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Understanding GST Applicability for Businesses and Individuals in India

India introduced the Goods and Services Tax (GST) in 2017, replacing multiple indirect taxes to streamline the tax system. This regime profoundly impacts businesses and service providers across various scales. Mandatory GST registration depends on factors like turnover thresholds and specific business activities, including inter-state supplies, e-commerce operations, and reverse charge mechanisms.

📖 4 min read read🏷️ GST Applicability

India's tax system underwent a significant transformation with the introduction of the Goods and Services Tax (GST). This new tax regime superseded various previous levies, including VAT, service tax, and excise duty. GST is anticipated to profoundly affect nearly all businesses and service providers, irrespective of their scale. The GST system officially launched on July 1, 2017.

Recent Changes to GST Registration Procedures

Subsequent to January 1, 2022, the Central Board of Indirect Taxes and Customs (CBIC) mandated Aadhaar authentication for applying to revoke a cancelled GST registration, as per CGST Rule 23 in REG-21. An extension was granted to taxpayers until September 30, 2021, for revoking cancelled GST registrations, provided the original deadline was between March 1, 2020, and August 31, 2021. This applied to cancellations under Section 29(2) clause (b) or (c) of the CGST Act, as outlined in CGST notification number 34/2021 issued on August 29, 2021. The deadline for filing applications to revoke registration cancellations, originally falling between April 15, 2021, and June 29, 2021, was extended to June 30, 2021. Furthermore, the timeframe for actions, replies, or order issuance under Rule 9 of the CGST Rules, 2017, for periods between May 1, 2021, and May 31, 2021, was extended to June 15, 2021. Taxpayers also benefited from an improved Search ARN Functionality for Registration after TRN login.

Businesses Subject to GST

GST encompasses various activities such as trade, commerce, manufacturing, professions, and vocations, regardless of their scale or regularity. This definition also extends to the supply of goods or services related to the commencement or termination of a business. Services are defined as anything apart from goods, and it is common for goods and services to be subject to different GST rates.

Individuals and Entities Covered by GST

The term "persons" under GST includes individuals, Hindu Undivided Families (HUF), companies, firms, Limited Liability Partnerships (LLP), Associations of Persons (AOP), co-operative societies, societies, and trusts. However, agriculturists are explicitly exempt from GST. Agriculture, for this purpose, covers activities like floriculture, horticulture, sericulture, and cultivating crops, grass, or garden produce. It specifically excludes dairy farming, poultry farming, stock breeding, fruit gathering, and the rearing of seedlings or plants.

GST Registration Requirements

Possessing a Permanent Account Number (PAN) is a prerequisite for obtaining GST registration. Non-resident individuals, however, may register for GST using alternative documents as specified by the government. A separate GST registration is necessary for each state where a business operates. Furthermore, taxpayers have the option to secure distinct registrations for different business segments within the same state.

Mandatory GST Registration Scenarios

Registration under GST is compulsory in several specific situations:

Based on Turnover

Businesses are required to collect and remit GST if their annual turnover surpasses Rs. 20 lakhs within a financial year. For certain special category states, this threshold is Rs. 10 lakhs. These thresholds dictate GST payment obligations. "Aggregate turnover" refers to the total value of all taxable, exempt, export, and inter-State supplies made by a person under the same PAN, calculated nationwide, excluding any taxes levied under the CGST, SGST, and IGST Acts.

Other Mandatory Cases (Irrespective of Turnover)

  • Inter-State Suppliers: Individuals or entities engaged in the inter-state supply of goods or services.
  • Casual Taxable Persons: Any person providing goods or services within a taxable territory without a permanent business location. Their registration is valid for 90 days.
  • Non-Resident Taxable Persons: Any person providing goods or services in India without a fixed establishment in the country. Their registration is also valid for 90 days.
  • Reverse Charge Mechanism (RCM): Individuals or entities obligated to pay tax under RCM, where the recipient, rather than the supplier, is responsible for tax payment.
  • Agents: Persons who facilitate supplies on behalf of other registered taxable individuals.
  • Input Service Distributors (ISD): Entities that receive supplies and issue tax invoices to distribute input tax credit (CGST/SGST/IGST) among their branches, sharing the same PAN as the supplier's office.
  • E-commerce Operators: Platforms facilitating online commerce.
  • Suppliers via E-commerce Operators: Individuals supplying goods (excluding branded services) through an e-commerce platform.
  • Aggregators: Those who provide services under their own brand name.
  • Online Information and Database Access or Retrieval (OIDAR) Service Providers: Persons located outside India who provide OIDAR services to unregistered persons in India.

Further Reading

Frequently Asked Questions

What is the primary objective of implementing GST in India?
The primary objective of GST in India is to streamline the indirect tax system by subsuming multiple central and state taxes into a single, comprehensive tax, thereby reducing complexity and fostering a common national market.
How does GST simplify the indirect tax structure in India?
GST simplifies the tax structure by eliminating cascading effects of taxes, ensuring a seamless flow of input tax credit across the value chain, and harmonizing tax rates and procedures nationwide.
Are all goods and services subject to the same GST rate?
No, goods and services are categorized into different tax slabs (e.g., 5%, 12%, 18%, 28%) under GST, with some essential items being exempt or taxed at lower rates, and luxury or sin goods at higher rates.
What is Input Tax Credit (ITC) under GST?
Input Tax Credit (ITC) allows businesses to claim credit for the GST paid on purchases of goods and services used for business purposes, thereby reducing their overall tax liability and preventing double taxation.
What is the significance of a GST Identification Number (GSTIN)?
A GSTIN is a unique 15-digit identification number assigned to every registered taxpayer under GST. It is essential for various GST-related activities, including filing returns, claiming ITC, and issuing tax invoices, serving as a taxpayer's identity in the GST system.
Which types of activities are excluded from the definition of agriculture under GST?
Activities like dairy farming, poultry farming, stock breeding, gathering of fruit, and rearing of seedlings or plants are not considered agriculture for GST purposes.

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