GST in India
A goods and services tax (GST) took effect in India on July 1, 2017.
The GST is an indirect tax throughout India. It replaces other taxes and levies that are applied by the central and state governments, including Value Added Tax (VAT), Central Sales Tax, Excise Duty, and Commercial Tax, among others.
Talk to your tax consultant to make sure your business is registered and compliant with the GST.
Who needs to register for GST?
GST registration is mandatory if:
- your turnover in a financial year exceeds Rs 20 lakhs (Rs 10 lakhs for North Eastern and hill states)
- your business is registered under an earlier law, such as Service Tax or VAT
- you are involved in inter-state supply of goods
- you sell on online marketplaces.
This is not a complete list. Talk to your tax consultant to learn whether you need to register.
What's the difference between IGST, CGST, and SGST?
For inter-state supply of goods or services, a single tax - Integrated GST (IGST) - is payable to the central government. For intra-state sales, you need to pay Central GST (CGST) to the central government and a State GST (SGST) to your state government.
Because you can't set multiple tax line items in Shopify, you can set up your taxes so that you are charging the sum of SGST and CGST for intra-state sales of goods.
Where can I learn more about the different GST categories?
For information about the GST categories, see the website of the Central Board of Excise and Customs.
How should I set up my taxes?
Because the tax rate differs depending on the type of product, the specific rate cannot be set automatically. Instead, Shopify sets some defaults that you must update depending on your specific needs.
The CGST is set initially to 9%. The IGST is set to 18% instead of federal tax for all states except Karnataka. For Karnataka, the SGST is set to 9% added to federal tax.
Use these default tax rates as a starting point to set up your taxes.
For example, if you are a merchant in Mumbai (state of Maharashtra) where a 28% GST applies:
- Set the federal tax rate to 14%.
- For all states except Karnataka and Maharashtra, set the IGST tax rate to 28%.
- Set the rate in Karnataka to 28% IGST instead of federal tax.
- Set the rate in Maharashtra to 14% SGST added to federal tax.
To apply different rates to different types of products, you can create hidden collections for each tax category and assign your products to these collections, and then override the tax rates for each collection.
How do I set an HSN code on my products?
You can use the HS tariff code for products to store the HSN code. This field is in the Shipping section of the product page.
This field requires that codes have at least 6 digits, so if you want to use shorter HSN codes you'll need to add HS codes as metafields or product tags.
Does Shopify provide a GST-compliant invoice?
Shopify doesn't create a GST-compliant invoice. You'll need to engage a third-party GST invoicing service instead. For example, the following third-party apps can help you set up your invoices: