What is GST?
On July 1, 2017, the Indian Government initiated a new act, termed the Goods and Service Tax Act (GST Act). The act was officially passed on March 29 the same year in the Parliament.
GST is an indirect tax that was formed to abolish several other indirect taxes in India, to create a single taxation regime for ease of collection and to increase the efficiency of the process.
Today, new GST registration has become mandatory for businesses with an annual turnover of Rs. 40 Lakh and above. In the North East and Hill states, registration is compulsory for companies earning more than Rs. 10 Lakh yearly revenue.
The GSTIN registration process is relatively simple and will hardly take between 2 and 6 working days to complete.
But first, here are the various kinds of GST applicable in India.
Types of GST
GST can be divided into four sections, based on the kind of transaction it involves. Before a business can determine its GST liability, assessing the following table is essential.
|GST Types||What It Is|
|State Goods and Services Tax (SGST)||SGST refers to the tax payable on the sale of services and products within a state.|
It replaces previous taxes, including, Value Added Tax, Entry Tax, State Sales Tax, Entertainment Tax, surcharges and cesses.
|Central Goods and Services Tax (CGST)||The tax levied on the supply of intra-state products is CGST. The Central Government charges this tax.|
CGST replaced many taxes levied by the Centre, including Service Tax, Central Excise Duty, CST, SAD, Customs Duty, etc.
|Union Territory Goods and Services Tax (UTGST)||Taxes applicable to the sale of products and services in Union Territories, such as Andaman and Nicobar, Daman and Diu, Chandigarh, Dadra, etc.|
|Integrated Goods and Services Tax (IGST)||Sale of inter-state products and services leads to taxation. This is IGST. Basically, when businesses transfer services and products from one state to another need to pay this form of GST.|
Who Should Register for GST?
Business operators satisfying any of the below-mentioned clauses are liable to register for GST as per the Goods and Services Act-
- Individuals and businesses who were registered under pre-GST laws must register under GST as well.
- Businesses that exceed a yearly turnover of Rs. 40 Lakh (Rs. 10 Lakh for businesses in the North-Eastern or hilly areas) are eligible for GST registration online.
- Any individual supplying products through an e-commerce aggregator.
- E-commerce aggregators are liable to pay GST as well.
- Non-resident and casual taxable person.
- Individuals paying taxes under a reverse charge mechanism are also eligible for new GST registration. In such cases, the receiver is liable to pay taxes, instead of the supplier of goods and services.
All eligible individuals or businesses should keep several clauses regarding the eligibility and documentation to ensure a hassle-free registration process.
Types of GST Registration
Registration under GST is divided into several types. Undergoing the registration procedure is difficult without recognising its different forms. Take a look at the table below to acquire a better idea regarding the types.
|Who is Eligible?||Type of Registration|
|Average taxpayer||No deposits are necessary from businesses or individuals filing GST this category. Most companies in India fall under this classification|
|Casual Taxable Individual||Individuals setting up occasional or seasonal businesses need to register their GST under this category.|
The person needs to make a deposit equal to the GST liability from the occasional business.
The tenure for registration is 3 months. However, businesses can apply for renewal and extensions.
|Non-Resident Taxable Individual||People who reside outside India but occasionally supply goods or provide service as agents, principals, or in other capacities to Indian residents are liable to file for registration under this category. The business owner must pay a deposit equal to the expected GST liability during the GST active tenure.|
The normal tenure is three months. However, taxpayers can extend or renew the registration if required.
|Composition Registration||Composition registration process reduces the hassle involved with GST registration greatly. In this case, businesses need to deposit a fixed yearly payment irrespective of their actual earnings.|
Only companies that have a yearly turnover of up to Rs. 1 Crore are eligible for such a registration process.
Documents Necessary for new GST registration online
Applicants must furnish some documents without fail to complete their GST registration process successfully. However, the documentation differs based on whether it is a business or an individual applying for the registration.
Check out the table illustrated below for a better idea about the documents necessary.
|Sole Proprietors and individuals|
|Hindu Undivided Families|
|LLPs and Partnerships|
Upon furnishing all the mentioned documents, a 15-digit GSTIN is created unique to every registered business operating in the country. No charges are required as registration expenses for this process.
Fines for Not Registering Under GST
In case a GST-eligible individual or business does not pay taxes, either fully or partially, he/she has to pay penalty charges for it.
