Understanding the basics of GST and Current Account
What is GST?
Goods and Services Tax – GST is a single indirect tax that is aimed to turn India into a unified common market. The tax is levied on the products and or services within the country. GST has now subsumed numerous indirect taxes which were imposed on the suppliers and consumers by the Central and State Government.
Several benefits with the implementation of the GST can be summed up as :
• Elimination of the cascading outcome of tax on the sale of goods and services.
• Organised regulation of the unorganised sectors of business.
• Lower responsibility of compliances.
• An extensive threshold for registration.
• Accurate and precise treatment for E-commerce businesses
• An integrated online process for registration, filing returns, applying for refunds, etc
• Composition program for small businesses.
To carry out any financial transaction for your business, you require to set up a Current Account. However, GST is not mandatory to open a Current Account.
A current bank account is widespread among companies, sole proprietorships, enterprises who execute a large number of financial transactions regularly.
The Regular Current Account can be opened with a majority of commercial banks; however, at times, there is a requirement to maintain a minimum balance in this kind account. The account holder does not earn any interest on this account due to its liquidity factor. There is no GST on Current Bank Account.
Since we have established what is a Current Account and GST, let us look at whether they have any implication on each other.
The Current Account is mainly for business banking transactions.
GST is a tax levied on the end-user when they purchase a commodity or service.
Thus, there is no levy of GST on Current Account,
Let us look at a list of documentation required to set up a Current Account and to register for GST.
Current Account :
Identity proof such as PAN card (compulsory), Passport, Aadhar Card, etc
• Address proof: Aadhar Card, driving license, voter id card, etc
• In the case of any company, the registered documentation related to the specific type of company is required.
• No deposit is needed for the account when you receive your welcome kit.
Valid Indian mobile number
Valid email ID
Valid Indian bank account (Current Account details)
Bank details: IFSC code, address and branch name
Place of operations
All prescribed documents and information
At least one proprietor, partner, director, trustee, karta, a member with their corresponding PAN
An authorised Indian signatory with valid details, including PAN
When you register under the GST scheme, you are provided with a GSTIN – Goods and Services Tax Identification Number which is provided to all businesses under various platforms consolidated under the GST. The GSTIN is not mandatory when you set up your Current Account with any bank. However, when you register under the GST scheme, you do require a functional Current Account.
Therefore the business owner does not have to pay GST on Current Bank Account set up or functioning.
Looking to apply for a Current Account? Click here to get started.
Want to know more about tax implications of holding a Current Account? Click here to get started.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.