The concept of casual taxpayer registration under the Goods and Services Tax (GST) regime is important for businesses to understand. So, a clarified knowledge of casual taxpayer registration – who needs it, why it matters, and how to get it right- becomes necessary. This definitive guide decodes concepts, explains eligibility, and suggests situations requiring registration.
Understanding the Concept of Casual Taxpayer Registration under GST
A “casual taxpayer” refers to a business or person that makes taxable supplies of goods or services in a state where they do not have a fixed place of business. Casual taxpayer registration is under India’s Goods and Services Tax (GST) law.
What is a Casual Taxpayer?
Section 2(20) of the Central Goods and Services Tax Act, 2017 defines a “casual taxable person” who:
- Undertakes transactions involving the supply of goods or services occasionally in a state.
- Does not have a fixed place of business in that state.
- Can make supplies either as a principal or agent or in any other capacity.
- Makes such supplies in the course or furtherance of business.
For example, if a garment manufacturer from Punjab has to supply goods to buyers in an exhibition held in Delhi for ten days, he would be a casual taxpayer in Delhi.
So the key points are:
- Occasional transactions in a state.
- There is no fixed place of business in that state.
- Transactions are made in the course of business.
- Transactions involve the provision of products or services.
Why is Casual Taxpayer Registration Required?
Casual taxpayer registration serves multiple purposes:
- Tax Collection: It enables the tax authorities to collect GST on supplies made by businesses that temporarily supply goods or provide services in a state where they are not based. If there were no such provision, it would have led to tax leakage.
- Compliance: It allows proper compliance tracking for such suppliers and ensures no tax evasion by avoiding registration despite undertaking taxable transactions in a state.
- Level Playing Field: It creates a level playing field where all businesses undertaking taxable transactions are brought within the GST ambit, irrespective of supplies’ occasional or temporary nature.
- Input Tax Credit: It enables the businesses undertaking such occasional transactions to avail input tax credit on inward supplies they received, hence removing cascading of taxes.
Thus, casual taxpayer registration balances the government’s intent to monitor compliance, collect tax revenues, and facilitate legitimate businesses by allowing them to claim input tax credits.
Determining Eligibility for Casual Taxpayer Registration
The following criteria are essential to determine the eligibility for casual taxpayer registration in a state.
Key Aspect 1: Occasional Transactions
The transactions should be occasional and non-recurring to be eligible to register as a casual taxpayer. Frequent transactions may require taking normal GST registration.
For instance, if a garment supplier from Maharashtra participates in an exhibition held every month in Karnataka, it indicates frequent transactions requiring normal GST registration in Karnataka.
Key Aspect 2: No Fixed Place of Business
The person should not have any fixed place of business in that state where the transactions are being carried out.
Having a fixed place of business in a state would lead to mandatory regular GST registration requirements, irrespective of the threshold exemption limit. Casual taxpayer registration is not permitted in such cases.
For example, if a sweets manufacturer from West Bengal sets up a small temporary outlet in Bihar for 2 months to capture festive demand, casual taxpayer registration would be required in Bihar.
Key Aspect 3: Transactions Considered as Supply
The transactions undertaken in the other state should qualify as “supply” under GST law. For instance, if goods are taken to another state exclusively for display in an exhibition and are not meant for sale from the exhibition premise, they may not be considered a supply.
Hence, merely displaying goods in another state may not require casual taxpayer registration. The person should examine whether the activity results in a “supply” under GST.
Situations Where Casual Taxpayer Registration is Required
Some common examples where businesses may need to register as a casual taxpayer are:
Participation in Trade Fairs, Events, or Exhibitions
Whenever a business in one state participates as an exhibitor by taking a stall in any trade fair, event, or exhibition held in another state, casual taxpayer registration becomes mandatory before beginning such participation.
For example, a leather bags manufacturer from Punjab participates in a trade exhibition held in Karnataka for 10 days. It would need casual taxpayer registration in Karnataka.
