The registration of a taxpayer is a significant step in identifying a taxpayer and complying with the rules in the taxation regime in an economy. A registered taxpayer (i.e. an individual or a business entity) has credibility in the eyes of the state.
GST stands for Goods and Services Tax, a significant step in the indirect tax regime. Non-registration of GST is an offence and will get punished with a heavy penalty.
GST registration is done to enrol one’s business under the ambit of this indirect tax regime to avoid a further hassle in the supply, sale or purchase of goods and services.
What is GST registration?
GST is registration mainly done under the central goods and service tax act 2017 and the procedure for such registration is governed under central goods and service tax rules, 2017 GST registration is a compulsory process in which every taxpayer must obtain a GST identification number (GSTIN) to collect tax on behalf of the government and to claim the input tax credit on already paid GST.
GST identification number is a unique 15-digit number used to identify each taxpayer and their liability to pay tax.
A 15-digit GSTIN contains:-
- The first two digits as the state code,
- Next ten digits as the PAN number,
- The next digit (i.e. 13th digit) shows the no. of registrations the PAN holder has in the state.
- The next digit (i.e. 14th digit) is ‘Z’ by default
- The last digit is a random digit or letter to reduce redundancy
Under GST legislation, GST registration is mandated for every business entity where the supply value exceeds Rs. 40 Lakhs.
Need for GST registration
Registration of GST is required because:-
- The registered taxpayer will be legally authorised to collect taxes from its customers.
- The registered taxpayer can also claim input tax credits on inward supplies and use that credit on the pending taxes needed to pay on the supply of goods and services.
- The registered user will be a legal and credible user for the supply of goods and services throughout the country.
- It provides a hassle-free supply of goods throughout the country with the GST invoice of goods.
- There will be a feasible flow of input tax credit from the purchaser to the supplier.
Types of GST registration
Based on the type of taxpayer, here are the types of GST registration:-
This type of GST registration applies to taxpayers operating a business in India. Taxpayers registering for normal tax do not require a deposit and get an unlimited validity date.
An individual should enrol under the GST Composition Scheme for registration as a composition taxpayer.
Taxpayers covered under the Composition Scheme are eligible to pay tax at a flat GST rate. However, these taxpayers are not allowed to claim the input tax credit.
Casual taxable person
Any taxpayer establishing a small business unit should register under the casual taxable person category. To register as a taxpayer, the taxpayer must pay a deposit equal to the amount of GST liability, and the liability the registration remains active for 3 months.
Non-resident taxable person
The non-resident taxable persons are those individuals located outside of India and should be supplying goods or services to residents in India.
Advantages of GST Registration
The GST registration:
- Increases the trustworthiness of businesses in the market
- Enables business entities to sell their goods online
- Permits the trading of goods across the country by just paying a single tax
- Signified as a proof of a legal entity registration
- Aids to claim any input tax credit when any goods or services are being purchased or supplied inwards in the supply chain
- GSTIN is necessary for opening a current bank account of a company. The GSTIN aids the business in building face value in the eyes of the law by contributing to the economy.
GST registration process
The GST Registration process involves the following steps:
- Visit the GST portal and click on ‘Register Now’ under ‘Taxpayers (Normal)
- Click ‘New Registration’ and select ‘Taxpayer’ in the drop-down menu.
- Proceed to choose the desired state and district.
- Mention your associated PAN, business name, mobile number and email ID.
- You will get an OTP (one-time-password)on your registered mobile number.
- Enter the password and click on ‘Continue.’
- You will get a TRN (Temporary Reference Number on your registered phone number and email address.
- Again, visit the GST portal and click ‘Register now’ button.
- Click the TRN option, mention your temporary reference number (TRN), and the given captcha code. Now click on ‘Proceed.’ You will receive an OTP on your registered mobile number.
- Enter the given OTP and click on ‘Proceed.’
- Your application will get displayed as a draft. Make sure you click the Edit Icon.
Now, the following documents need to be submitted:-
- Proof of constitution of the company
- Document proving the location of your business
- Photographs for identity proof.
- Details of your bank account
- Your authorisation form
Visit the verification page, check and click the declaration, and send in your GST application using one of the following ways:
- Electronic Signature (E-Sign): E-sign is an electronic signature service in India that allows Aadhar cardholders to sign a document digitally. An OTP will be sent to the registered mobile number for confirmation of the verification process initiated by the applicant.
- Electronic verification code: An OTP will be received on the registered mobile number for verification.
- Digital Signature Certificate (DSC): DSC is compulsory for companies and required by the companies to be issued.
A confirmation message will be received stating that the verification was successful, and an Application Reference Number (ARN) will be provided to the registered email ID and mobile number.
Documents required for GST registration
- PAN Card of the company and directors of the company
- Aadhar card of the authorised signatory
- Proof of details of bank accounts in the form of a passbook or cheque
- Address proof of the company’s head office by showing a legal ownership document, i.e. electricity bill, rent or lease agreement, etc.
