GST Registration Process for Foreigners
GST Registration Process for Foreigners
India’s significant business potential attracts foreign investors and Non-Resident Indians (NRIs) interested in establishing businesses. Non-residents planning to provide goods, services, or both—temporarily or permanently, directly or indirectly, as agents or in any other role—must register for the Goods and Services Tax (GST). Additionally, non-resident taxpayers must appoint a representative in India to manage their GST responsibilities. This article covers GST registration for foreigners, GST implications for overseas services in India, and the GST registration process.
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Get Started!What is Good and Service Tax?
The Goods and Services Tax (GST) is a unified tax system introduced by the Indian government to consolidate various indirect taxes previously levied at both federal and state levels, including Service Tax, Value Added Tax (VAT), Luxury Tax, Amusement Tax, and others, into one single tax structure. This tax reform aims to simplify the taxation process, making it easier and more transparent for businesses to operate. Non-resident Indians (NRIs) involved in the supply of goods and services must register as taxable persons under GST.
Definition of Non-Resident Taxable Person
A “non-resident taxable person” in the context of India’s GST law refers to an individual or entity that engages in transactions involving the supply of taxable goods or services, or both, either as a principal or an agent, but does not have a permanent place of business or residence in India. Such individuals or entities must be mandatorily registered under the GST Act.
GST Registration for NRI
GST registration is mandatory for Foreigners who conduct taxable transactions in India. As India continues to grow as an economic hub, there is increasing interest from non-resident Indians and foreign entities to set up businesses there. Consequently, any non-resident person, whether an individual residing outside India or a foreign company that supplies goods or services within India, is classified as a non-resident taxable person and must comply with the Goods and Services Tax Act.
Such non-resident taxable persons must appoint an authorized representative in India responsible for fulfilling GST obligations on their behalf. Additionally, foreigners must obtain GST registration at least five days before they commence business operations in India. This ensures that all tax liabilities are met in accordance with Indian tax law from the outset of their business activities.
Additionally, non-resident individuals or entities providing Online Information and Database Access or Retrieval (OIDAR) services to unregistered persons in India must register under GST law. This ensures that all relevant tax obligations are met for services provided within the Indian market, regardless of the provider’s physical presence in the country.
Eligibility Criteria for GST Registration for Foreign Company
The eligibility criteria for GST registration for non-residents are listed as follows:
- Mandatory Registration: Non-resident taxable persons must register for GST in India, regardless of their annual turnover.
- Advance Registration: Registration must be completed at least five days before starting business operations in India.
- Early Compliance Recommended: Foreign companies selling goods and services in India should register for GST as early as possible.
- Exclusion from Composition Scheme: Non-resident Indians (NRIs) cannot opt for the composition scheme, a simplified tax payment method for smaller businesses.
- Tax Identification Number: A business entity based outside India, supplying taxable goods or services in India, must register for GST and be assigned a Tax Identification Number based on the country of registration.
Documents Required for GST Registration Process for NRI
For Non-Resident Indians (NRIs) looking to register for GST in India, the following documents are typically required:
- Bank Account Proof: Evidence of a bank account in India, which is necessary for the financial transactions associated with the business.
- Digital Signature Certificate (DSC): The DSC of the authorized signatory in India is needed to authenticate documents electronically during the GST registration process.
- Proof of Business Incorporation: This document should be validated by the foreign government where the business is established and must confirm the legal status and registration of the business.
- Passport Details: The passport of the NRI-taxable person is required to verify identity and nationality.
- Unique Number or Tax Identification Number: This number, provided by the foreign government, is necessary to identify the NRI’s business entity in its home country.
GST Registration Process for Foreigners
In India, the GST registration process for foreigners includes two main stages: provisional and final registration. The GST registration process for foreigners or non-resident taxable persons involves several specific steps:
Provisional GST registration for NRI
The provisional GST registration process for non-resident taxable persons involves several key steps and requirements:
- Form GST REG-09: Non-resident taxable persons must use this form to submit an electronic registration application. This form is specifically designed for non-residents engaging in taxable transactions in India.
- Passport and Tax Identification: The application should include a self-attested copy of the applicant’s valid passport. If the applicant is a foreign business entity, they must also provide their country’s tax identification number (TIN) or a PAN if they have one.
