In India, businesses operating under specific conditions are legally required to be registered under the Goods and Services Tax (GST) regime. Although numerous taxpayers willingly enroll in GST compliance benefits, some businesses are forced to enroll regardless of their turnover. This has been referred to as mandatory registration under GST.
It is essential to understand who, under what circumstances, and when individuals, business owners, and employees must be registered with GST, to prevent penalties and ensure compliance with GST regulations. This blog provides a summary of the mandatory GST registration, the types of persons involved, and the implications of failing to acquire GST.
What is the Compulsory Registration in GST?
Mandatory registration under GST refers to a scenario where organisations or individuals are required by law to be registered under GST, regardless of the turnover limit. The GST, 2017, provides that specific categories of persons are required to register under GST before commencing business operations or supplying taxable goods or services.
It is not registered by exceeding the limit of the threshold but by the nature of the business, supply, or activity. Inability to secure mandatory registration may result in a fine, pre-payment of taxes, and interest charges.
Who’s Required to Obtain Compulsory Registration?
- Every business or individual involved in the interstate supply of goods that are taxable should be GST registered, though there is a provision that this can be done even without exceeding the 20 lakh turnover limit.
- Those individuals who are providing taxable supplies via e-commerce operators must achieve registration prior to starting supplies.
- Before commencing its operation in India, non-resident taxable persons and casual taxable ones need to register regardless of their turnover.
- Parties bound to pay tax through the reverse charge must obtain GST registration on a compulsory basis.
- The businesses engaged in supplying goods on behalf of another taxable person or in any other character as an agent are required to register under GST.
- Input Service Distributors (ISD) must also get a GST registration to transfer the input tax credit to other branches.
- All individuals under obligation to pay TDS or TCS, as specified under the GST, are required to be registered.
- Individuals who supply online information and data access or retrieval services (OIDAR) to unregistered individuals in India, including those located outside India, must be registered.
- Those persons whom the government informs through certain notifications also have to be registered compulsorily as well.
- Individuals who provide goods or services using their own websites are also required to make registration mandatory.
The Exceptions and Threshold Limits
- In most states, businesses are required to register for GST when their taxable turnover exceeds 20 lakhs.
- The above categories, however, are compulsorily registered even when they do not meet the threshold level.
- OIDAR service providers, sellers of goods in the e-commerce sector, and interstate suppliers of goods are not exempt.
- Below the threshold limit, voluntary registration is also permitted; however, once a person has been registered, the GST compliance provisions come into effect.
Time Limit for Compulsory GST Registration
- The GST registration should be applied for within 30 days of when a person becomes liable to register.
- The application by non-resident taxable persons and casual taxable persons must be made at least five days prior to the commencement of business processes within India.
- Any delay in registration can result in tax liability since the date of liability together with interest and penalties.
Necessary Documents for GST Registration
- The PAN card of the applicant or business.
- Evidence of business location in the form of an electricity bill, rent agreement, or ownership document.
- Identity and address proof of promoters or directors.
- Bank statement/Bounced cheque.
- Picture of the applicant.
- Digital Signature Certificate (of companies and LLPs).
- A letter of authorization or a resolution of the board in case of an authorized person.
Penalty for Non-Compliance
- It is the taxpayer’s liability to pay GST as and when they are liable to register; however, as long as the taxpayer has not registered, they are liable to pay GST as if they were liable to register.
- An amount of 10 percent of the amount of taxes due or 10,000 INR, whichever is greater, can be charged as a penalty in case of non-registration.
- In case the non-registration is treated as an attempt at evasion, 100 percent of the tax judgment may be charged as a penalty.
- Businesses that are not registered cannot charge customers GST or claim input tax credit.
- Failing to register may result in missing out on business opportunities, particularly in cases where one is dealing with registered entities or participating in governmental tenders.
Conclusion
Registration under GST is not merely an administrative formality, but a critical compliance measure for businesses involved in supplying goods or services of a particular nature. You can avoid multiple penalties and make the passage of your business easier by determining whether you are in a category that requires mandatory registration or not. It does not matter whether you are in the business of supplying goods across the states, selling your product on an online platform, or working with reverse charge; you must act accordingly by registering under GST and complying with regulations.
To seek help on GST registration, documentation, and compliance, visit our GST experts now and keep a step ahead in your tax adventure.
