Who Must Register for GST? Persons Liable for GST Registration

Summary: GST registration is a key compliance requirement for businesses, professionals, traders, service providers and other persons undertaking taxable activities in India. The principal liability arises under Section 22 of the CGST Act, 2017 when aggregate turnover exceeds the prescribed threshold, subject to the nature of supplies, the State or Union Territory involved and applicable exemptions or relaxations. Aggregate turnover broadly includes taxable supplies, exempt supplies, exports and inter-State supplies of persons having the same PAN, computed on an all-India basis. However, turnover is not the only test. Section 24 provides for compulsory registration for specified categories of persons irrespective of the normal turnover threshold, subject to statutory exemptions and amendments. These categories include specified persons making inter-State taxable supplies, casual taxable persons, persons liable under reverse charge, certain e-commerce operators and suppliers, non-resident taxable persons, TDS-related persons, Input Service Distributors, agents and other specified persons. Section 23 also provides circumstances in which registration is not required, including persons exclusively supplying goods or services that are not liable to tax or are wholly exempt, subject to the applicable provisions and notifications. A person who is not otherwise liable may also opt for voluntary registration under Section 25. Once registered, the person becomes subject to the applicable GST compliance framework, including invoicing, returns, record keeping, tax payment and other statutory requirements. Accordingly, determining GST registration liability requires consideration of aggregate turnover together with the nature, location and character of supplies and the specific statutory provisions applicable to the person.

An Introduction

One of the first and foremost compliance details for businesses in India is GST registration. On 1 July 2017, the Goods and Services Tax (GST) regime came into existence, superseding a number of indirect taxes with a single tax regime. But all economic activities do not necessarily have to be registered for GST. The requirement will depend on the nature of the turnover, supplies used, location of the supplier and/or the statutory provisions.

So it is important for businesses, professionals, traders, service providers or others conducting taxable activities to understand who needs to register.

Who is Liable to Register?

The basic rule is provided in Section 22 of CGST Act.

A person is presumed to be making taxable supplies when his aggregate turnover in a financial year is more than the prescribed threshold for tax registration under the GST law.

The threshold may vary as a function of:

• the length of time the supplies are in use; and
• the State/Union Territory in which the person works; and

Whether a person is providing goods or services:

This means that a small business that does not exceed the applicable turnover thresholds will be exempt from required registration for GST, with some exceptions.

What is the meaning of Aggregate Turnover?

Usually the following activities are considered as turnover of the aggregate in India and calculated under the same PAN:

• taxable supplies;
• exempt supplies;
• exports; and
• inter-State supplies.

Excludes generally taxable supplies that are taxable under the reverse charge mechanism, except for certain specified supplies.

The concept of aggregate turnover is particularly important because it is computed with reference to persons having the same PAN on an all-India basis.

Example:

Assume a person has two businesses in Punjab and Haryana, with the same PAN. For aggregate turnover to be considered while registering for GST, turnover of both businesses can be considered.

Persons Required to Register Irrespective of Turnover

One of the significant aspects of the GST regime is that there is no requirement to cross the turnover threshold to be registered.

As per CGST Act, 2017, Section 24, some categories of persons are applicable for registration even if their turnover is below the normal threshold of registration, provided changes and statutory exemption to these provisions.

Among others, they include:

1. Persons who make inter-State taxable supplies

A person carrying on a supply across the boundary of two States or Union Territories may be a person engaged in making supplies and, as such, may be liable to compulsory registration, taking account of any exemptions applicable to the supplies.

2. Casual taxable persons

A casual taxable person is the person who occasionally engages in transactions in the supply of goods or services in a State (or Union Territory) where he or she does not have a fixed place of business.

3. Persons liable to pay tax under reverse charge

Certain persons who are liable to pay GST under the reverse charge mechanism (RCM) may be subject to registration requirements. RCM is an arrangement that allows the recipient to instead of paying GST in certain cases, the supplier is responsible for paying the tax.

4. E-commerce operators

Under the applicable statutory provisions, certain electronic commerce operators will have to register for GST, even with turnover.

5. Persons supplying via some e-commerce operators

Some special provisions may apply to persons supplying goods or services via e-commerce operators. The law has, however, changed over the years and there are exemptions and relaxations for certain categories based on thresholds.

