GST Taxpayer Categories and GST Registration Procedure
GST Taxpayer Categories and GST Registration Procedure in India
Understanding the different types of GST registration is crucial for anyone looking to register as a new taxpayer in India. Before you embark on the registration process, it’s essential to identify the specific taxpayer category that best suits your business needs. Knowing the right type and category of GST registration that aligns with your business model is key to ensuring a smooth tax process. It’s important to familiarize yourself with the definitions, eligibility criteria, and various types of GST registration to set up and expand your business effectively.
For expert guidance on navigating the complexities of GST registration, talk to our experts at IndiaFilings; we offer specialized assistance for GST Registration.
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GST registration is when a taxpayer becomes recognized under the Goods and Service Tax (GST) system. This process is tailored to different types of taxpayers, depending on their specific needs and business requirements. Upon completing the GST registration process, the taxpayer is assigned a Goods and Service Tax Identification Number (GSTIN). This 15-digit number is crucial for identifying businesses subject to GST obligations. The GSTIN facilitates tracking GST-related transactions and helps determine a business’s liability for GST payments.
Also read, GST Rates for Different Goods and Services in India
Eligibility Criteria for GST Registration
- Businesses Previously Registered: If your business was registered before GST, you need to switch to GST now.
- Non-Resident Businesses: Businesses based outside India but operating in India must register for GST.
- Occasional Sellers: If you sell in GST areas sometimes but don’t have a permanent business there, you should register.
- Users of Reverse Charge Mechanism: If you’re responsible for paying GST instead of your supplier, you need GST registration.
- E-commerce Platforms: GST registration is mandatory if you operate an e-commerce platform.
- Businesses with High Turnover: You must register if your business’s turnover exceeds Rs. 40 lakh (Rs. 20 lakh for special category states).
- Input Service Distributors: Your business must register if it distributes input tax credits.
- Agents for Suppliers: Agents who supply goods for others must register.
- E-commerce Sellers: Those selling goods or services on e-commerce platforms must register.
- Online Service Providers from Abroad: If you provide online services or data from outside India to unregistered users in India, you’re required to register.
Different types of GST Taxpayers & GST Registration
GST registration in India is categorized into various types to accommodate the diverse nature of businesses and taxpayers. The different types of GST taxpayers are:
- Normal Taxpayer
- Composition Taxpayer
- Casual Taxable Person
- Input Service Distributor (ISD)
- Non-Resident Taxable Person
- Non-Resident Online Service Distributor
- Embassy/UN Body/ Other Notified Persons
- Special Economic Zone (SEZ) Developer/ Unit
- Tax Deductor at Source (TDS) /Tax Collector at Source (TCS)
Normal Taxpayers in the GST Regime
Under the GST framework in India, the ‘Normal Taxpayer’ category applies to businesses based on their annual turnover. Here’s a breakdown of the criteria and obligations for a Normal Taxpayer:
- Registration Threshold: Businesses must register for GST if their annual turnover exceeds Rs. 40 lakhs in normal category states and Rs. 20 lakhs in special category states.
- Turnover Consideration for Composition Scheme: A registered person whose aggregate turnover in the previous financial year did not exceed Rs. 75 lakhs may be eligible for the composition scheme.
- Applicability to Service Providers: The Normal Taxpayer category encompasses taxpayers in the service industry, excluding those in the restaurant sector. These taxpayers must adhere to regular GST compliance requirements.
- GST Return Filing Requirements: Normal Taxpayers are required to file monthly returns. Currently, the filings include GSTR 3B, a summary return of inward and outward supplies, and GSTR 1, detailing outward supplies of taxable goods and/or services.
- Input Tax Credit Benefits: Regular taxpayers under this category can receive an input tax credit. This means they can deduct the amount of GST paid on purchasing goods or services from the GST they must pay on their output.
Composition Scheme in GST
The Composition Scheme under GST is tailored for small taxpayers, offering a simplified taxation process. It’s an attractive option for businesses with a turnover of less than Rs. 1.5 crore. Here are the key benefits of registering under the Composition Scheme:
- Simplified Compliance: Taxpayers under this scheme enjoy reduced compliance burdens. They need to file fewer returns and have simplified record-keeping requirements.
- Reduced Tax Liability: The scheme allows taxpayers to pay GST at a fixed turnover rate, typically lower than the regular tax rates.
