Goods and Services Tax is a new tax that has replaced all the other taxes. The Indian Government introduced it in July 2017. GST is an indirect tax strategically designed to establish a unified taxation system. It aims to enhance the efficiency of tax collection processes for businesses nationwide.
Businesses with an annual turnover of ₹40 lakhs or more are supposed to undergo GST registration. However, the amount is less in some special category states.
Learning what GST registration means and how it works is essential for a business owner. This article will explore what it implies, its types, benefits, or registration process!
What is GST?
GST, or Goods and Services Tax, is an indirect tax imposed on the supply of goods and services across India. The comprehensive taxation system is applied to the manufacturing, sales, and consumption of goods and services.
GST forms a crucial part of the entire indirect tax structure. Operating as a value-added tax, GST is levied at each stage of the supply chain. It ensures a seamless taxation process from manufacturers to the final consumer.
What are the Types of GST?
GST can be categorised into four sections, each based on the type of transaction involved. Understanding these categories can help businesses navigate the complexities and ensure compliance with the applicable regulations.
1. Integrated Goods and Services Tax
IGST comes into play when businesses transfer goods and services from one state to another. It is imposed on the sale of interstate products and services. IGST streamlines taxation for transactions that cross state borders.
2. Central Goods and Services Tax
CGST is the tax levied on the supply of goods and services within the jurisdiction of the Central Government. It has replaced central taxes, including Central Excise Duty, Service Tax, Central Sales Tax, Special Additional Duty, and Customs Duty.
3. State Goods and Services Tax
SGST is the tax applied on selling goods and services within a specific state. It replaces state-level taxes like entertainment tax, value-added tax, state sales tax, entry tax, surcharges, and cesses.
4. Union Territory Goods and Services Tax
UTGST is the form of GST applicable to selling goods and services within Union Territories. Union Territories include Chandigarh, Daman and Diu, Andaman and Nicobar Islands, Dadra, and others. Businesses operating here must pay tax on the intra-territory supply of products and services.
What is GST Registration?
GST registration is the formal procedure for taxpayers enrolling under the Goods and Services Tax (GST). The process is deemed mandatory for all entities that fall within the ambit of the GST act and are thus liable to fulfil tax obligations.
Who Should Register for GST Registration?
As per the 2017 Goods and Services Tax (GST) Act, businesses with an annual turnover of ₹40 lakh or more must register for GST. Notably, this threshold is set at ₹10 lakh in northeastern and hill states. However, some businesses must register for GST and acquire a unique 15-digit GSTIN, irrespective of their turnover:
- Individuals or entities engaged in the inter-state supply of taxable goods and services
- Individuals acting as distributors of input services
- Non-resident taxable individuals
- Individuals providing products or services on behalf of another registered taxpayer.
- Individuals falling under the reverse charge mechanism
- All eCommerce operators
- Individuals eligible for tax deductions under Section 37
- Aggregators supplying services under a new trade or brand name.
Additionally, if one is involved in the sale of goods within the same state with an annual turnover exceeding ₹20 lakhs or if one is a service provider within the same state with an annual turnover exceeding ₹40 lahks, GST registration is compulsory. This requirement also extends to suppliers within the same state.
What are the Types of GST Registration?
GST registration allows businesses to formally sign up to be subject to the Goods and Services Tax. Multiple types of GST registration are there to meet the varying demands of enterprises.
1. Regular GST Registration
The normal taxpayer category applies to most businesses operating in India. Entities under this category must register under GST if their turnover from taxable supplies exceeds ₹ 40 lakhs. The threshold is ₹20 lakhs for special category states (Jammu and Kashmir, Himachal Pradesh, and Uttrakhand).
2. Casual Registration
If a business operates on an occasional or seasonal basis, it falls under the category of a casual taxable individual. Under this classification, GST only applies to the income from business activities.
A business qualifies as a casual taxable individual if it meets the following conditions:
- Operates periodically or seasonally.
- Avoids engaging in regular trade activities.
- Ensures that total annual income from all sources is at most ₹2 million.
3. Non-Resident Registration
This category is designed for Non-Resident Indians who engage in the supply of goods or services as agents in a seasonal manner. Non-resident taxable (NRT) individuals fall under this special category, provided their total revenue from all sources, within and outside India, is less than ₹20 lakhs annually.
