The Goods and Services Tax has made the entire tax process in India much smoother with a shift involving various indirect taxes coming together into a single tax form. It follows a destination-based model, meaning tax is collected at the point of consumption rather than the point of origin. Every business or individual that is registered under the GST is supposed to have a Unique Identification Number referred to as the GSTIN (Goods and Services Tax Identification Number). If you plan to apply for business loan you should be well versed with GST state codes.
Format of GSTIN
The GSTIN is a 15-digit unique identity number assigned to every registered taxpayer. It includes all the relevant taxpayer information, state, PAN, and type of business a person is running.
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Here is how it is actually broken up:
- First two digits: State code
- Next ten digits: PAN (Permanent Account Number) of the taxpayer
- Thirteenth digit: Entity code (shows the number of registrations the taxpayer has in a state)
- Fourteenth digit: Default value “Z”
- Fifteenth digit: Checksum digit for error detection
Example: A GSTIN may look like 29ABCDE1234F1Z5. The first two digits “29” represent the state code Karnataka.
Who Must Obtain GSTIN?
Not all are compulsorily registered under GST. The GST law specifies certain thresholds and conditions for registration.
Here are a few classes of persons and entities that must obtain a GSTIN:
1. Firms with Annual Turnover Above the Threshold
- In most states, businesses with turnover above ₹20 lakhs (₹10 lakhs for special category states) must register under GST.
- The threshold for services is ₹ 20 lakhs
2. Interstate Suppliers
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- Whether the turnover is above the threshold limit or less, any business that deals in the supply of goods as well as services from state to state needs to get registered in GST.
3. E-commerce Operators
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- Whether it is Amazon, Flipkart, or Swiggy all the sellers selling on these platforms are subject to GST registration.
4. Casual Taxable Persons and Non-Resident Taxable Persons
- All such persons or entities that do not have a fixed place of business in India but supply goods or services also require obtaining a GSTIN.
5. Other Types
- Input service distributors
- Those taxpayers falling under the reverse charge mechanism
- Those who are liable to deduct or collect tax at source (TDS/TCS)
What is a State Code Under GST?
The state code represents the GSTIN and specifies the jurisdiction to which a taxpayer is deemed to belong. There are two digits assigned to each Indian state and union territory under GST. These are the first two digits of the GSTIN. They ensure proper collection and allocation of taxes to the pertinent state or union territory.
Examples of GST State Codes:
36: Telangana
37: Andhra Pradesh
27: Maharashtra
29: Karnataka
33: Tamil Nadu
For example, if you are registered in Tamil Nadu, then your GSTIN would start with 33. The code tells not only where you are but also which state would get the SGST share of the amount collected.
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Why GST State Codes Matter
Knowing and applying the correct GST state code is crucial for various reasons:
- Sharing of Taxes: GST is broken down into three equal parts—CGST (Central GST), SGST (State GST), and IGST (Integrated GST). The state code ensures the SGST amount reaches the concerned state.
- Error Prevention: Supply of the wrong state code may lead to errors in a return filed and may attract late fees/penalties.
- Classification of Interstate and Intrastate Supply: State codes ensure a supply is classified as either interstate or intrastate according to which IGST or CGST+SGST has to be paid.
Conclusion
GST state codes and jurisdictions are a vast knowledge area, which is of significant importance to the smooth accomplishment of India’s GST regime. The state codes, although they help identify the location of a taxpayer, also play an important role in the proper assignment of tax revenue to the respective states. For businesses operating at multiple locations, understanding GSTIN structure and state codes is important in preventing errors, penalties, or delayed tax filings. Be it a small-scale business or large-scale enterprise, it is only due to knowledge about GST that things are smooth and going in the right way.
Business owners, especially MSMEs, face difficulty in getting timely financial assistance due to various factors, and NBFCs are supporting them by providing unsecured business loan to the MSME sectors with a specifically useful nature for cash flow management, expansion of operations, and investment in growth opportunities. It differs from traditional banks with a more flexible nature and speedy mechanism for loan approval, which play an important role in their growth journey.
