The Goods and Services Tax (GST) is a tax levied on goods and services consumed within India. It is an indirect tax that has replaced several other indirect taxes in the country, including excise duty, VAT, and services tax. The implementation of GST began on July 1, 2017, following the enactment of the Goods and Service Tax Act by the Indian Parliament on March 29, 2017.
Taxable person under GST
A 'taxable entity' as defined by the GST Act refers to an individual or organization that engages in business activities within India and is either registered or required to be registered under the GST Act. This includes individuals, Hindu Undivided Families (HUFs), companies, partnerships, Limited Liability Partnerships (LLPs), Associations of Persons (AOPs)/Bodies of Individuals (BOIs), corporations or government companies, foreign corporate entities incorporated under foreign laws, cooperative societies, local authorities, government bodies, trusts, or artificial juridical persons.
GST Registration Turnover Limit
GST registration can be obtained voluntarily by any person or entity irrespective of turnover. GST registration becomes mandatory if a person or entity sells goods or services beyond a certain turnover.
Service Providers: Any person or entity who provides service of more than Rs.20 lakhs in aggregate turnover in a year is required to obtain GST registration. In special category states, the GST turnover limit for service providers has been fixed at Rs.10 lakhs.
Goods Suppliers: As per notification No.10/2019 any person who is engaged in the exclusive supply of goods whose aggregate turnover crosses Rs.40 lakhs in a year is required to obtain GST registration. To be eligible for the Rs.40 lakhs turnover limit, the supplier must satisfy the following conditions:
- Should not be providing any services.
- The supplier should not be engaged in making intra-state (supplying goods within the same state) supplies in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripur and Uttarakhand.
- Should not be involved in the supply of ice cream, pan masala or tobacco.
If the above conditions are not met, the supplier of goods would be required to obtain GST registration when the turnover crosses Rs.20 lakhs and Rs.10 lakhs in special category states.
Special Category States: Under GST, the following are listed as special category states - Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
Aggregate Turnover: Aggregate turnover = (Taxable supplies + Exempt Supplies + Exports + Inter-State Supplies) - (Taxes + Value of Inward Supplies + Value of Supplies Taxable under Reverse Charge + Value of Non-Taxable Supplies).
Aggregate turnover is calculated based on the PAN. Hence, even if one person has multiple places of business, it must be summed to arrive at the aggregate turnover.
Types of GST Registration
There are various types of GST registration like regular, casual taxable persons, non-resident taxable persons and e-commerce operators. Casual taxable persons, non-resident taxable persons and e-commerce operators are required to obtain GST registration irrespective of turnover limit.
Casual Taxable Persons: The GST Act defines as a casual taxable person as a person who occasionally supplies goods or services in a State or a Union territory where the entity has no fixed place of business. Hence, persons running temporary businesses in fairs or exhibitions or seasonal businesses would fall under casual taxable person under GST.
Non-resident Taxable Persons: Non-resident taxable person (NRI) under GST is any person or business or not-for-profit supplying goods or services but have no fixed place of business or residence in India. Thus, any foreign person or foreign business or organisation supplying goods or services to India would be a non-resident taxable person - requiring compliance with all GST regulations in India.
E-Commerce Operators: Electronic commerce operator is every person who, owns, operates or manages digital or electronic facility or platform for electronic commerce. Thus, any person selling through the internet can be termed as an e-commerce Operator requiring GST registration irrespective of business turnover.
Benefits of GST Registration
The following are some of the advantages of GST registration:
Bank Loans: Registering for GST and filing GST returns provide evidence of business activity and establish a track record for your business. Banks and NBFCs consider GST return data when lending to businesses. Therefore, obtaining GST registration can help formalize your business and increase your chances of obtaining credit.
Supplier Onboarding: Many reputable companies require suppliers to have GST registration as part of the onboarding process. Therefore, having GST registration can open up more opportunities for your business.
e-Commerce: Selling online through platforms like Amazon, Flipkart, Snapdeal, Zomato, Swiggy, etc., requires GST registration. Therefore, obtaining GST registration is essential if you want to sell online.
Input Tax Credit: Entities with GST registration can collect GST from customers for the supply of goods and services and offset the liability against GST taxes paid on purchases. This allows you to save on taxes and improve your profit margins.