4. Composite Registration
Businesses with an annual revenue of up to ₹1 crore are eligible for the Composition Scheme. The Composition Scheme under Goods and Service Tax (GST) streamlines tax compliance. It reduces tax rates for businesses with a turnover of ₹1 crore.
What are the Documents Requirements for GST Registration?
Applicants must provide some documents to verify and validate their identity and complete their registration. However, the documentation varies depending on whether an individual or a business is applying for GST registration. The table below lists the necessary documents:
|Individuals or Sole Proprietors
|Hindu Undivided Families
|Partnerships and LLPs
What is the Fee for GST Registration?
Obtaining GST registration can be a complex process. It involves the submission of extensive business details and necessary scanned documents. It is worth noting that, currently, there are no prescribed fees under the GST law for self-registration on the GST portal. The online registration process is designed to be hassle-free and allows taxpayers to register at no cost.
What is the Process of GST Registration?
There are two ways to register for GST. Given below are the steps to go through the process:
Offline GST Registration
Businesses without access to the internet can opt to do it offline. The method is simple and straightforward.
- Visit the nearest GST office or centre (GST Seva Kendra).
- Ask for the GST registration form from the front office.
- Complete the form with correct and accurate information with all the relevant details. Businesses must provide their name, address, PAN, and contact information.
- Attach photocopies of the registration certificate, trade license, and other required documents.
- Check the form manually once done and submit it to the respective official.
- You will receive an application tracking number. Use it to know your registration status.
- Your business will get its GST registration number once the registration process is verified and complete.
Online GST Registration
It is the simplest and most common way to apply for GST. Here is a detailed process for online GST registration.
- Navigate to the GST portal. Click Services on the top menu and select New Registration.
- A new GST registration page will open. You will find two options: New Registration and Temporary Reference Number (TRN). Select the former and fill in the asked details.
- Validate your identity by entering the OTP sent to your registered mobile number and email.
- Jot down the Temporary Reference Number (TRN) displayed; it will be crucial for future reference.
- Return to the GST portal and select Register under the Taxpayers menu.
- Opt for TRN and input the generated TRN and the Captcha code.
- Confirm your identity by entering the second OTP received via the registered email and mobile number and click Proceed.
- On the next page, view your application status. Locate the Edit icon on the right side and click on it.
- At the top of the page, the registration application form will show ten tabs. Click each tab to enter specific details such as business particulars, information about promoters/partners, details of the authorised signatory, primary and additional business locations, specifics of goods and services, state-related information, Aadhaar authentication, and final verification. Rectify any inaccuracies in the Edit section.
- Validate the entered details on the Verification page and submit the application using EVC, E-sign, or DSC.
- A confirmation message will appear upon successful submission, and the Application Reference Number (ARN) will be dispatched to your registered mobile number or email for online GST registration.
- Track the status of your new GST registration using the ARN.
- Retrieve the GSTIN (GST Identification Number) generated for your registration.
How to Check the GST Registration Process?
Taxpayers can monitor the status of their applications, including new registrations, core amendments, or cancellations.
- Log in to the GST portal and go to Services. Click Track Application Status.
- Choose “Registration” from the Module dropdown.
- Select the application status using ARN, SRN, or submission date.
- Download the acknowledgement by clicking on the “download” hyperlink.
Please note that this feature is not available for first-time GST registration applicants.
What are the Benefits of GST Registration?
Businesses and individuals can take advantage by registering for GST. Besides being a legal necessity, registration makes taxpayers eligible for input tax credits. It means they can deduct the tax they paid on purchases from the tax paid on sales. Consequently, the entire tax bill is reduced. Some other notable benefits are:
1. Bank Loans
Regular GST return filing creates a reliable track record and proves business activity. Financial institutions, including banks and Non-Banking Financial Companies, often use GST return data to evaluate the creditworthiness of businesses.
2. Reduced Compliance Burden
Earlier businesses filed multiple returns for various indirect taxes. GST streamlines the process with a unified tax regime, reduces the number of filings, and makes compliance simpler.
3. Regulation of Unorganised Sector
GST registration introduces provisions for compliance, tax payments, and input credit benefits. It promotes transparency in tax collection and regulates the unorganised sector.
