The indirect tax, or GST, on the sales of goods and services in India was implemented on July 1, 2017. It resulted in the reduction of several other indirect taxes. Now, manufacturers, retailers, customers, etc., are not required to pay VAT, service tax, excise duty, etc. They only need to pay GST from their respective ends. In this article, we will understand the different GST registration types, how to choose the right one, its process, who needs to register, the penalties for not registering, and more.
Understanding Different GST Registration Types
Under GST, a business with a turnover of over Rs. 40 lakhs, 20 lakhs, and 10 lakhs in some cases must register for the Goods and Services Tax. GST registration is mandatory for certain businesses. Let’s learn about the major GST registration types:
The first type in this category is regular GST registration. Suppose the total turnover exceeds the threshold limit in a financial year. In that case, a business must register with the state or union where the taxable goods or services are supplied.
The limit is Rs. 20 lakhs, Rs. 40 lakhs, and sometimes Rs. 10 lakhs. Taxpayers under this scheme must file quarterly returns for a turnover of over Rs. 50 crore and pay monthly taxes.
Registration under Composition Scheme:
Small firms with a turnover slightly below the threshold limit can register under this scheme. There are fewer obligations in this than in ordinary regulation. Besides, businesses must pay a fixed percentage of their annual sales. Registered individuals or firms cannot avail of input tax credits under this scheme.
This registration type is ideal for seasonal or periodical operators in other states besides their actual location. When the seasonal business starts, an advanced amount equivalent to their GST liability must be submitted. Its validity is up to 90 days, but it can be renewed or extended after expiration.
Businesses that supply goods and services to India from outside must register under this category. It helps them adhere to GST rules and their tax liabilities. The validity for this registration type is also 90 days and can be renewed or extended as needed.
Registration for the SEZ
A separate registration procedure exists for businesses operating in the special economic zones (SEZ). They get unique tax breaks and exemptions. However, they must register under this category to avail benefits.
Choosing The Right GST Registration Type
Registering for the Goods and Services Tax is a crucial step for businesses. It ensures a seamless flow of goods and services, besides abiding by tax regulations. However, there is no single decision here that fits all needs. Here are a few factors you can consider when choosing a GST registration type for your business.
Annual Turnover Threshold
Annual turnover is the first and foremost factor when selecting the right GST registration. Once a business crosses a certain turnover threshold, it becomes mandatory to register. The threshold limits vary for service providers, manufacturers, and businesses operating in regions with unique category laws.
Besides, there are different turnover threshold limits for different categories of businesses. Therefore, understand the distinct threshold limit that is concerned with your business. There are also regular revisions of the threshold limits; it is recommended to stay updated with the help of tax authorities or an individual professional.
Interstate Supply Of Goods And Services
Among the other major factors to consider when choosing GST registration is the interstate supply of goods and services. Such supplies include transactions across state lines and require specific GST regulations for proper taxation. Be aware of the GST regulations that apply to such trades. Ensure your business abides by necessary regulations, as failure to do so can lead to penalties.
E-Commerce Vendor Obligations
E-commerce vendors must ensure GST registration to sell their products and services online, regardless of their annual sales. It is done to ensure a fair share of taxes. Understand the process associated with registering as an e-commerce vendor and know the required documents. Once registered as an e-commerce vendor, stay updated with the compliance changes and adhere to the obligations to ensure seamless business operations. It involves filing returns and remitting taxes.
Certain businesses operate seasonally or sporadically in the form of stores or pop-up stalls. Even if their turnover is below the threshold limit, they are required to register under GST. It ensures appropriate accounting for all economic activities. Assessing your business model to determine if such GST registration is needed is recommended. If yes, remember to register during the active period of your business operations and follow the compliance requirements.
Voluntary GST registrations exist even if businesses do not meet a certain threshold value. Such registrations offer several benefits, like input tax credits. This guide to selecting the appropriate GST registration option recommends understanding the pros and cons of it and seeing if it aligns with your business goals. Tax professionals can provide you with insights on whether this registration type can benefit your business or not.