If the error of payment is genuine, i.e. unintentional, the individual or business in question has to pay 10% of the total tax. However, this is only applicable if the total tax burden is higher than Rs. 1 Lakh.
If the error of payment is intentional, the culpable entity needs to pay the entire due amount as penalty.
What are the Advantages of GST Registration?
Business entities can enjoy several benefits under GST. These include –
- Abolition of cascading effect – Introduction of GST has eliminated the previously noted cascading effect in indirect taxation, causing double taxation in every step. This measure has lowered the tax liability of business entities.
- Convenient application procedure – The application procedure for GST registration online as well as filing of GST can be conveniently done through the GSTN portal, making it time-efficient and easy.
- Lesser compliance – Under the previous tax regime, businesses had to file multiple returns accorded with different indirect taxes – VAT, excise, and service tax. As GST is a unified and singular tax regime, the number of filings has come down, making it less hassling for entities to file a return.
- The benefit of composition scheme – SMEs with annual turnover less than Rs. 1 Crore can enjoy lower tax rates and less stringent terms of compliance if registered under the GST Composition Scheme.
- Less stringent terms on logistics – Under GST, the terms for logistics are comparatively less strict than under the previous tax regime.
- Regulation of unorganised sector – Registration under GST comprises several provisions such as compliances, payment of taxes, and benefit of input credit, ensuring transparency in the tax collection system.
Such benefits notably reduced the hassle of filing taxes, ensuring efficient indirection tax collection regime.
When is GST Deregistration Possible?
Entities that have already registered their businesses or ventures under GST, in later stages, might need to cancel or surrender their GST registration.
There are several circumstances that prompt cancellation or surrendering of GST registration. These circumstances are discussed below –
- Turnover below the minimum limit
In case a business’s turnover has fallen below the minimum threshold applicable in its respective state post GST registration, that company can apply for deregistration.
For instance, business A, which operates in Maharashtra, had a turnover of Rs. 50 lakh when it got registered under GST. However, after several months, its annual turnover fell to Rs. 20 lakh. As the minimum threshold in Maharashtra for GST registration is Rs. 40 lakh, business A can choose to cancel its registration.
Nevertheless, entities which supply goods to other states are required to be registered under GST irrespective of their annual turnover.
- Discontinuation of business
If a business entity discontinues its operations, it needs to apply for a cancellation of its GST registration.
- Change in business status
Businesses that undergo a transfer in the ownership status can apply for cancellation of GST registration.
- Change in business constitution
A business needs to surrender its GSTIN registration if it has undergone any constitutional alteration and apply new for registration as per the current constitution.
For instance, if a business has changed its constitution from a Partnership firm to a Private Limited Company, it needs to cancel its registration as a Partnership firm and register new under GST as a Private Limited Company.
How to Apply for Cancellation of GST Registration?
Individuals can submit their application for cancellation of registration with the Form GST REG-29. Taxpayers in question shall include the following details when filling the form –
- Details of inputs or raw materials along with goods in work-in-progress and finished goods in the inventory on the date of application for cancellation.
- Liabilities, as shown in the Balance Sheet on the date of application for deregistration.
An officer, who shall oversee the cancellation procedure, is then required to issue a formal order in Form GST REG-19 within a month from the date of application. This officer shall also decide the date from which cancellation would be effective and subsequently notify the taxpayer in question.
Both GST registration online and deregistration are extensive procedures and hence, requires due diligence and comprehensive knowledge when filing. Taxpayers need to ensure they are updated regarding GST regulations and are in compliance with those laws if applicable to avoid legal consequences.
Besides efficiency in the tax collection process, many businesses also enjoy a lower tax liability owing to a change in the indirect taxation slabs under the Goods and Services Tax Act. Thus, registering businesses for GST can prove to be beneficial in multiple aspects.
- When does a business need to apply for several GST registrations?
In case a business entity operates in more than one state, it needs to have individual GST registrations for each state.
- What are the benefits for businesses that voluntarily register under GST?
Businesses that voluntarily register for GST, i.e. without being liable to do so can enjoy similar benefits as that of an eligible business such as the advantage of an input tax credit.
- What is GSTIN?
Businesses that are registered under GST are provided with a unique GSTIN or Goods and Services Tax Identification Number.