- Certificate of incorporation of the company
- The proof of appointment of authorised signatory in the form of a letter of authorisation
- A copy of the resolution agreed on by the management committee and an acceptance letter.
Who should register for GST?
It is advisable to register for GST to be a credible source of doing business. Registration of GST is compulsory for some business houses and not compulsory for some.
Any business entity crossing an aggregate turnover of Rs.40 lakhs and is involved exclusively in the supply of goods is required to obtain GST registration.
Any service provider providing a service having a value of more than Rs. 20 lakhs annually is required to obtain registration of GST.
In the states lying in the special category, this limit is Rs. 10 lakhs.
A business entity should acquire registration of GST if it is involved in the supply of goods on an inter-state basis, i.e., from one state to another, irrespective of their aggregate turnover.
Inter-state service providers must acquire their GSTIN if their annual turnover exceeds Rs. 20 lakhs. Agates, this limit is Rs. 10 lakhs in special category states.
Any entity involved with supplying goods or services through an e-commerce platform shall apply for GST registration.
The entities must get registered with GST irrespective of their turnover. Hence, sellers registered on e-commerce platforms must obtain GST registration to commence business.
Casual taxable persons
Irrespective of annual aggregate turnover, any individual undertaking the supply of goods or services seasonally or intermittently through a temporary stall or shop should also have GST registration.
Any entity can obtain registration of GST voluntarily. Earlier, any entity that obtained GST voluntarily could not surrender the registration for up to a year. However, after revisions, the applicant can surrender voluntary registration of GST at any time.
Liability to register
GST is an indirect tax levied on the supply of goods and services from one entity to another entity within the country. These can be intra-state or inter-state supplies. The government laid down the threshold limit to get one’s business registered with GST.
The business entities having a turnover of more than 40 lakhs need to obtain GSTIN through registration of GST. The businesses having turnover below the threshold limit can register themselves voluntarily.
The aggregate turnover is calculated on the number of goods and services supplied and does not apply to the businesses involved in supplying goods and services.
The tax application under GST does not even involve the supply of agricultural products if cultivated from agricultural land.
If all the supplies are taxable under reverse charge, the supplier is not required to register under GST.
The reverse charge is the condition in which the supplier is not liable to pay GST on the supplies made by him; instead, the receiver of the goods and services is liable to pay GST applicable on the amount of supplied Goods and Services.
Nature of registration
The GST registration in India is done by linking the GSTIN with the PAN of the applicant. It is done to ensure tax compliance and comply with data exchange mechanisms by the income tax department by using the PAN card of the taxpayer.
It is also a state-based taxation system. A business entity in a single state has to obtain a single registration while it has multiple registrations in other states for having branches in those states.
A business entity can obtain separate registrations for each of its branches in different states or can declare one branch as principal office and other branches additional offices.
Cancellation of registration
The GST legislation provides for the grounds on which a GST registration can get cancelled:-
- When the GSTIN holder surrenders his GST with voluntary consideration
- When the appropriate authority considers it necessary to cancel the GST on account of certain defaults
The person desiring to cancel his registration must place the same request on the GST portal.
The person applying for cancellation of GST has to declare:-,
- The value of stock held by him on the date on which he seeks cancellation,
- The value of pending dues and credit reversal,
- The particulars of payments made towards discharge of such liabilities
In case a voluntary registration is obtained by the beneficiary despite not being liable for obtaining registration, no cancellation is allowed until the expiry of one year from the effective date of registration.
If satisfied, the appropriate officer has to cancel the registration within 30 days from the date of application or the date of reply to the notice.
The GST registration enables swift and hassle-free trading of goods and services throughout the country. The GST introduced the concept of one nation, one tax, and prohibited collecting various indirect taxes applicable on goods and services in India.
A business entity gets recognised in the eyes of the law by obtaining a GSTIN after GST registration, which is a valid proof of the business’s existence. GST is linked with the PAN no. of the taxpayer to ensure the taxpayer’s compliance with the indirect taxation regime.
The businesses registered under GST must mention GSTIN in all the generated invoices to claim an input tax credit in future.
What are the eligibility criteria to register for GST?
Every business entity is eligible to register for GST. However, there is a minimum threshold turnover limit of 40 lakhs, above which all the business houses must obtain GST registration compulsorily.
What is the penalty for non-registration of GST?
The penalty for non-registration of GST is 100% of the due tax or Rs 10,000/-, whichever is higher.
What is the difference between GSTIN and UIN?
The GSTIN is a goods and services tax identification number issued to regular taxpayers. On the other hand, UIN is a unique identification number issued to foreign diplomatic missions and embassies to allow them to claim a tax refund on purchasing goods and services.
What are the goods on which the GST doesn’t apply?
GST does not apply to natural gas, aviation turbine fuel, petrol, diesel, crude oil, or alcohol used for human consumption.
What are the fees for obtaining GST registration?
GST registration requires no fees, and the process is free of cost.