Selecting the right GST registration involves considering the above factors and thoroughly understanding them. Whether it is the annual turnover or e-commerce obligation, it will ensure smooth business operations and eliminate legal complications.
Comparing Different Registration Types
When choosing a GST registration type, it is critical to compare the different options. One must understand the simplicity and complications of each type before making a decision. For instance, the regular registration type is more thorough and complies with the current taxation regulations. Hence, some may find it more challenging.
The composition scheme streamlines compliance and requires small businesses and start-ups to pay a fixed amount. It makes it convenient for them and gives them an edge.
Casual registration is another simplified type and is best suited for seasonal operators. Firms supplying goods and services to India from outside must consider other factors than non-residential ones before deciding.
While SEZ registration is unique, it has a distinct structure of its own. This can sometimes be complicated to understand and abide by.
When comparing the types of registration mentioned above, the seasonal one is the most convenient. This is due to its fixed payment features and easier compliance rules. However, it is recommended to decide based on your unique business needs and choose the one that best suits them.
Process Of Applying For GST Registration
- The first step in applying for GST registration is gathering crucial documents. They include identification proofs like a PAN card, address proof, bank information, and business registration documents. These documents are necessary for successful GST registration.
- The next step is filling out the registration form. The GST portal makes it immensely simpler by allowing it all to be done online. You must provide integral details like owner information, business partners, and business activities. Provide accurate information to prevent any complications in the future.
- You will now need to upload the necessary document by following the instructions on the portal. These documents usually involve address proofs, identification proofs, business documents, etc. Ensure you have scanned copies of these. Also, re-check the application to eliminate the chances of flaws.
- Once you have filed the GST application, the portal will begin its verification process. It involves reviewing the submitted application and ensuring the submitted documents are authentic. If everything is accurate and flawless, your application will be approved. Once done, you are ready to receive your GST registration certificate. It is a legal e-document verifying an individual’s GST registration.
A comprehensive indirect tax, GST, offers several perks. There are several GST advantages, from overall low tax amounts to higher threshold limits. However, to experience the ultimate benefits, one must register under the right GST type. Each factor must be carefully considered to ensure proper GST compliance and avoid any legal trouble. You can also get help from tax professionals and learn in-depth about the GST regulations to make an informed decision about your business.
- How much does it cost to register for GST online?The process of GST registration is free online. However, if you get help from a CA for registering, you may need to pay some amount to him.
- Is GST registration mandatory?Yes, GST registration is compulsory if your turnover exceeds a certain threshold value.
- What will happen upon the completion of GST registration?One gets a Goods and Services Identification Number, or GSTIN, after registration. You must follow the GST regulations once you have registered as a taxpayer. You can trade in different states, collect GST from customers, collect input tax credits, and file tax returns for goods and services.
- Can I submit applications for multiple GST registrations?If your business operates in more than one state, obtaining a distinct GST registration for each state is necessary. For instance, if you are supplying in both Karnataka and Tamil Nadu, you will need separate registrations in both states.
- Can I change the type of registration in GST?You will have to cancel the current registration and apply for a fresh one to opt for a new registration type. Before changing the registration type, review the returns you have received under the earlier registration type.
- Is it possible to change the type of business in GST?You must apply for an amendment to change the business type in GST. Login to your account and file an amendment under the nature of business. You can choose the HSN and SAC codes for the same over there.
- Who is allowed to register under the GST composition scheme?Small taxpayers seeking lower tax rates and compliance can opt for the composition scheme. A trader with a turnover under Rs. 1.5 crore can be considered for this scheme.
- Will I need different GST numbers for different businesses?You don’t need different GST registrations if you have different businesses running in the same state. You can operate them with a single GST number.
- What is the time limit for GST registration?The GST registration can be completed in 5-6 working days. It can be easily done online on the GST portal.
- Why is GST registration rejected?For GST registration, a business must submit documents like AADHAR, PAN, address proof, business documents, etc. Incomplete documentation is one of the primary reasons that lead to rejection. Besides, providing incorrect information can also be another reason.