When and How to apply GST registration ?

Gst registration in India

What is GST Online registration?

GST registration is the process by which a person is required to apply for a goods and service tax identification number (GSTN), collect tax, or claim the input tax credit for purchases and other inputs. Without allotment of a valid GST registration number, a person cannot collect taxes or claim the input tax credit.

Once a GST registration number is allotted a person is legally recognized as a supplier of goods or services, GST input tax credit will be accounted for in your GST number if the GST number is provided before raising the invoice.

What is the time required for GST registration approval?

GST registration application should be submitted in the common portal gst.gov.in, all information and documents required for GST registration shall be submitted in online mode there is no requirement to submit any documents directly to the department.

After the submission of the GST registration application, there may be 2 situations and timelines for approval depending on the process required in each situation.

Situation 1:  Application submitted and aadhaar validation is completed 

Once the application is submitted and aadhaar validation is completed, the application reference number (ARN) will be generated, date of the ARN number is considered as the date of submission of the GST registration application.

GST application will be approved within 7 working days from the date of  ARN or a query will be raised within 7 working days.

In case a query is raised we need to reply to the GST registration query within 7 working days and the same shall be considered by the officer and registration will be approved or rejected within another 7 days.

After the ARN number is generated registration will be granted or rejected in a minimum time of 7 working days and a maximum time of 21 working days.

Situation 2: Application submitted aadhaar validation failed

In case of failure of the aadhaar validation or aadhaar, validation is not completed within 15 working days, or the option for aadhaar validation has not opted, registration will be granted only after site inspection by the officer from the GST department.

ARN number will be generated only after the expiry of 15 days from the date of submission of FORM -GST-01 or failure of aadhaar validation or ARN will be generated on the same day if the option for aadhaar validation is not opted during the time of submission of application.

In all the above cases GST registration in Chennai will be approved only after a site inspection of the proper officer within 30 days from the date of generation of ARN.

If there is any clarification required after the site inspection the same shall be responded to within 7 working days and an officer will approve the registration within the next 7 working days.

So maximum time will be  30 days plus 29 working days in case the application faces all critical issues.

After approval of GST registration application bank account details needed to be updated within 45 days from the date of issue of registration certificate.

Who is required to apply for GST registration?

GST registration Based on aggregate turnover in the financial year.

General threshold limit for GST registration for supply of taxable goods and services or supply of services.

  • Special category states – Rs.10,00,000 for states of Mizoram, Tripura, Manipur, Nagaland
  • Other than special category states – Rs. 20,00,000.

The enhanced limit for the exclusive supply of goods 

The above limit was increased to a Limit of Rs.40,00,000 for a dealer who is engaged only in the taxable supply of goods as per notification dated 07-03-2019 starting from the financial year 2019-2020 except the following.

1. Persons engaged in the supply of ice cream and other edible ice whether or not containing cocoa, Pan masala, Tobacco, and manufactured tobacco substitutes.

2. Persons engaged in intra-state supplies ie: the dealer who sells only within the state in the states of Arunachal Pradesh, Mizoram, Manipur, Sikkim, Tripura, Telangana, Puducherry, Uttarakhand, Nagaland, Meghalaya.

This notification does not apply to the supplier of services, therefore, the limit of Rs.20,00,000 or Rs.10,00,000 will apply to the dealer in respective states.

The above-enhanced threshold limit is applicable only if the dealer deals in the sale of goods

How to calculate total turnover for GST registration?

Aggregate turnover to determine GST threshold requirements is turnover calculated on an India basis including exempt supplies, and exports.

Once aggregate turnover is calculated on an all-India basis dealer needs to register only if the person is engaged in taxable supply in the state. For eg: If aggregate turnover crosses the threshold limit and dealer supplies only exempt supplies then registration is not required.

When the dealer first crosses the above limit in the state of taxable supplies he needs to apply within 30 days of crossing the limit, this limit is the one-time limit once they crosses the limit it is applicable indefinitely in the future even if the sale is below threshold limit is succeeding years.

Example for threshold limit : 

Mr. Arun starts his textile business in the name of M/s. GOOD QUALITY GARMENTS (sale of goods) during the financial year 2020-2021 in Tamil Nadu so his threshold limit is Rs.40,00,000, in the whole financial year his aggregate turnover never crossed Rs.30,00,000,  in this case, he had never crossed the threshold limit Rs.40 lakhs hence he not required to register during the financial year 2020-2021.

In the case of the financial year 2021-2022 his turnover crossed Rs.40,00,000  on August 31 due to good customer relations and the quality of products, so he needs to apply for Online GST registration in Chennai within 30 days which is falling on 30 th of September 2022.

Similarly if in the financial year 2022-2023, his sales never cross Rs.40,00,000, still he cannot cancel the registration in the succeeding financial year as the threshold limit is one time for the PAN of the person.