- Enhanced Liquidity: With taxes levied at a lower rate, businesses have higher liquidity, allowing them to utilize funds more effectively for operational and growth purposes.
Casual Taxable Person under GST
In the GST framework, a ‘Casual Taxable Person’ is defined as someone who occasionally supplies goods and/or services in a GST-applicable territory but does not maintain a fixed place of business in that territory. This classification under GST caters to those conducting business transactions on an ad-hoc or temporary basis.
Input Service Distributor (ISD) in GST
In the context of GST, an Input Service Distributor (ISD) is a specific classification that caters to the distribution of tax credits. It is defined as:
- Function: An ISD is an office of the supplier of goods or services. It is responsible for receiving tax invoices upon receipt of input services. Subsequently, it issues tax invoices to distribute the credit of CGST (Central Goods and Services Tax), SGST (State Goods and Services Tax), and/or IGST (Integrated Goods and Services Tax) paid on these services to its branches that have the same Permanent Account Number (PAN).
- Restriction on Credit Distribution: An important aspect of ISD is that it can only distribute the credit received on ‘input services’. It does not cover credit distribution for input goods or capital goods.
- Eligibility: To qualify as an ISD, the entity must be a supplier of taxable goods or services and share the same PAN as the office performing the role of the ISD.
- Voluntary Basis: Becoming an Input Service Distributor is optional. Businesses not currently registered as ISDs can opt for this mechanism if it aligns with their operational structure and tax management strategies.
Non-Resident Taxable Person in GST
In the GST framework, a ‘Non-Resident Taxable Person’ is defined as an individual or business entity not based in India but occasionally supplies goods and/or services in a territory where GST is applicable. This category specifically addresses those who do not have a fixed place of business within India.
GST Compliance: As per GST regulations, Non-Resident Taxable Persons ( individuals or entities) must comply with the GST norms.
Non-Resident Online Service Distributor in GST
Under the GST regime, a Non-Resident Online Service Distributor, often referred to as a provider of OIDAR (Online Information and Database Access or Retrieval) Services, is a specific category that addresses the taxation of digital services. This category includes foreign entities providing various online services from outside India to individuals or entities within India (excluding registered GST individuals).
Key Aspects:
Scope of Services: OIDAR services encompass a wide range of digital offerings, such as online advertising, cloud services, e-books, movie downloads, software, online digital content (like movies, TV shows, music), data storage, online gaming, etc.
- Mandatory GST Registration: Any foreign provider offering OIDAR services to unregistered persons in India must register under GST.
- Single PAN-India Registration: A single registration is applicable across India for Non-Resident Online Service Providers.
- Centralized Processing: The Office of the Principal Commissioner of Central Tax in Bengaluru West centrally handles such service providers’ registration and subsequent processes.Appointment of an Authorized Signatory in India: These service providers must appoint an Authorized Signatory based in India with a valid PAN. This Authorized Signatory is responsible for handling the GST registration process on the GST portal on behalf of the Non-Resident Online Service Provider.
GST Registration for Embassies, UN Bodies, and Other Notified Persons
Under the GST regime, Embassies, UN Bodies, and Other Notified Persons are eligible for a Unique Identity Number (UIN).
Key Points of UIN:
- Issuance and Purpose: UIN is issued to UN Bodies and Embassies based on letters from the Ministry of External Affairs. It can also be granted to other entities as notified by the Commissioner. The UIN allows these bodies to procure taxable goods/services from registered persons in India.
- Invoice and Refund Process: The UIN must be mentioned on purchase invoices. This enables UIN holders to claim refunds of the GST paid on transactions. Refunds are processed based on Form RFD-10, generated after filing a statement of inward supplies in Form GSTR-11.
Registration Process on GST Portal:
To apply for UIN as a UN Body, Embassy, or Other Notified Person:
- Go to the GST Portal and navigate Services > Registration > New Registration.
- Select the ‘New Registration’ option and choose ‘United Nation Body/Consulate or Embassy of Foreign Country/Other Notified Person’ from the ‘I am a’ drop-down list.
- Conditions for UIN Application:
- Unique Registration: The applicant should not already possess a UIN in that State. UN Bodies and Embassies require only one registration for all of India, whereas Other Notified Persons must obtain state-wise registration.
- Valid Contact Details: Applicants must have an Indian mobile number and email address.
- Mandatory Documents and Information: All required documents and information for registration must be complete and accurate.
