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Understanding Taxable Entities and Registration Requirements under GST in India

This article clarifies the definition of a 'taxable person' under India's Goods and Services Tax (GST) framework, outlining who is legally obligated to register. It details recent updates to GST registration rules and criteria for mandatory registration, including turnover thresholds and specific business types. The guide further explains categories such as casual taxable persons, non-resident taxable persons, input service distributors, and taxpayers under the Composition and QRMP Schemes, providing a comprehensive overview of GST registration nuances.

📖 3 min read read🏷️ GST Registration

Under the Goods and Services Tax (GST) framework in India, a 'taxable person' refers to any entity conducting business operations within the country that is either already registered or legally obligated to register under the GST Act. This definition encompasses a broad range of entities, including individuals, Hindu Undivided Families (HUFs), companies, partnerships (firms and LLPs), associations of persons (AOPs) or bodies of individuals (BOIs), corporations, government companies, foreign-incorporated bodies corporate, cooperative societies, local authorities, governmental bodies, trusts, and artificial juridical persons. Essentially, any entity involved in economic activities, including trade and commerce, is considered a taxable person for GST purposes.

Recent Updates Regarding GST Registration

Budget 2023 Changes

Effective retrospectively from 1st July 2017, Budget 2023 amends Section 23 of the CGST Act. This clarification states that certain persons listed in Section 23 are exempt from obtaining GST registration, even if they meet the conditions specified in Sections 22(1) and 24 of the CGST Act.

Mandatory Aadhaar Authentication

As of 1st January 2022, the CBIC has mandated Aadhaar authentication for applying for the revocation of cancelled GST registration, as per CGST Rule 23 in REG-21.

Extended Time for Revocation Applications

Taxpayers were granted an extended period until 30th September 2021 to apply for the revocation of cancelled GST registration if the original deadline fell between 1st March 2020 and 31st August 2021. This applied to registrations cancelled under Section 29(2) clauses (b) or (c) of the CGST Act, as per CGST notification number 34/2021 dated 29th August 2021.

Revocation Application Due Date Extension

The due date for filing an application to revoke registration cancellation, originally between 15th April 2021 and 29th June 2021, was extended to 30th June 2021.

Extension for Rule 9 Actions

For actions, replies, or order passing under Rule 9 of the CGST Rules, 2017, with deadlines between 1st May 2021 and 31st May 2021, the time limit was extended to 15th June 2021.

Enhanced ARN Search Functionality

On 5th March 2021, the 'Search ARN' functionality for registration after TRN login was improved for taxpayers.

Criteria for Mandatory GST Registration

GST registration becomes compulsory for various entities, including:

  • Businesses supplying goods with an annual turnover exceeding Rs.40 lakhs in Normal Category states (or Rs.20 lakhs in Special Category states).
  • Businesses providing services with an annual turnover over Rs.20 lakhs in Normal Category states (or Rs.10 lakhs in Special Category states).
  • Any individual or entity already registered under previous tax laws (e.g., Excise, VAT, Service Tax) must also register under GST.
  • In cases of business transfer or demerger, the transferee is required to obtain registration from the transfer date.
  • Persons involved in making inter-state supplies.
  • Casual taxable persons (details provided below).
  • Non-resident taxable persons (details provided below).
  • Agents acting on behalf of a supplier.
  • Entities liable to pay tax under the reverse charge mechanism.
  • Input service distributors (details provided below).
  • E-commerce operators or aggregators.
  • Individuals supplying goods or services through an e-commerce aggregator.
  • Persons supplying online information and database access or retrieval (OIDAR) services from outside India to a non-registered person in India.

Note: These provisions do not apply if the turnover consists solely of exempted goods or services under GST. Additionally, the Budget 2023 amendment to Section 23 of the CGST Act clarifies that certain persons are exempt from registration, regardless of meeting conditions in Sections 22(1) and 24. This change is pending notification by the CBIC.

It's important to note that some Normal Category states have retained the Rs.20 lakh limit, and some Special Category states have opted for the Rs.40 lakh limit for goods suppliers. Also, e-commerce sellers/aggregators are exempt from mandatory registration if their total sales are less than Rs.20 lakh, as per Notification No. 65/2017 – Central Tax dated 15th November 2017.