Registration for taxpayers who had already registered under old sales tax and other indirect tax laws

Every person who is already registered under the old state sales tax and central service tax act law and required to apply for migration application from the date the GST act comes into force, so they need not apply for new registration.

If still, the existing dealers under old indirect tax laws prefer to apply for new registration the benefit of existing input tax credit available unutilized will expire.

Mandatory Registration of suppliers whose sales are considered interstate sales under various provisions

  • Supplies of goods out of the state are called interstate suppliers and registration of GST for interstate supply is mandatory irrespective of the threshold limit.
  • Similarly, in the case of the interstate supply of services, the supplier is liable for registration only when aggregate turnover crosses the prescribed threshold limit.
  • The export of goods or services is considered an interstate sale, and goods transported for exports are considered an interstate sale till reach customs frontiers.
  • Supply to SEZ are treated as interstate sales therefore supplier is bound to register GST for supplies to SEZ irrespective of the threshold limit.

Mandatory registration of E-commerce supplier

Every e-commerce supplier of goods or services is required to apply for GST registration irrespective of the threshold limit. There for suppliers who are willing to tie up to sell goods through online E-commerce platforms like Amazon, and Flipkart shall apply for GST registration.

India is witnessing steady growth of the “gig economy” Considering the fact of the ground reality of those e-commerce suppliers government has given an exemption from compulsory GST registration for E-commerce suppliers.

Supplier of services through an e-commerce operator is required to apply for GST registration only when aggregate turnover crosses the threshold limit when the E-commerce operator “collects tax at source” as per section 52. E.g.: E-commerce supplier of taxi services through Ola and Uber.

Mandatory registration of Casual taxable person

A casual taxable person is a supplier of goods or services who does not have a fixed place of business in the state or union territory from where he wants to make a supply.

In simple terms, a casual taxable person is a supplier who does not have a registered business address in the state but who wants to sell goods from the state.

Example :

Mr.Ravi is a resident of Hyderabad and plans to sell goods at the “Chennai Trade Center Furniture Mega Annual Fair” but he does not have any place of business in Hyderabad and more over the event is a short-term event for which he feels that renting an office is not necessary, in this case, he can apply as a casual taxpayer with the period for which he likes to register as a casual taxpayer.

Mandatory registration of other taxable persons making taxable supply

  1. Every non-resident who supplies taxable supplies is bound to apply for GST registration
  2. A person who is required to deduct tax under Section 51
  3. Input service distributor
  4. Persons who are required to pay tax under the reverse charge mechanism
  5. Every e-commerce operator who is required to collect tax at source under section 52
  6. Persons who are making the supply of taxable goods on behalf of other taxable people eg: franchise business, in case Mr. Aditya starts the Adidas showroom through a franchise agreement he is liable to register for GST even though he does not cross the threshold limit.

We had specifically avoided discussion of OIDAR services in mandatory registration as it requires in-depth analysis and information to determine registration requirements which will be discussed separately elsewhere.

Important points regarding the effective date of registration and revision of the invoice

  • The effective date of registration is the date from which he is liable to apply for registration in case registration is applied within 30 days from the date of applicability.
  • In case registration is applied after the expiry of 30 days from the date on which the person is liable to register the effective date of registration is the date of the grant of the GST registration certificate.
  • The revised invoice shall be issued within one month from the date of approval of registration for invoices already issued from the date of applicability and up to the date of grant of registration, and the taxpayer shall request their supplier to issue a revised invoice so that it will enable the taxpayer to claim the input tax credit.
  • A revised invoice cannot be issued in the case of registration applied after the expiry of 30 days as the effective date of registration commences only on the date of grant of registration.

Example for the effective date of registration and a revised invoice

  • Continuing the same example above Mr.Arun is liable to GST from 1st September and he applies within 30 days so the effective date of registration will be from 1st September 2022.
  • If Arun applies for registration after the expiry of 30 days that is on 1st Oct 2022 and the certificate is issued on 5th October then the effective date of registration is 5th October is the date of grant of GST registration number.
  • Mr.Arun applied for registration on 05 th day of September 2022 and the GST Online registration application was approved on 10 th day of September 2022, in this case, the effective date of registration is from 1 st day of September 2022 as we applied within 30 days of applicability (date of applicability 1 st September 2022), and revised invoice shall be issued for the invoices already issued from 1 st September 2022.

GST optional or voluntary registration

In a practical business environment when we are dealing with corporates for our business it will be demotivating in terms of marketing if we present ourselves as an unregistered dealer because we are exposing ourselves as small businesses.

In such a situation where there is no mandatory requirement, we can get a GST number as voluntary registration. Another reason for voluntary registration is pressure on registered dealers who purchase products from unregistered dealers.

Registered dealers should pay tax on supplies made by unregistered dealers on a reverse charge basis so to avoid unnecessary legal formalities it is better to opt for voluntary registration if the majority of customers are registered dealers.

