalties as follows:

  • Late filing – INR 100 per day, totaling to INR 200 per day. The maximum amount that can be charged is INR 5000, with 18% interest p.a.
  • Non-filing – can trigger accumulated late filing penalties.
  • For over 21 non paid or non-fully paid amounts, the taxpayer will be liable for 10% of the tax amount due
  • If the intention was tax invasion or fraud, a taxpayer is liable for 100% of the unpaid amount, with the highest penalty being a jail sentence of up to 5 years.

Invoice Requirements

Required fields for GST compliant invoice are as follows:

  • date of the invoice
  • a unique number of the invoice
  • supplier data (company name, address, tax number)
  • customer data (address and other data if available, GSTIN)
  • Place of supply
  • HSN code/ SAC code
  • full description of goods and services provided (quantity, unit, total value)
  • the net, the taxable value of the invoice
  • any discounts if applicable
  • rate and amount of taxes, i.e., CGST/ SGST/ IGST
  • if GST is payable on a reverse charge basis, a signature of the supplier

E-Invoicing

All invoices that need to be submitted for tax reporting will have to be uploaded via the GST portal as of January 2020 (applies to B2B only).

The limit for the applicability of e-invoicing is currently set at INR 1B (as of Dec 2019).

Real-Time Invoice Reporting

Invoice Registration Portal - IRP

The IRP authenticates electronic invoices and serves as a register for e-invoices. Systems can interact with the IRP portal in many ways, including APIs, mobile apps, etc.

The IRP system validates required fields of B2B electronic invoices based on pre-defined parameters. It generates an invoice reference number if that hasn’t been done by the issuing system already. After the invoice reference number has been generated, the system creates a digital signature and a QR code in JSON for the supplier. IRP also sends an authenticated payload to the GST portal for returns. GDT ANX-1 and 2 also get auto-filled for the relevant tax period.

An invoice can still be printed. The system only requires invoices in electronic format for validation.

OIDAR

The IGST Act defines OIDAR (Online Information Database Access and Retrieval) is a category of services provided through the medium of the internet and received by the recipient online without having any physical interface with the supplier of such services.

Some of the services in the scope of OIDAR:

  • online ads
  • providing cloud or hosting services
  • provision of e-books, movies, music, software over the internet
  • online supplies of digital content (movies, television shows, music, and the like)
  • digital data storage
  • online gaming


This type of tax must be paid by the supplier, even if it is located outside of India. For example, if an online media streaming provider is from the US, it is obliged to pay the digital service tax.

GST tax rate of 18% will apply for such services, while e-books have a lower tax rate of 5%.