4. No More Double Taxation
The previous indirect tax system levied a tax on the same product or service multiple times at different supply chain stages. GST eliminates the cascading effect of double taxation and, thus, reduces the tax burden for businesses.
5. Composition Scheme for SMEs
Small and Medium Enterprises (SMEs) with an annual turnover below ₹70 lakhs can register for GST Composition Scheme for lower tax rates and less stringent compliance requirements.
What are the Things to Consider While Doing GST Registration?
It is essential to evaluate the complexity and simplicity of each GST registration. Businesses and individuals must consider the following factors to determine the correct registration type.
1. Annual Turnover
Businesses must evaluate their annual turnover to determine whether they surpass the prescribed threshold for mandatory GST registration. Different turnover thresholds may apply to various categories of businesses.
2. Business Structure
The business structure has implications for GST registration and may have varying compliance requirements. It refers to the legal form under which a business operates, such as a proprietorship, partnership, LLP, or company. The registration process may differ accordingly.
3. Nature of Business
The nature of business outlines the type of products or services a business deals with and its industry. It influences the GST rate applicable to its goods or services. Different categories attract different GST rates, and businesses must accurately classify their offerings.
4. Exempt Supplies
Exempt supplies refer to goods or services that are not subject to GST. Businesses dealing with them may have varying GST implications. Understanding and identifying exempt supplies is crucial for accurate GST compliance and reporting.
5. Filing Frequency
Filing frequency indicates how often a business must file GST returns, which can be monthly, quarterly, or annually. Businesses need to determine the frequency at which they are required to file GST returns based on their turnover to stay compliant.
Obtaining GST registration is a fundamental requirement for businesses. The PAN-based system streamlines the taxation framework and ensures a cohesive record of business transactions and compliance with regulatory standards. Proactive planning is crucial for entities operating on a casual or non-resident basis.
The application for GST registration must be submitted at least five days before the commencement of business activities. Additionally, for individuals navigating legal obligations across multiple states, timely registration within thirty days of becoming liable ensures adherence to state-specific regulations.
Embracing the GST registration process aligns businesses with regulatory requirements and fosters transparency and compliance. It lays the groundwork for seamless operations and growth opportunities in the dynamic taxation landscape.
Frequently Asked Questions
Q1. What is GSTIN or Goods and Services Tax Identification Number?
Goods and Services Tax Identification Number is a unique 15-digit identification number assigned to each taxpayer for every state in which they operate. The PAN-based number is acquired once the GST registration application undergoes verification and approval.
Q2. What is the Timeframe for Registering Under GST?
Individuals or entities must obtain GST registration within 30 days from the date they become liable for registration.
Q3. Is GST Registration Free of Cost?
Yes, businesses with an annual turnover of up to ₹20 lakhs more can register for GST for free.
Q5. Is GST Compulsory?
Yes. GST laws and regulations mandate businesses that conduct particular types of transactions or reach the specified turnover threshold to register for GST.
Q5. How Many Days Does it Take for GST Registration?
Registering for GST in India takes 5 – 7 business days to 15 days. The time frame depends on various factors, like the accuracy of the information provided.
Q6. What if the GST Registration Application Gets Rejected?
The applicant can respond to the rejection letter if the GST application is rejected. However, if one decides to submit a new GST registration application, they are required to wait for a final rejection, which typically takes approximately ten days.
Q7. Should I Need the PAN Card to Register Under GST?
Yes, a PAN card is mandatory for GST registration. Although obtaining it is crucial before applying for GST registration, one can use a TAN for TDS registration under GST.
Q8. What Happens After Obtaining the GST Registration?
The taxpayer will receive a GST registration certificate in Form GST REG-06 and a valid GST Identification Number after the successful registration. One can then raise GST-compliant invoices, input tax credits, and file returns.
Q9. What is the Penalty for not Registering Under GST?
Suppose one fails to pay tax due to genuine reasons. In that case, the penalty will be 10% of the tax amount outstanding, subject to the smallest possible amount of ₹10000. However, there will be a penalty of 100% of the due tax amount for those who purposely evaded the tax.
Q10. Can I File for Cancellation of GST Registration?
You can file for cancellation if you are registered under GST and have not been carrying out any business activities. Fill out Form GST C-20 and combine it with an affidavit claiming you have not done any business activities in the last 12 months.