Compulsory Registration under GST
Compulsory Registration Under GST
GST registration is an essential procedure for businesses in India to adhere to the tax framework established by the government. According to the CGST Act 2017, any business engaged in the supply of goods or services must register for GST to comply with the tax regulations. GST registration is necessary primarily based on the business’s turnover, as specified by CGST Act 2017. Once a business exceeds this specified turnover threshold, it must register for GST and contribute to the GST system. Nonetheless, there are instances where businesses are required to register for GST even if their turnover does not reach the threshold. In this article, we will look into Compulsory Registration Under GST.
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Section 24 – Compulsory Registration Under GST
According to Section 24 of the CGST Act 2017, specific categories of persons must register for GST compulsorily, regardless of whether their aggregate turnover falls below the exemption threshold outlined in Section 22(1). This requirement applies even if they are otherwise exempt from GST registration under the provisions of both the CGST and SGST Acts. Here are the categories for compulsory registration under GST, irrespective of their aggregate turnover:
- Persons making any inter-state taxable supply.
- Casual taxable persons making a taxable supply.
- Persons are required to pay tax under the reverse charge mechanism.
- Electronic Commerce Operators.
- Non-resident taxable persons making a taxable supply.
- Persons are required to deduct tax under section 51.
- Persons making taxable supplies on behalf of other taxable persons, whether as an agent or otherwise.
- Input Service Distributors.
- Providers of online information and database access or retrieval services from outside India to a person in India other than a registered person.
- The Government may notify any other persons or class of persons based on the recommendations of the GST Council.
Despite the provisions outlined in subsection (1) of Section 22, the following categories of individuals and entities must register under the GST Act regardless of their aggregate turnover:
GST Registration
GST Registration is mandatory for entities engaged in the supply of goods or services that meet specific criteria outlined by the GST Act.
GST Registration Threshold Limits
The Goods and Services Tax (GST) in India sets specific registration thresholds to determine when businesses must register and start collecting the tax.
General Threshold Limits
- For Goods Suppliers: Businesses involved in the supply of goods must register for GST if their annual turnover exceeds Rs. 40 lakhs.
- For Service Providers: For those providing services, the registration threshold is Rs. 20 lakhs in annual turnover.
Special Category States:
- The threshold for GST registration is reduced in the special category states. For suppliers of goods in these regions, the limit is Rs. 20 lakhs, while for service providers, it is Rs. 10 lakhs.
- Special Category States include Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, and Uttarakhand.
1. Compulsory Registration Criteria for Inter-State Supplies Under GST
Under the Goods and Services Tax (GST) framework, specific criteria mandate compulsory registration for certain business activities, regardless of turnover thresholds. One significant category that requires attention is the inter-state supply of goods and services.
General Rule for Inter-State Supplies:
Any person or entity making an inter-state taxable supply of goods or services must register under section 24(i) of the GST Act.
Exceptions to Compulsory Registration under GST:
- Inter-State Supply of Services: Persons making an inter-state supply of services are exempt from GST registration if their aggregate turnover does not exceed Rs. 20 lakhs across India. For special category states, this threshold is reduced to Rs. 10 lakhs.
- Inter-State Supply of Handicraft Goods or Specified Products: Similar to service providers, craftsmen and producers of certain specified products who engage in inter-state supply are not required to register if their aggregate turnover is below Rs. 20 lakhs, or Rs. 10 lakhs in special category states.
2. Compulsory Registration under GST for Casual Taxable Persons
Casual taxable persons are defined as those who make a taxable supply of goods or services in a state or union territory where they do not maintain a fixed place of business.
Mandatory Registration under GST
According to Section 24(ii) of the GST Act, casual taxable persons must register for GST regardless of their turnover.
Exceptions to the Registration Requirement
- Individuals engaged in the supply of handicraft goods or other specified products outside their home state or union territory are exempt from obtaining casual registration if their aggregate turnover does not exceed Rs. 20 lakhs nationally. For special category states, this threshold is Rs. 10 lakhs.
- A casual taxable person is not required to register if they are involved in the movement of goods on an approval basis, where the invoice is issued only at the time of final delivery.
3. Compulsory Registration under GST for Non-Resident Taxable Persons
Non-resident taxable persons—individuals or entities not residents of India but engage in taxable supply activities within the country—face specific registration requirements under the GST framework.
According to Section 24(v) of the GST Act, non-resident taxable persons must register for GST regardless of turnover. This mandate ensures that all taxable supplies are made.