- Signature and Verification: The GST registration application must be properly signed by the authorized signatory or verified through the Electronic Verification Code (EVC).
- Timely Filing: The application for provisional GST registration must be filed at least five days before the intended start date of business activities in India. This ensures sufficient processing time for the tax authorities.
- Advance Tax Deposit: Along with the application, a tax advance deposit is required. This deposit is based on estimating the GST liabilities that the non-resident taxable person expects to incur during their taxable activities in India.
This provisional registration ensures that non-resident taxable persons comply with India’s GST laws before they commence their business operations.
Final GST registration GST registration for NRI
The process for achieving final GST registration for non-resident taxable persons is aligned with the steps taken by resident taxpayers but with some specific requirements tailored to non-residents:
- Completion of FORM GST REG-26: Individuals seeking final GST registration must complete and submit FORM GST REG-26 electronically. This step is essential for converting the provisional GST registration into a final one.
- Provision of Additional Information: The applicant must provide any additional information requested by the GST authorities. This information must be submitted within three months of receiving the request.
- Issuance of FORM GST REG-06: If the information provided is accurate and complete, the final GST Registration Certificate will be issued in FORM GST REG-06.
- Handling Discrepancies: If there are discrepancies or errors in the information provided, the tax officer will issue a show-cause notice using FORM GST REG-27. The applicant will then be allowed to address or correct the issues mentioned in the notice.
- Cancellation of Provisional Registration: If the issues are not satisfactorily resolved, the provisional registration may be cancelled using FORM GST REG-28.
- Revocation of Show Cause Notice: If the applicant successfully addresses the concerns raised in the show-cause notice, the notice can be revoked, and the process can proceed. This is formalized by issuing an order using FORM GST REG-20.
- Signature Requirement: The final application for a non-resident’s GST registration must be signed by their authorized signatory, who must be a resident of India and possess a valid PAN.
GST Rates for a Foreign Company
The GST rates for a foreign company operating in India vary depending on the type of goods or services provided. Generally, the standard GST rate is 18% for most goods and services. However, certain essential items, including food and medicines, benefit from a reduced rate of 5%. Additionally, some services may be exempt from GST entirely.
Understanding these rate distinctions is crucial for foreign companies to price products and services correctly, ensure compliance with tax regulations, and avoid financial penalties. Detailed and updated information regarding GST rates can be obtained from the Central Board of Indirect Taxes and Customs (CBIC) website, which provides comprehensive guidance to assist businesses in navigating India’s GST framework.
GST Regulations for Non-Resident Taxable Persons
Non-resident taxable persons are not eligible for input tax credits on goods and services received within India, except for goods that they import. The taxes paid by non-resident taxable persons will be credited to the recipients who are eligible under the GST framework. Furthermore, as of January 1, 2022, the Central Board of Indirect Taxes and Customs (CBIC) has mandated Aadhaar Authentication for non-residents applying for the revocation of a cancelled GST registration, according to CGST Rule 23 in Form REG-21. This step aims to enhance compliance and verification processes within the GST system.
Key GST Compliance Requirements for Foreign Companies
For a foreign company registered under GST in India, adhering to compliance requirements is critical to ensure smooth operations and avoid legal issues. Here are the key compliance requirements:
- Monthly GST Returns: Foreign companies must file monthly returns using the GSTR-1 form, which details all supplies made during the month, including sales and other outward supplies of goods and services.
- Details on GST Paid: The returns must also include information on GST paid on purchases (input tax credit) from other suppliers. This helps in adjusting the tax liability.
- Tax Liability and Payments: The GSTR-3B form must be submitted to declare the company’s total monthly tax liability and any payments made towards this liability. This form consolidates the details of GST collected on outward supplies and the GST available as input tax credit.
- Annual Return: In addition to monthly returns, a foreign company must also file an annual return using the GSTR-9 form. This return summarizes all the supplies and purchases made during the financial year.
Foreign companies must stay informed about the latest GST regulations and amendments to ensure compliance.
Conclusion
As India is a significant player in the global economy, understanding and adhering to its GST registration process becomes paramount for foreign investors and Non-Resident Indians looking to tap into its market. The GST system requires foreign entities to complete provisional and final registration, ensuring compliance from starting their business activities. By following this detailed yet streamlined process, foreign companies can effectively integrate into India’s tax framework, avoiding penalties and establishing a reputable business presence.
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