Introducing a pivotal transformation in India’s Tax Structure: Goods and Services Tax (GST). This monumental shift in the tax regime has profound implications, especially GST incentives for special category states such as Himachal Pradesh and Jammu and Kashmir, thus allowing them to enjoy unique privileges.
Did you know that these states have caught a glimpse of a remarkable 14% average increase in tax revenue since enforcing GST?
This blog delves into the comprehensive benefits of GST registration in special category states, shedding light on the significant GST advantages and incentives that propel these regions toward economic growth and streamlined compliance.
Understanding GST Registration
Registration and related processes under GST being primarily an online procedure, various forms/formats numbering 30 have been specified under CGST Rules relating to enrollment.
In this section, we’ll explore the requirements and different categories for GST enrollment. Registration and benefits of GST registration in special category states and who need to sign up for GST.
What is GST Registration?
GST registration, short for Goods and Services Tax registration, is an obligatory cycle for businesses and individuals in India who are involved in the supply of goods or services. It is a lawful provision for entities whose annual turnover transcends a defined threshold.
You are allocated a unique GSTIN (Goods and Services Tax Identification Number) when you document GST filing. This number allows you to collect GST from your consumers, claim an input tax credit on the GST paid on your assets, and file GST returns.
GST advantages for special category states and helps streamline the taxation system by ensuring that businesses comply with tax regulations, facilitating the smooth flow of credits and compensations, and reducing tariff evasion.
Who Needs to Register for GST?
In India, the Goods and Services Tax (GST) registration is directed for the following individuals and entities:
- Mandatory Registration: You must register for GST if your annual turnover exceeds the threshold limits.
- For enterprises in most states: INR 40 lakhs
- GST incentives for special category states: Threshold at INR 20 lakhs for Manipur, Mizoram, Sikkim, Tripura, Himachal Pradesh Uttarakhand, and more.
- For service providers: INR 20 lakhs.
- Voluntary Registration: You can choose to voluntarily register yourself for GST even if their turnover rate is below the fixed limit. This can be profitable, as it allows one to claim the input tax credit on your investments making your industry more credible to others.
- E-commerce Operators: E-commerce media, irrespective of turnover, must acquire GST registration.
- Interstate Sales: If your business is spread across state lines, you need to enlist for GST, regardless of your turnover.
- Casual Taxable Person or Non-Resident Taxable Person: Individuals or entities concerned with infrequent taxable trades in India, such as event organizers or foreign businesses, must register for GST.
Apart from these, several other entities need to register for GST as documented under Sections 22 to 30 of the Central Goods and Services Tax Act, 2017 (CGST Act) and respective State Goods and Services Tax Act, 2017 (SGST Act).
Different Categories of GST Registration
GST registration can be classified into various types to cater to the specific conditions of businesses and individuals.
- Regular GST Registration: Corporations whose annual turnover exceeds the prescribed threshold limits, need to file for regular GST returns and collect GST from their clients.
“Analysis of Return Filing Data Reveals 90% of GST Contribution Originates from the Upper 22% of Businesses in India with Turnovers Exceeding 50 Crores”
- Composition Scheme Registration: Small businesses with an annual turnover below a certain limit (usually INR 1.5 crores) can opt for the composition strategy. Under this scheme, they pay GST at a lower rate and are not qualified for lawsuit input tax credit.
- Casual Taxable Person: Individuals or businesses that engage in occasional taxable transactions in a different state where they don’t have a regular place of business need to register as casual taxable persons.
- Non-Resident Taxable Person: Foreign non-resident individuals or industries making taxable commodities in India must obtain registration as non-resident taxable persons.
- TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) Registration: Individuals or entities that are mandated to deduct or collect tax at authority are required to register under GST.
Special Category States and GST Registration
GST incentives for Special category states in India, such as Himachal Pradesh, Uttarakhand, Jammu and Kashmir, and some northeastern states, allow certain liberties and exemptions when it comes to GST registration.
- Higher Threshold Limits: One of the primary GST advantages for special category states is that the threshold limits for GST registration are generally higher in these states. The limit set for businesses was INR 40 lakhs, but in special category states, it was INR 20 lakhs. This means that businesses in these states with an annual turnover of up to INR 20 lakhs are not required to record for GST.
- Composition Scheme: Small businesses in special category states with an annual turnover of up to INR 1.5 crores have the option to enroll in the composition scheme. Under this scheme, they can pay GST at a reduced rate and enjoy easier compliance.
- IGST Exemptions: For inter-state supplies, businesses in special category states are often exempt from the Integrated Goods and Services Tax (IGST). This can reduce the tax burden on businesses engaged in interstate transactions and therefore, GST registration can help special category states attract foreign investment.
- Incentives for Investment: Some of these states provide supplementary incentives, such as exemptions or reduced rates, for specific initiatives or investments, proving GST registration can help special category states boost their economy.
Top Benefits of GST Registration in Special Category States
Here are the top 7 benefits of registering for GST in special category states:
- Tax Exemption: GST incentives for special category states offer businesses significant tax immunities or lower tax rates, resulting in significant cost savings, particularly for startups and small industries.
- Input Tax Credit: Industries can claim input tax credits on their assets and improve cash flow by reducing the overall tax liability. This is also how GST registration can help special category states boost their economy.
- Visa to a Larger Market: Special category states often benefit from their strategic geographical locations or unique economic incentives, which can provide businesses with opportunities to access a larger market and tap into new customer bases.