- Authorized Signatory: The applicant should designate an authorized signatory with valid details.
GST Registration for SEZ Developers and Units
- Under the GST regime, both Special Economic Zone (SEZ) developers and SEZ units are mandated to register anew, following specific guidelines:
- Fresh Registration Requirement: SEZ developers and units must apply for new registration under GST, treating themselves as separate business verticals.
Registration Process:
In the GST registration application, under the ‘Business Details’ tab, select ‘SEZ Unit’ or ‘SEZ Developer’ as the reason for obtaining registration.
Upload the necessary certificates or documents issued by the Government of India in the ‘principal place of business’ tab. These documents prove your status as an SEZ unit or developer.
Email Confirmation for Existing Enrolments:
- If ‘SEZ’ was chosen as a business activity during the initial GST enrolment, the primary authorized signatory should receive an email for further action to identify the GSTIN as an SEZ Unit or Developer.
- In the absence of such an email or if ‘SEZ’ was not selected initially, it’s recommended to approach the Jurisdictional Tax Authority. They can facilitate the process by raising a request with the GST system to incorporate this change.
GST Registration for Tax Deductors and Tax Collectors
In the GST regime, entities responsible for Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) must register accordingly. Here’s a breakdown of their roles and registration process:
TDS under GST:
Entities Required to Register:
Departments, Centre/State Government establishments, local authorities, government agencies, and certain persons or categories notified by the Central/State Governments. These entities must register as TDS deductors if they make contractual payments to suppliers exceeding INR 2.5 lakhs.
Deduction Rates:
- 1% under CGST and 1% under SGST for intra-state transactions.
- 2% under IGST for inter-state transactions.
The deducted GST amount should be remitted to the appropriate GST account, and the suppliers will receive credit for these payments.
TCS under GST:
Similar to TDS, entities specified by the government as tax collectors must register under GST for TCS purposes.
Registration Process:
Online Application: The registration process is entirely online via the GST portal.
Form and Preconditions:
- Entities must apply using the prescribed form.
- Registration conditions include a valid PAN or TAN, a valid mobile number, an email ID, the necessary documents, a place of business, and an authorized signatory with valid details.
- Self-Registration: Entities can file the Registration Application for Tax Deductor/Tax Collector themselves through the GST system.
What is the procedure for different types of GST registration?
Here’s a simplified guide to the steps for registering under different types of GST:
- Visit GST Portal: Start by visiting the official website of GST.
- Register Now: Click ‘Register Now’ under the ‘Taxpayers’ menu.
- New Registration: Choose ‘New Registration’.
- Fill in Details:
- Under ‘I am a’, select ‘Taxpayer’.
- Choose your state and district.
- Enter your business name and PAN.
- Provide an active email ID and mobile number for OTP verification.
- Complete the CAPTCHA challenge and click ‘Proceed’.
- OTP Verification: Enter the OTP received on your email and mobile.
- TRN Generation: Note the Temporary Reference Number (TRN) displayed on the screen.
- Revisit the GST Portal: Go back to the GST portal and select ‘Register’ under ‘Taxpayers’.
- Enter TRN: Choose ‘Temporary Reference Number (TRN)’, input your TRN, and complete the CAPTCHA.
- OTP Verification Again: Enter the OTP sent to your email and mobile.
- Application Status: View your application status. Click the Edit icon to make any changes.
- Fill Application Form: Complete all 10 sections, uploading necessary documents like photographs, business address proof, bank details, authorization form, and constitution of the taxpayer.
- Verification: Go to the ‘Verification’ page, agree to the declaration, and submit your application via EVC, e-Sign, or DSC (for companies).
- ARN Generation: After submission, you’ll receive a success message and an Application Reference Number (ARN) on your registered mobile and email.
- Track ARN Status: Use the ARN to track your application status on the GST portal.
- GST Registration Number: If all documents are verified successfully, you’ll receive your GST registration number within 7 days.
This comprehensive process ensures your registration aligns with the specific type of GST applicable to your business.
Final Consideration
Before applying for GST registration, it is crucial to understand all the types of GST registrations to determine which category best fits your entity’s requirements. This ensures compliance with GST regulations and facilitates the smooth handling of tax deductions and collections.
At IndiaFilings, we specialize in making the GST registration process smooth and hassle-free. Our team of experts is equipped to guide you through every step, ensuring a seamless transition to GST compliance for your business.
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