Example of voluntary GST registration

  1. Mr. Balaji runs a small textile retail shop by purchasing textile materials in the local market from unregistered dealers, their customers are unregistered dealers as dress materials are usually purchased for personal purposes unless he decides to resell. So, in this case, it is not justifiable to opt for voluntary registration as there is no benefit of registration in fact if Mr.Balaji is opting for voluntary GST registration then he should be a generous man who earns low profits to pay taxes to the government.
  2. Mr. Siva is also in the textile business but his business is supplying t-shirts and other textile materials for corporate events, uniforms, etc. So, in this case, the buyer would be a registered buyer and he prefers to deal with a registered GST supplier, in this case, Mr.Siva can opt for voluntary registration if his aggregate turnover is below the threshold limit. Decisions regarding the option for a composition scheme should be analyzed based on profitability and pricing strategy or Mr.Siva.
  3. Mr.Ramachandran does facility management business in Chennai and his turnover is about to touch the threshold limit for the first time so he decides to apply for GST registration in Chennai. Mr.Ramachandran has clients from apartment associations and households so their customers are sensitive to price, they do not worry about the taxable value and tax separately. In this case, as a GST registration consultant we advised you to apply for GST registration for the facility management business as a composite dealer the final price for clients will be less as well as profitability will be more due to a reduced GST rate of 6 % rather than normal rate of 18%.

Benefits of GST voluntary registration

1. You can get benefits of the Input tax credit as same as any other dealer.
2. Additional proof of business Existence.
3. Smooth dealing with the registered supplier.

5 Critical points for GST registration under the optional category.

1. All provisions and rules are applicable once you register for GST.
2. You cannot claim threshold exemption when you are registered under GST.
3. Increased customer final price, if your customer is an end user, it will be difficult to sell at a competitive price compared to the unregistered dealer.
4. GST filing is mandatory for dealers who have applied for Online GST registration under the optional category.
5. The requirement to maintain prescribed documents under GST.

Impact of GST optional or voluntary registration.

1. Food business operator – Optional registration for the seller of food products to the final consumer is not recommended because it will increase the final price of the product, and most of the inputs are non-GST or zero-rated. – Optional Registration is not recommended.

2. Highest GST on inputs and Low GST rate on output – There will be some products where the raw material used will have a high GST rate, compared to GST on finished products in such cases optional registration is recommended.

A comparative example with the same selling price for products sold to the final consumer.

To explain, if the total raw material cost is only 100 Rs and the GST rate is 18 % you pay 118 for purchasing raw materials including GST. Your sale price is Rs. 1000 excluding GST and your GST rate is 5 %.

  With GST registration Without GST registration
Selling price  1050 (Including GST). 1050
Less Purchase cost 118 (Including GST). 118
Net amount excluding GST Payment 932 932
Less GST payable (50-18) 32 0
(Amount remaining for-profit and other processing) 900 932

So in this case without GST registration you will get an additional profit of Rs.32 and this can also be used to reduce the selling price up to Rs 1018, so you can sell your products cheaper than the registered dealer. You can compare it with different selling prices and purchase prices and decide on a registration advantage.

Conclusion  “Voluntary GST registration is good for certain dealers”.

GST Composition scheme registration and GST filing  

Small businesses will have less turnover so the cost of monthly GST filing of returns, and the cost to prepare complete purchase and sales data will be very high for the level of their activity,  therefore on considering the facts about genuine hardship of small business relaxation in form of composition scheme is provided to a taxable person who is required to register under the act.

Dealers who had registered under the composition scheme need to pay tax less rate as compared to dealers registered under the regular category.

So first we need to decide on do we need to apply for mandatory registration, if the answer is yes then you have composition provided taxable turnover will be less than the prescribed limit.

Let us get out of the confusion here,  if you have crossed the threshold limit for mandatory registration or applying GST voluntarily you can apply as a composite dealer if you are eligible and pay tax at lower rates than the normal tax rate.

Detailed guide for composition scheme GST registration

What does 15 digit GST number mean?

GST number commonly called GSTN is 15 digit number, the first 2 digits are the state code representing the state of registration of the dealer next 10 digits are the personal PAN number, 13th digit represents the number of total registrations granted to the dealer including canceled registration, 14 th digit is time being kept as random digit which can be used for any purpose in future,  15 th digit is the random check digit.

State Code PAN Entity code Blank Digit Check digit
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
3 3 A A A C A 1 1 1 1 1 2 Z A

In the above tabular column, the first 2 digits represent 33- Tamil Nadu as the state code, the next ten digits are the pan of the taxpayer, and 13 th digit is 2 which means that the dealer has applied and approved 2 GST numbers in the state, it also includes the number of canceled or suspended registration. The other 2 digits have no meaning as of now.

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