- Attracting Foreign Investors: GST registration can help special category states attract foreign investment. The tax incentives and business-friendly environment in special category states encourage industry development and expansion.
- Reduced Scrutiny and Inspections: GST incentives for special category states by ensuring businesses adhere to standardized rules and regulations, reducing the likelihood of extensive scrutiny and inspections, thereby streamlining operations and saving time and resources.
- Compliance with Legal Requirements: GST registration ensures that businesses adhere to legal compliance, fostering transparency in business operations and protecting the interests of both businesses and consumers.
- Economic Development: GST registration can help special category states create jobs by promoting business growth. It contributes to the overall economic development of special category states, bringing about social and economic benefits to the region.
Things to Keep in Mind While GST Registration Process
When going through the GST registration process in India, there are several important aspects to keep in mind to ensure a smooth and law-abiding registration.
- Ensure that you meet the eligibility criteria for GST registration, which includes turnover thresholds, business type, and location.
- Be prepared for Aadhaar authentication, as it is often a part of the registration process.
- Gather and upload the required documents, including business proof, address proof, bank account details, and authorized signatory details.
- Provide accurate information about your business, including its legal name, trade name (if any), and PAN (Permanent Account Number).
- Specify the authorized signatory who will be responsible for GST compliance, and provide their details.
- Mention the goods and services you intend to supply under GST. Use the appropriate HSN (Harmonized System of Nomenclature) or SAC (Service Accounting Code) codes.
The GST registration process can be complex, and adherence to these considerations can help businesses register correctly and avail the benefits of GST registration in special category states. This navigates the GST system more effectively.
Step-by-Step Guide to Registering for GST
Primarily, the individuals should be aware of the eligibility and compile documents required for the registration process. Here’s a directory of documents that one needs to gather to register GST in special category states.
List of Documents Required
The specific documents required for GST registration in India may vary based on the type of business entity, such as a proprietorship, partnership, company, or others. However, here is a general list of documents commonly needed for GST registration:
- PAN Card: Permanent Account Number card of the enterprise entity or the person applying for registration.
- Aadhaar Card: Aadhaar card of the proprietor, partners, or directors, depending on the type of industry.
- Photograph: Passport-sized photographs of the proprietor, members, or administrators.
- Proof of Business Registration:
- For a partnership firm: Partnership deed.
- For a company: Certificate of Incorporation and Memorandum of Association.
- For other entities: Registration certificate under a relevant act.
- Proof of Principal Place of Business:
- Rental/lease agreement or electricity/water bill for the premises.
- NOC from the owner of the property.
- Bank Account Details: A scanned copy of a canceled cheque or bank statement.
- Authorized Signatory Details: List of authorized signatories and their proof of identity and address.
- Details of Business Venture: Description of the main business activities and the list of goods or services offered.
- Digital Signature Certificate: In the case of companies, LLPs, or other entities, a Class 2 Digital Signature Certificate is required for online verification.
- Business Bank Account Proof: A bank statement or a copy of the passbook for the bank account.
11-Step Process For GST Registration
Step 1: Determine Eligibility
Check whether your business is eligible for GST registration based on the suggested annual turnover and other criteria.
Step 2: Create a GST Common Portal Account
Visit the GST Common Portal (https://www.gst.gov.in/) and create an account.
Step 3: Log in to the GST Portal
Log in to the GST portal using the created username and password.
Step 4: Fill the Part-A of GST REG-01 Form
Navigate to the “Services” tab and select “Registration” and then “New Registration.”
Fill in Part-A of the GST REG-01 form, including PAN, mobile number, and email address.
You’ll receive an OTP (One-Time Password) on your registered mobile and email for verification.
Verify the OTP and receive the Temporary Reference Number (TRN).
Step 5: Fill Part-B of GST REG-01 Form
After obtaining the TRN, return to the “New Registration” option.
Complete Part B of the GST REG-01 form by entering the TRN and the CAPTCHA code.
Submit the form, and you’ll receive an Application Reference Number (ARN) on your registered mobile and email.
Step 6: Document Submission
Now, log in to the portal again using the ARN.
Complete Part-A and Part-B of the GST REG-01 form.
Upload the required documents as per your business type (proprietorship, partnership, company, etc.).
Step 7: Verification
The GST authorities will verify the information and documents attached. This may take a few days.
Step 8: Clarifications and Response
If the authorities require any clarifications or additional documents, they will communicate through the portal. Respond promptly.
Step 9: Registration Certificate
Once the verification is successful, you’ll receive the GST registration certificate with the GSTIN (Goods and Services Tax Identification Number).
Step 10: Start Filing Returns
After receiving the GSTIN, you can start filing GST returns as per the prescribed schedule.
Step 11: Maintain Records
Keep detailed records of all transactions, invoices, and GST-related documents for future reference and audits.
Frequently Asked Questions
What is the meaning of a special category?
A special category concerning GST registration is a state that confronts physical and socioeconomic barriers such as challenging topography, low population density, significant tribal populations, strategic location along international borders, and economic backwardness.
What is the GST exemption limit for special category states?
The GST exemption limit for special category states is Rs. 20 Lakhs (for the supply of goods) and Rs. 10 lakhs (for the supply of services).
What are the criteria for declaring special category states?
The criteria for declaring special category states include hilly or difficult terrain, low population density, sizable tribal population, strategic location along international borders, and economic backwardness. These states face unique challenges that warrant special assistance.
How many states have Special Category Status?
There are 11 states in India with special category status – Arunachal Pradesh, Assam, Himachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Uttarakhand.