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Is sales tax applicable to my business?

If you are selling any physical goods or product then sales tax applies to your business. The product could be a pen, paper, office stationery, laptops, notebooks, food items, and groceries. So for that matter, any item that you could touch and feel if you are selling such an item sales tax applies to your business.

What is the sales tax?

Sales tax is a tax that you pay to the government. Unlike income tax, this is not a tax amount that you pay from your pocket. You need to collect the tax amount from your customer and then pass it on to the government. For example, let's say you are selling an item for Rs.100 and assume 10 percent is a rate of sales tax in your state. So the total bill amount would be 100 rupees plus 10 rupees which is the tax amount. So the total bill amount would be a hundred ten rupees. Out of which hundred rupees for you and ten rupees is for the government. Hope that makes it clear.

Two kinds of sales tax:
1.VAT (Value Added Tax).
2. CST(Central Sales Tax).

VAT stands for valueadded tax and CST means Central Sales Tax. So when is VAT applicable to you and when CST? Let's say you have a shop in Bangalore and your customer is also in Bangalore, or in Karnataka. So if you're selling your product within the state of Karnataka then you will charge VAT on your bill. However, if your customer is in some other state could be Andhrapradesh, could be Tamilnadu, or could be Uttar Pradesh. Then you need a central state sales tax. The rate of VAT varies from state to state similarly the rate of a central sales tax varies from product to product. Please remember that sales tax is mandatory and you need to charge your customers either VAT or CST. If not, you might end up paying sales tax from your own pocket and that too with the penalties which you don't want to do. So please note that you have to charge the sales tax and collect it from your customers.

What is a TIN number?

The TIN stands for our Tax Identification Number. TIN is a local term for the sales tax number even though TIN stands for tax identification number it does not apply to service tax. It only applies to sales tax. So TIN is just another local term for a sales tax number that's it.

How much does it cost to get a sales tax number?

It cost 5000 to 10000 rupees to get us sales tax registration done. In some states like Maharashtra, they made it compulsory to get a professional tax registration also when you're applying for a sales tax number. In some states, a security deposit is also asked for. So you would have to pay a security deposit of around five thousand rupees to twenty thousand or thirty thousand rupees depending on the state and this is a security deposit that's normally refundable at the end of three years. So in most cities in India, the cost of sales tax registration is around 5000 to 10000 rupees.

What are the documents required to get a sales tax number?

If you go to any tax consultant is gonna give you a big list of documents that you will find very hard to understand. Keep it simple. Just remember that

1.You need to submit IDs and address proof of your business.
2.You also need to submit ID and address proof of the individuals or partners involved in the business.

What do we mean by ID and address proof of the business?

Please note that a PAN card is mandatory for any tax registration. I'm not referring to your personal PAN card but I'm referring to the PAN card of the business. So for example, if yours is a partnership firm then you need to apply for a PAN card in the name of the Partnership Firm before you can apply for a sales tax registration. Similarly, if yours is an LLP or a private limited company you need to get a PAN card in the name of the LLP or a private limited company. Now I was telling you that you need a submit ID and address proof of the business. You also need to submit ID and address proof of individuals or partners involved in the business. Now, what do they mean by ID and address proof of the business? First ID proofs of the business. PAN card copy of the business if it's a partnership: a partnership agreement.

If yours is an LLP then a PAN card along with the LLP agreement and a Certificate of Incorporation.

If yours is a private limited company then again a PAN card plus certificate of incorporation and the MOA and AOA. So these could be considered as the ID proofs of the business.