GST created a uniform, efficient, and transparent indirect tax system in India and helped to realize the vision of ‘one nation, one tax,’ for the country. As per GST laws, every person who is engaged in the supply of goods and services and whose aggregate turnover exceeds the specified limit or whose business falls under the compulsory registration category is required to register under GST in India. If an entity is engaged in business in two or more states, GST registration has to be done separately in each state, as per Section 25(1) of the CGST Act, 2017. They can be done under the same PAN.
PAN details are required while registering in GST, and it is a major component of GSTIN, which makes the number unique for each registrant. Generally, a single GST registration can be obtained for different businesses in the same state or union territory. As per Section 25(2), a person carrying on multiple business verticals in a state or union territory may be granted separate GST registrations for each such business vertical, subject to such conditions as may be specified. So, a person can obtain two or more GST registrations with the same PAN in a state or union territory. This leads us to the question, ’What is a business vertical?’ It is defined as follows:
What is a business vertical?
As per Section 2 (18) of the CGST Act, 2017, a business vertical refers to a distinguishable component of an enterprise that is engaged in the supply of goods and services or a group of related goods and services that is subject to risk and returns that are different from those of the other business verticals.
Criteria for multiple GST registrations
A set of rules has been specified with regard to separate GST registrations for business verticals operating in the same state or union territory.
As per Rule 11 of the CGST Act, any person seeking new registration for their business vertical in the same state shall ensure that:
- A person or entity seeking separate registration should have more than one business vertical as per the provisions of Section 2 (18) of the CGST Act.
- The applicant cannot opt for registration under the composition scheme if the remaining business verticals of such an applicant have already secured registration under the normal scheme.
- Where any of the business verticals is ineligible to be registered under the composition scheme, the other business verticals shall also become ineligible.
- The person or entity should deal in interstate supplies.
Section 9 states that all differently registered verticals and branches of a business shall pay tax separately and shall also be liable to pay tax in respect of goods and services supplied to any other vertical, as this supply shall be considered a supply to a distinct person, and the same is taxable even when it is a supply without consideration. They have to issue invoices for the supply of goods and services.
According to Rule 8(1) of the CGST Act, any business registered in the special economic zone (SEZ) or an SEZ developer must submit a separate application as a vertical situated outside the SEZ for separate GST registration.
Some guidelines have been further added as per Rule 11(1); they are that if a person or business entity has multiple places of business in a state or union territory, it may be granted a separate registration for each place of business, subject to such conditions as may be specified under the GST law. So, in this amendment, the different business verticals have been done away with. Businesses can now apply for separate registrations with the same PAN when they have different locations of business, even though the business vertical may be the same.
The central or state governments are empowered to grant exemptions from tax, subject to certain conditions, which are as follows:
- The exemptions are in the public interest.
- The exemptions are through notifications.
- They are done on the recommendations of the council.
Also Read: Basics of GST: A Beginner’s Guide
When places of business are in two different states or union territories
As per Subsection (1) of Section 15 of the CGST Act, if a business is located in two different states or union territories, then they must register in both states or union territories. For example, if a business operates from Mumbai and has a branch in Bangalore, then the business must obtain two registrations for the two locations under the same PAN.
Registration Process for two GST registrations
- The applicant has to visit the official GST portal.
- Then they have to select the ‘new registration’ option.
- Next, they must fill in the details of the first registration and submit the details.
- After the first registration is approved, the applicant has to apply for the second registration using the same PAN but with a different business vertical or different place of business, branch office, or warehouse details.
- Then submit the application for the second registration.
Benefits of two GST registrations with the same PAN
The following are the benefits of having two GST registrations with the same PAN in the same state:
- Separate books of accounts can be maintained for each business vertical, branch office, or warehouse, which gives clarity and transparency to the business.
- The tax liability can be calculated separately for each business vertical, branch office, or warehouse.
- Input tax credit can be claimed separately for each business vertical branch office or warehouse.
Also Read: Unlocking the Benefits of GST Registration
Disadvantages of two GST registrations
- The compliance burden is increased as each branch vertical, office, and warehouse will have to follow the compliance procedures.
- The increase in cost of maintaining separate books of account, manpower, and administrative expenses
- Monitoring and reconciling the transactions of each business vertical, branch office, etc., will be complicated and tough.
GST is PAN-based and is provided for a particular state or union territory. But a person can apply for more than one GSTIN in the same state when the person has more than one business vertical or place of operation in the same state or UT. Having two registrations under one PAN has many benefits but also some challenges for the taxpayer.
Frequently asked questions
What does Section 11(2) specify?
Section 11(2) specifies the condition for exempting payment of tax on the supply of goods and services or both under exceptional circumstances, necessary in the public interest, and on the recommendation of the council.
What does Section 11(3) specify?
This Section specifies that the person who has been granted exemption in respect of any goods or services, or both, from the whole or part of the tax leviable thereon shall not collect tax in excess of the effective rate on such supplies.