4. GST Registration for Reverse Charge Mechanism
The Reverse Charge Mechanism (RCM) under GST mandates certain persons to pay tax directly to the government, which typically would have been paid by the supplier. Mandatory Registration under Reverse Charge Mechanism:
- Compulsory Registration: As stipulated in Section 24(iii) of the GST Act, persons who are liable to pay tax under the reverse charge mechanism for inward supplies of goods or services must register for GST irrespective of their turnover.
- Exception to the Registration Requirement: Persons who make only outward supplies of goods or services, where the tax is liable to be paid on a reverse charge basis by the recipient as per Section 9(3), are exempt from registration.
5. Mandatory Registration under GST for Service Providers via E-Commerce Operators (ECOs)
Under Section 24(iv) of the CGST Act, service providers offering certain services through an E-Commerce Operator (ECO) must register for GST. In such cases, the ECO is responsible for paying the tax on behalf of the service providers. The services covered by this rule are listed in Section 9(5) of the Act and include:
- Passenger Transportation Services: This category includes services provided by radio taxis, motor cabs, maxi cabs, and motorcycles.
- Accommodation Services: This includes services provided by hotels, inns, guest houses, clubs, campsites, or any other commercial establishments offering residential or lodging purposes.
- Housekeeping Services: Services such as plumbing, carpentry, and other similar maintenance activities.
ECOs must register for GST and are responsible for collecting and remitting the tax for the services mentioned above if the service providers’ turnover is less than Rs. 20 lakhs (or Rs. 10 lakhs for special category states). They are not required to register under Section 22 of the CGST Act.
Liability Under Section 9(5): Service providers offering the specified services through an ECO must register for GST, even if their turnover is below the threshold limit, ensuring that all taxable services provided through such platforms are subject to GST.
6. Mandatory Registration under GST for TDS Deductors
Under Section 24(vi) of the CGST Act 2017, individuals or entities required to deduct tax at source (TDS) under Section 51 must obtain a separate registration specifically as a tax deductor, even if they are already registered under the GST Act for other activities.
- Separate Registration: Entities that need to deduct TDS under Section 51 must register separately as TDS deductors.
- Mandatory Requirement: This registration is compulsory, regardless of whether the entity is already registered for other GST-related activities.
7. Mandatory GST Registration for Input Service Distributors
Under Section 24(viii) of the CGST Act 2017, every entity that functions as an Input Service Distributor (ISD) must register for GST. This requirement applies regardless of the entity’s registration status under the GST Act.
- Mandatory GST registration: Entities must register as Input Service Distributors even if they are already registered under the GST Act for other activities.
- Role of ISD: Input Service Distributors distribute input tax credits to various branches or units of the same entity, ensuring proper allocation and utilization of tax credits.
8. Section 24(xii): Mandatory Registration under GST for Specified Individuals
Under Section 24(xii) of the CGST Act, mandatory GST registration is required for any individual or category of individuals as specified by the Central Government or a State Government based on the recommendations of the GST Council.
- Compulsory Registration: Mandatory for individuals or categories of individuals specified by government notifications.
- Based on Recommendations: The requirement is based on recommendations from the GST Council, ensuring alignment with national tax policies.
- Government Notification: The specific individuals or categories will be identified and notified by the Central or State Government.
9. Other Applicable Provisions for GST Registration
While Section 24 of the CGST Act mandates compulsory registration for certain categories, there are specific provisions and exemptions to be aware of:
- Exempted Products: Individuals dealing exclusively in exempted products are not obligated to register under GST unless they are liable under the reverse charge mechanism.
- Reverse Charge Liability: Compulsory GST registration is necessary when an individual is liable to pay tax under reverse charge.
- Section 23 of the CGST: The requirements for mandatory registration do not apply to individuals exempt from registration under Section 23 of the CGST and SGST Acts.
Categories Exempt from Registration, Even if Falling Under Section 24(1):
- Individuals Supplying Non-Taxable Goods or Services: Those who exclusively supply goods or services not subject to GST.
- Wholly Exempt Goods or Services: Individuals supplying goods or services that are wholly exempt from tax.
- Agriculturists: Persons engaged in agriculture directly related to the production of land.
- Supplies Where Recipient Pays Tax: Individuals supplying goods or services where the recipient is liable to pay tax under the reverse charge mechanism.
Conclusion
In conclusion, understanding the nuances of compulsory GST registration under Section 24 of the CGST Act 2017 is crucial for businesses operating in India. Whether engaging in inter-state supplies, acting as a casual taxable person, providing services through e-commerce platforms, or falling under any other specified category, compliance with GST registration requirements ensures legal operation and adherence to tax regulations.
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