Who needs to register for GST and eligibility criteria?

Who needs to register for GST and eligibility criteria?

Goods and Services Tax is referred to as GST. Many nations across the world impose a value-added tax on the sale of goods and services. GST is a consumption tax, which means that it is paid by the final customer rather than by the companies that manufacture or market the products. Every step of the supply chain is where the tax is collected, and companies can seek credit for the GST they paid on their purchases to lower the GST they owe on their sales. As it removes the cascading impact of several taxes and lessens the administrative load on businesses, the GST is intended to be a more effective and transparent tax system.

Purpose of GST registration

The purpose of GST registration is to enable a business to collect and remit the Goods and Services Tax (GST) to the government. GST registration is mandatory for businesses that have a turnover exceeding the threshold limit set by the government. Once registered, a business is assigned a unique GST Identification Number (GSTIN), which is used to track the tax payments and filings made by the business.

There are several benefits of GST registration, including:

• Legitimacy: GST registration provides legal recognition to a business and enhances its credibility in the market.
• Input Tax Credit (ITC): GST-registered businesses can claim the input tax credit on the GST paid on their purchases, which can be used to offset the GST liability on their sales.
• Compliance: GST registration ensures compliance with tax laws and avoids penalties and legal action.
• Expansion: GST registration allows a business to expand its operations across the country, as it can collect and remit GST in all states.

GST registration is essential for businesses to comply with the tax laws, claim input tax credits, and operate legitimately and smoothly in the market.

Who needs to register for GST?

Businesses with an annual turnover exceeding the threshold

In India, businesses with an annual turnover exceeding the threshold of INR 20 lakh for goods and INR 10 lakh for services are required to register for Goods and Services Tax (GST). The threshold limit is different for special category states, such as the northeastern states of India, where the threshold for goods is INR 10 lakh. Once a business is registered for GST, it must collect GST from its customers on the supply of goods or services and deposit it with the government. Failure to register for GST can result in penalties and fines. Additionally, GST registration provides businesses with certain benefits, such as the ability to claim input tax credits.

Businesses engaged in inter-state supplies

Businesses engaged in inter-state supplies in India are required to register for Goods and Services Tax (GST). As per the GST Act, any business with an annual turnover of over Rs. 20 lakhs (Rs. 10 lakhs for North Eastern states and hill states) engaged in the supply of goods or services across state borders must obtain GST registration.

This registration process involves obtaining a unique GSTIN (Goods and Services Tax Identification Number) from the government and complying with various GST rules and regulations, such as filing GST returns and maintaining proper documentation.

Failing to register for GST when required can result in penalties and legal consequences. Therefore, it is essential for businesses engaged in inter-state supplies to obtain GST registration and ensure compliance with GST regulations.

Businesses engaged in e-commerce

In India, businesses engaged in e-commerce are required to register for Goods and Services Tax (GST) if their annual turnover exceeds a certain threshold. The threshold for mandatory registration is Rs. 20 lakhs for most businesses and Rs. 10 lakhs for businesses located in special category states.

E-commerce businesses are required to collect and remit GST on all taxable supplies made through their platform. This includes sales made by third-party sellers, who are required to register separately for GST if their turnover exceeds the threshold.

Registering for GST can be done online through the GST portal, and businesses are required to file regular returns and maintain accurate records of their transactions. Failure to register or comply with GST regulations can result in penalties and legal consequences.

Casual taxable persons

In India, casual taxable persons who are not registered under GST and wish to make taxable supplies during a financial year are required to register under the Goods and Services Tax (GST) system. Failure to do so may result in penalties and legal action.

Non-resident taxable persons

Non-resident taxable persons who supply goods or services in India are required to register for GST (Goods and Services Tax) in India. They can apply for registration online through the GST portal and must obtain a GSTIN (Goods and Services Tax Identification Number) before commencing any business activities in India.

Input service distributors

As per the Goods and Services Tax (GST) law in India, Input Service Distributors (ISDs) are required to register for GST. ISDs are entities that receive invoices for input services and distribute the input tax credit to their units. They must register for GST and comply with the relevant rules and regulations.

Agents of a supplier

As per the Goods and Services Tax (GST) law in India, any agent supplying goods or services on behalf of a supplier is required to register for GST if their annual turnover exceeds the prescribed threshold limit. Failure to do so may result in penalties and legal consequences.

Those paying tax under the reverse charge mechanism

Under the reverse charge mechanism in India, the recipient of goods or services is liable to pay the GST instead of the supplier. Therefore, if a person is paying tax under the reverse charge mechanism, they need to register for GST in India as per the GST Act.

Businesses supplying goods or services on behalf of another taxable person

According to the Goods and Services Tax (GST) law in India, any business or individual supplying goods or services on behalf of another taxable person is considered a “casual taxable person” and is required to register for GST. This includes businesses that operate on a temporary or occasional basis, such as event management companies or exhibition organizers. The threshold for registration is the same as for regular taxable persons, which is an annual turnover of Rs. 20 lakhs for most businesses. However, certain types of businesses, such as those involved in inter-state supplies or e-commerce, may be required to register for GST regardless of their turnover.

