GST stands for Goods and Services Tax. It is a comprehensive indirect tax that came into force in the year 2016 and is levied on the supply of goods and services at each stage of the production and distribution chain. GST has replaced various indirect taxes that were previously applicable like VAT, Service tax and various other taxes. The objective of implementing GST is to create a unified and simplified taxation system, reduce tax evasion, and promote a more efficient and transparent tax structure. Under the GST system, businesses are required to charge and collect GST on their sales, and they can also claim credits for the GST paid on their purchases. It is a destination-based tax, meaning that the end consumer ultimately bears it.
Eligibility for GST Registration
- Previous registration: Individuals registered under the Pre-GST law (i.e., Excise, VAT, Service Tax etc.)
- Turnover Threshold: Businesses with turnover above the threshold limit of Rs.40 lakh (for sale of goods in normal category states) or Rs.20 lakh (for sale of goods in special category states/ for supply of services in normal category states) or Rs.10 lakh (for supply of services in special category states) as the case may be.
- Interstate Supply: In some jurisdictions, businesses engaged in the supply of goods or services across state or national borders may need to register for GST, irrespective of their turnover.
- Mandatory Registration Categories: Certain types of businesses, regardless of turnover, may be required to register for GST. This could include entities involved in e-commerce, online services, or specific industries identified by the tax authorities.
- Voluntary Registration: Even if a business does not meet the mandatory criteria, it may choose to register for GST voluntarily. This could be advantageous for businesses looking to avail themselves of input tax credit benefits or wanting to establish a more formal presence in the market.
- Casual and Non-Resident Taxable Persons: Individuals or entities making taxable supplies on a casual or non-regular basis may have to register for GST in some jurisdictions.
- Reverse Charge Mechanism: Businesses that are required to pay GST on a reverse charge basis, where the liability to pay tax is on the recipient rather than the supplier, may need to register.
- Input Tax Credit: Businesses seeking to claim input tax credits on their purchases of goods and services may be required to register for GST.
- Any other person: A person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person.
Benefits of GST registration
It’s important to note that the benefits of GST registration can vary based on the nature of the business, its operations, and the specific regulations in the relevant jurisdiction.
However, registering for Goods and Services Tax (GST) can offer several benefits for businesses. Here are some common advantages associated with GST registration:
- Legal Recognition: GST registration provides legal recognition to a business as a supplier of goods or services. It establishes the business as a legitimate entity in the eyes of the law.
- Input Tax Credit (ITC): Registered businesses are eligible to claim Input Tax Credit, allowing them to offset the GST paid on their purchases against the GST collected on sales. This in turn leads to a reduction in overall tax liability.
- Wider Market Reach: GST is a destination-based tax and therefore allows businesses to participate in interstate commerce without any restrictions. This facilitates the expansion of the market reach for goods and services.
- Competitive Advantage: GST compliance can enhance the competitiveness of a business, as many customers prefer to deal with registered suppliers to avail themselves of Input Tax Credit benefits.
- Business Recognition: GST registration can enhance the credibility and trustworthiness of a business, especially when dealing with other businesses or government entities.
- Legal Protection: Registered businesses enjoy legal protection under the GST law. They have the right to collect taxes from their customers and pass on the benefits of Input Tax Credit.
- Access to E-commerce Platforms: Many e-commerce platforms and large businesses prefer to engage with GST-registered suppliers. Being registered opens up opportunities to participate in online marketplaces.
- Facilitates Exports: GST provides benefits for exporters, including a simplified and transparent tax structure. Registered businesses can often avail themselves of schemes like GST refunds for exports.
- Compliance with Law: GST registration ensures that a business complies with the tax laws of the country. Non-compliance can result in penalties and legal consequences.
- Government Contracts: Many government tenders and contracts require suppliers to be GST registered, making it a prerequisite for participating in government procurement processes.
- Simplified Tax Structure: GST replaces multiple indirect taxes, leading to a more simplified and uniform tax structure. This simplification can reduce the administrative burden on businesses.
Documents required for GST registration:
The specific documents required for GST registration can vary by jurisdiction, but generally, the following documents are commonly requested during the GST registration process:
1. Proof of Business Registration:
- For a sole proprietorship: PAN card and Aadhar card of the proprietor.
- For a partnership firm: Partnership Deed.
- For a company: Certificate of Incorporation and Memorandum of Association.
2. Identity and Address Proof of Promoters or Partners:
- PAN card and Aadhar card of all promoters or partners.
- Mobile number of all promoters or partners.
- E-mail ID of all promoters or partners.
- Passport-size photograph of all promoters or partners.
3. Business Address Proof:
- Copy of electricity bill/water bill/property tax receipt for the business premises.
- NOC from the owner of the premises.
4. Bank Account Details: A scanned copy of the first page of the bank passbook or a cancelled cheque with the name of the business entity.
5. Authorization Form (in case of partnership/company): An authorization letter signed by the authorized signatory of the business.
6. Digital Signature Certificate (DSC): In some jurisdictions, a DSC may be required for the authorized signatory.
7. Additional Documents for Different Business Types:
- In the case of a partnership firm, a copy of the Partnership Deed.
- In the case of a company, a copy of the Board Resolution for authorised signatory.
- In the case of a trust or society, a copy of the Trust Deed or Society Registration Certificate.
- In the case of an LLP, a copy of the LLP Agreement.
8. Authorized Signatory Details: Details of the authorized signatory, including PAN card, Aadhar card, mobile number and E-mail ID.
9. GST Registration Certificate (if applicable): If the business is already registered under the old tax regime, the existing registration details may be required.
10. Aadhar Authentication: As per new amendment in GST law, Aadhar authentication is a mandatory step to complete the process of GST registration. This is the last step in GST registration that requires verification of the proprietor (in case of proprietorship) or authorised representative (in any other case) through Aadhar OTP.
NOTE: For this step, the mobile number of the proprietor/ authorised representative shall be linked with Aadhar.
Conclusion: In conclusion, navigating the complexities of GST registration requires a comprehensive understanding of eligibility criteria, associated benefits, and the essential documents needed for a seamless process. Whether a business seeks legal recognition, input tax credit, or an enhanced market presence, GST registration is a crucial step towards compliance and competitiveness in the evolving taxation landscape.
To know the complete process of GST registration kindly read the next article.