Executing a Temporary Project
Businesses undertaking temporary projects, like construction contractors and works contractors, may need to obtain casual taxpayer registration if they are executing any project in a state where they need an established place of business.
For instance, if a contractor from Telangana sets up a temporary project site in Tamil Nadu for 7 months, he should register as a casual taxpayer in Tamil Nadu.
Agents Supplying Goods on Behalf of Principal
Sometimes, businesses appoint commission agents in other states to facilitate the supply of goods to customers in such states. These agents qualify as casual taxpayers with a fixed establishment in such states.
Consider a pharmacy company in Gujarat that appoints commission agents in Maharashtra. Such agents would be required to register as casual taxpayers in Maharashtra.
E-commerce Operators Appointing Collection Centres
E-commerce operators facilitating the supply of goods often establish collection centers in other states from where customers can pick up products.
Operating such collection centers is equivalent to a place of business. Hence, if no fixed place of business already exists in such states, e-commerce operators would need casual taxpayer registration.
Benefits of Casual Taxpayer Registration for Eligible Businesses
Key benefits of obtaining casual taxpayer registration:
Registration enables compliance under GST laws for such suppliers’ temporary or occasional transactions in other states. With such a provision, tracking compliance becomes easier for tax authorities.
Input Tax Credit Benefit
One of the major benefits is the ability to avail of input tax credits on inward supplies received, such as:
- Goods or services used by exhibitors in a fair or exhibition, like construction of stalls, logistics, decoration, electricity, security, etc.
- Agents appointed in other states can claim input tax credits on meeting business expenditures.
- E-commerce operators can avail of input tax credits on leased properties, delivery vehicles, and local workforce hired.
Thus, registration under casual taxpayer provisions facilitates legitimate credit claims despite occasional business activities.
For businesses that export goods or services, casual taxpayer registration allows them to export such goods or services without payment of taxes.
Certain exemptions are provided exclusively to casual taxpayers by exempting them from registration requirements. Such as:
- Inter-state taxable supply of handicraft goods up to threshold turnover
- Inter-state supply of specific handicraft products as per notifications
Impact of Casual Taxpayer Registration on Tax Obligations
Key tax obligations that arise on obtaining casual taxpayer registration:
Advance Deposit of Estimated Tax Liability
A critical requirement before registration is granted to a casual taxpayer is that the applicant must make an advance deposit of the “estimated net tax liability” for the registration validity period in the electronic cash ledger on the common portal.
The portal provides a temporary identification number (TRN), which can be used to generate tax payment challans.
Only on making this advance deposit will the application for registration be processed. This is a crucial difference compared to normal GST registration.
Fulfilling GST Return Filing Requirement
A casual taxpayer must file specified GST returns within the stipulated due dates covering outward supplies, inward supplies, and the tax payment liability.
Monthly GSTR-1 and GSTR-3B are required to be filed by casual taxpayers. Further, a final return (GSTR-10) needs to be filed in case the registration is canceled.
Maintaining Proper Accounts and Records
A casual taxpayer also needs to maintain accounts and records as applicable to a normal taxpayer, including but not limited to purchase invoices, sales invoices, inventory records, books of accounts, ledgers, etc., covering the transactions undertaken from the state where such registration is obtained.
Tax Assessment and Audit Compliance
Casual taxpayers remain equally subject to compliance verification requirements like tax assessments and tax audits concerning the transactions undertaken from the state of registration.
Any non-compliance detected may raise a tax demand or deny input tax credit to such taxpayers, along with applicable interest and penalties.
Making Informed Decisions About Casual Taxpayer Registration
While for eligible businesses, undertaking casual taxpayer registration is a mandatory requirement before commencing operations in another state, it is prudent that certain upfront information is gathered by businesses to facilitate informed decision-making and smooth compliance.
Analyze Place of Supply Provisions
Businesses should carefully examine the place of supply provisions under IGST law to correctly ascertain the location of the supplier, place of supply, and where GST compliance obligations would arise.