Businesses liable to pay tax under the GST law

Under the Goods and Services Tax (GST) law in India, businesses that are liable to pay tax must register for GST.

GST is a value-added tax that is levied on the supply of goods and services in India. It has replaced various indirect taxes that were previously levied by the central and state governments, such as excise duty, service tax, and value-added tax.

Under the GST law, businesses with an annual turnover of Rs. 40 lakhs or more are required to register for GST. However, for businesses operating in certain sectors, such as e-commerce or inter-state trade, the threshold limit for registration is lower.

Businesses must obtain a GST registration number (GSTIN) and file regular returns with the tax authorities to comply with the GST law. Failure to register for GST or comply with GST regulations can result in penalties and legal action by the tax authorities.

Eligibility criteria for GST registration

Turnover threshold

turnover threshold is one of the eligibility criteria for GST registration in India. Under the GST law, businesses with an annual turnover of Rs. 40 lakhs or more (for goods suppliers) or Rs. 20 lakhs or more (for service providers) are required to register for GST.

However, there are some exceptions to this threshold limit. Businesses that are engaged in inter-state trade or e-commerce operations are required to register for GST regardless of their turnover. Additionally, certain businesses such as casual taxable persons, non-resident taxable persons, and agents of a supplier are also required to register for GST regardless of their turnover.

It is important to note that even if a business is not required to register for GST based on its turnover, it may still choose to voluntarily register for GST to avail of various benefits such as input tax credit and to comply with the GST regulations.

Mandatory registration for certain businesses

The GST law in India mandates that certain businesses must register for GST, regardless of their annual turnover. The following are some of the businesses that are required to register for GST:

1. Businesses engaged in inter-state supply of goods or services
2. E-commerce operators
3. Businesses that are registered under the previous indirect tax regime (such as VAT or service tax)
4. Casual taxable persons
5. Non-resident taxable persons
6. Input service distributors
7. Persons who supply goods or services on behalf of other registered taxable persons (such as agents)

In addition to these businesses, the GST law also provides for voluntary registration, which allows businesses with an annual turnover of less than Rs. 40 lakhs to register for GST if they choose to do so. However, once a business is registered for GST, it must comply with the GST regulations and file regular returns, even if its turnover falls below the threshold limit.

Voluntary registration

Voluntary registration is one of the eligibility criteria for GST registration in India. Under the GST law, businesses that are not required to register for GST due to their turnover being below the threshold limit of Rs. 40 lakhs (or Rs. 10 lakhs for businesses in special category states) can still register for GST voluntarily.

Voluntary registration can be beneficial for businesses as it allows them to take advantage of the input tax credit mechanism and claim credit for the GST paid on their purchases. It can also help businesses establish themselves as credible and trustworthy entities in the eyes of their customers and suppliers.

However, businesses that voluntarily register for GST must comply with all the requirements of the GST law, such as filing regular returns and maintaining proper records of their transactions. Failure to comply with these requirements can result in penalties and legal action by the tax authorities.

It is important for businesses to carefully consider the pros and cons of voluntary GST registration before making a decision. They should also seek professional advice from a tax consultant or chartered accountant to ensure compliance with the GST law.

Registration for e-commerce operators

as per the Goods and Services Tax (GST) law in India, e-commerce operators are required to register for GST regardless of their annual turnover. This means that e-commerce operators must obtain a GST registration number (GSTIN) even if their annual turnover is below the threshold limit of Rs. 40 lakhs.

An e-commerce operator is defined as any person who owns, operates or manages a digital or electronic platform for facilitating the supply of goods or services. This includes platforms such as Amazon, Flipkart, and Paytm, among others.

The GST law requires e-commerce operators to collect and deposit GST on behalf of their suppliers, who may be registered or unregistered for GST. This is known as the “Tax Collection at Source” (TCS) mechanism, and it applies to all supplies made through an e-commerce platform.

Therefore, if a business is operating as an e-commerce operator in India, it must register for GST regardless of its turnover, and comply with the TCS mechanism for collecting and depositing GST. Failure to comply with these regulations can result in penalties and legal action by the tax authorities.

Conclusion

In India, GST registration is mandatory for businesses that are liable to pay GST. It is important for businesses to register for GST on a timely basis to avoid penalties and legal action by the tax authorities. Additionally, timely GST registration enables businesses to avail of various benefits, such as input tax credits, which can help reduce their tax liability. Moreover, GST registration helps in maintaining compliance and improving the business’s credibility, which can lead to increased customer trust and better business opportunities.

The consequences of non-registration of GST on time in India can be severe. The tax authorities can levy penalties and interest on the amount of tax that should have been paid, along with the possibility of prosecution for non-compliance. Non-registration of GST can also result in the inability to claim input tax credits, which can increase the tax liability of the business. Additionally, non-registration can lead to the loss of business opportunities and customer trust, as compliance with GST regulations is seen as a sign of a credible business.

Kanakkupillai is a business consulting firm that provides services related to GST registration and compliance in India with an experience of more than 10 years.

We can assist businesses in timely registration for GST, as well as provide guidance on maintaining compliance with GST regulations to avoid any consequences of non-registration. Their services include GST registration, filing of GST returns, and compliance management, among others.

FAQ on GST Registration and Eligibility Criteria