Defining a Casual Taxable Person under GST

A casual taxable person is an individual who occasionally provides goods and/or services in a GST-applicable region where they do not have a permanent business establishment. Such an individual is categorized as a casual taxable person under GST law. For instance, if a business owner with a primary location in Bangalore offers taxable consulting services in Pune, where they lack a fixed place of business, they would be considered a casual taxable person in Pune.

Understanding a Non-Resident Taxable Person under GST

Similar to a casual taxable person, a non-resident taxable person is a non-resident individual who sporadically supplies goods or services within a GST-governed territory but possesses no fixed business establishment in India.

What is an Input Service Distributor?

An 'Input Service Distributor' (ISD) refers to an office of a goods/services supplier that receives tax invoices for input services and then issues tax invoices to distribute the credit of CGST/SGST/IGST paid on these services to its branches under the same Permanent Account Number (PAN). The ISD must be a supplier of taxable goods/services, sharing the same PAN as the distributing office. Crucially, only credit for 'input services' can be distributed, not for input goods or capital goods. While this concept might be new for some taxpayers, its use is optional.

Characteristics of a Composition Taxpayer

A composition taxpayer is an entity registered under the composition scheme, which exempts them from collecting GST at standard rates from their customers. Instead, they remit tax to the government at a reduced or nominal rate based on their turnover or receipts, filing quarterly returns using Form CMP-08. Specific conditions apply to such taxpayers. Initially, under GST, only goods suppliers with an annual turnover up to Rs.1.5 crore could opt for this scheme (Section 10 of the CGST Act). Since 1st April 2019, service providers with an annual aggregate turnover up to Rs.50 lakh also have a similar scheme option.

Who Qualifies as a QRMP Taxpayer?

A registered person eligible for the QRMP Scheme (Quarterly Return Monthly Payment) is one required to file GSTR-3B, with an aggregate turnover not exceeding Rs.5 crore in the preceding financial year. Under this scheme, taxpayers can file GSTR-1 and GSTR-3B quarterly while making tax payments monthly using Form PMT-06. Furthermore, the Invoice Furnishing Facility (IFF) can be utilized if B2B sales invoices need to be uploaded monthly on the GST portal.

GST Registration Procedures by Taxable Person Category

  • Every individual or entity must apply for registration in each state where they incur liability, within 30 days of becoming liable for registration.
  • Casual or non-resident taxable persons should submit their registration application at least five days prior to commencing business activities.
  • GST registration numbers are PAN-based, making a Permanent Account Number (PAN) a mandatory prerequisite for obtaining registration.
  • Assessees are required to obtain separate registration for each state, as GST registration is state-specific.
  • Taxpayers also have the option to acquire distinct registrations for each 'business vertical' they operate within the same state.

Specific GST Registration Provisions for Casual and Non-Resident Taxable Persons

Casual taxable persons and non-resident taxable persons are required to apply for registration at least five days before their business commencement. Section 24 outlines specific provisions for these categories under GST. Such individuals may obtain a temporary registration valid for 90 days, which can be extended for an additional 90 days. Furthermore, any person registering under Section 24 must make an advance deposit of GST based on their estimated tax liability.

Frequently Asked Questions

What is the primary purpose of GST registration in India?
The primary purpose of GST registration is to ensure compliance with the Goods and Services Tax laws, enabling businesses to legally collect GST from customers, claim input tax credit, and file tax returns. It integrates businesses into the national indirect tax framework.
Are there different types of GST registration based on business activity?
Yes, while standard registration covers most businesses, there are specific categories like casual taxable persons, non-resident taxable persons, and input service distributors, each with distinct registration rules tailored to their operational nature under GST.
How does the Composition Scheme benefit small taxpayers under GST?
The Composition Scheme simplifies GST compliance for small taxpayers by allowing them to pay tax at a lower, fixed rate based on turnover, instead of the regular rates. It also reduces the need for detailed record-keeping and simplifies return filing, promoting ease of doing business.
What are the key implications of failing to register for GST when mandatory?
Failure to register for GST when legally required can lead to significant penalties, including fines and interest on unpaid tax liabilities. It also prevents businesses from legally collecting GST or claiming input tax credit, impacting their operational costs and legal standing.
Can a business have multiple GST registrations?
Yes, a business is required to obtain separate GST registration for each state where it has operations and is liable for registration. Additionally, a business has the option to obtain separate registrations for different 'business verticals' within the same state.