For example, specific statutory exemptions have been provided for certain suppliers through e-commerce operators, including the exemption introduced by Notification No. 34/2023-Central Tax.

6. Non-resident taxable persons

For a non-resident taxable person making taxable supplies in India may be required to be registered under the provisions of GST law.

7. Persons liable to deduct tax at source

If tax is deducted at source, the persons deducting the tax.

As per the law, some individuals who are mandated to perform TDS under section 51 of CGST Act must register.

8. Input Service Distributors

An Input Service Distributor (ISD) distributes eligible input tax credit relating to input services to its branches or units under the GST law and is registered as an ISD.

The provisions relating to Input Service Distributor registration have also undergone changes, with the ISD mechanism becoming mandatory in the circumstances prescribed by law.

9. Agents and specified suppliers

The provisions for compulsory registration can apply to persons making taxable supplies on behalf of other taxable persons, such as certain agents.

Voluntary Registration

Not all businesses are required to register for GST. You can be registered under the GST law, 2017 (CGST Act) on your voluntary registration application under Section 25 of the CGST Act, 2017 if you are not already required to be registered under the law. In cases where businesses are interested in issuing tax invoices under the Goods and Services Tax (GST) regime, claiming eligible Input Tax Credit (ITC) and registering as a registered supplier, voluntary registration can be helpful. It can also be beneficial to businesses that have customers and/or other businesses who want to buy from GST-registered businesses. Nevertheless, for voluntary registration, there are also some legal and compliance obligations. It is a common principle that once a person registers for GST on a voluntary basis, he is expected to follow the provisions of GST, which involve various aspects such as making returns, keeping records, billing properly, and paying GST when it is due.

Small Businesses Represent a Special Case

GST law offers some relief to small businesses in terms of not registering if their turnover is below the applicable limit. In such a case, a small trader engaged in making taxable supplies in a specific State, where there is no compulsory-registration condition, and also, where the aggregate turnover is not crossed, is generally not required to register for GST. But turnover must not be the only factor in calculating businesses’ registration liability. They will also need to consider what type of supplies they are using, from where supplies are sourced and where they are going, if applicable, if the supplies fit into any of the categories that are required to be registered, and if applicable, whether an exemption exists. Hence, even for businesses with a low turnover, it may be necessary to be registered for GST in certain circumstances based on the business activities.

The statutory framework also recognises persons who are not liable for registration under Section 23, including specified persons exclusively making non-taxable or wholly exempt supplies.

What is GST Registration? Who needs to register for GST?

It is important for persons liable under the GST law to be registered under the act. After registration a taxpayer is entitled to a unique GST Identification Number (GSTIN) and is bound by certain compliance requirements. In case they are applicable, the registered person may also be required to issue GST compliant invoice, collect and deposit GST with the Government, file applicable GST returns, maintain prescribed records and comply with Input Tax Credit, e-Tran, e-way bills and other provisions of GST. Meanwhile, the registration allows for the eligible taxpayer to avail Input Tax Credit on purchases and other business expenses as per law. If you are legally responsible for registration yet you have not done so, you could face penalties and other consequences. Hence, it is important for businesses to carefully assess themselves and register for GST, if they are liable to do so, within the deadline.

The registration procedure is governed principally by Sections 22 to 25 of the CGST Act, 2017 and the applicable rules.

Conclusion

The registration under the Goods and Services Tax is an important part of the Goods and Services Tax system as it indicates who have to be a part of the GST compliance. Registration may be prescribed at a turnover threshold, but some people may need to register even if they don’t meet the threshold due to the nature of their business or the nature of the supplies they provide. Meanwhile, GST law offers exemption and threshold relief for small businesses and persons who engage in only exempt supplies. Persons who wish to be a part of the GST framework and avail themselves of the benefits provided to registered persons can also voluntarily register themselves. Hence the assessable nature and place of supply, exemptions and specific statutory provisions must be taken into account to determine if GST registration is required, even if the threshold of turnover is not exceeded. Businesses can ensure smooth operations, compliance with the law, and prevent penalties by understanding these requirements.

References

• The Central Goods and Services Tax Act, 2017, Act No. 12 of 2017, particularly Sections 22–25, Government of India.
• The Central Goods and Services Tax Rules, 2017, Ministry of Finance, Government of India.
• Goods and Services Tax Council, GST – Goods and Services Tax, Government of India.