For instance, the inter-state supply of goods is determined based on the location from where goods are supplied. The place of supply determines where tax needs to be paid.
Estimate Tax Liability in Advance
Since an advance tax deposit is a prerequisite for obtaining registration, it is vital to determine the expected sales, input tax credit availability on inward supplies, and the resultant net tax liability during the period of operation in the state where registration is being sought. Any short or excess deposit would need to be adjusted subsequently.
Understand State-specific GST Procedures
Businesses should also evaluate whether the state where registration is being obtained has any specific GST rules, notifications, or procedures applicable to casual taxpayers that should be considered from a planning and compliance perspective.
Seek Expert Assistance
Given those activities leading up to registration as a casual taxpayer, like advance tax payment, determining the place of supply, etc., involve complex legal analysis, businesses should seek expert consultancy right from the planning stage to ensure full compliance.
Casual taxpayer registration brings occasional or temporary suppliers of goods or services within the GST ambit by mandating registration in the state where such transactions are undertaken, enabling better compliance and tax collection for the government and facilitating legitimate businesses through benefits like input tax credit claims.
Careful determination of eligibility based on criteria like recurrency of transactions, physical presence in the state, activity resulting in supply, etc., must be done before considering such registration. Being an optional exemption for businesses not having statutory registration requirements in any state otherwise, it offers balanced benefits for firms and administrators if the provisions are judiciously enforced and complied with.
FAQs on Casual Taxpayer Registration
Q1. Who is considered a “casual taxpayer” under GST law?
Ans: A “casual taxpayer” refers to a person who occasionally makes a taxable supply of goods or services in a state where he does not have any fixed place of business. The supply should be made in the course or furtherance of business and the capacity of either principal or agent.
Q2. Can a person with a fixed business place in one state obtain casual taxpayer registration in another?
Ans: No, having any fixed place of business in a state disqualifies a person from obtaining casual taxpayer registration in that state.
Q3. Is the physical presence of the provider of goods or services required to qualify as a casual taxpayer?
Ans: Yes, the goods must be carried to another state, or the supplier of services needs to temporarily shift to such a state to register as a casual taxpayer. A mere inter-state supply of goods or services does not warrant such registration.
Q4. Can an agriculturist selling produce in markets cross-state be eligible for registration as a casual taxpayer?
Ans: An agriculturist is exempted from obtaining registration irrespective of the turnover achieved through selling agricultural produce. Hence, the requirement to register as a casual taxpayer has yet to arise.
Q5. What are the common situations where obtaining casual taxpayer registration becomes essential?
Ans: Participation as an exhibitor in trade fairs or events held in other states, executing temporary project sites in different states, and agents or e-commerce companies facilitating supply from collection centers in other states are some examples requiring casual taxpayer registration.
Q6. Can a business registered as a casual taxpayer opt for the composition scheme?
Ans: The composition scheme is available only to regular taxpayers with turnover below specified limits. A person registered as a casual taxpayer cannot opt for a composition levy.
Q7. Is physical verification of business premises mandatory before granting casual taxpayer registration?
Ans: No, physical verification is generally not undertaken for registration applications filed by non-resident taxable persons, casual taxpayers, etc., since conducting such verification within stipulated timelines may not be feasible.
Q8. What is the maximum period up to which casual taxpayer registration can remain valid?
Ans: The initial registration granted can be for a maximum of 90 days or the actual period for which a person expects to conduct business in that state, whichever is earlier. An extension can further be obtained for 90 days, thereby taking the total period of validity to 180 days.
Q9. Can a business seek multiple casual taxpayer registrations within a state?
Ans: If a business registers multiple business verticals in its home state, it can seek separate casual taxpayer registration for each vertical in another state while ensuring supply through that specific registration only.
Q10. What are the consequences of non-compliance with conditions applicable to a casual taxpayer?
Ans: Non-compliance can lead to cancellation of registration. Further, recovery can be initiated for evaded taxes, and ineligible input tax credits claimed earlier, including a levy of interest and penalties.