GST India: Registration Process

GST Registration India:

Registration of a business under GST besides being mandatory (after crossing certain threshold*) provides certain advantages as below:

·         Legal recognition as a supplier of goods and services

·         Eligibility to setoff GST liability against input credits

·         Ability to pass-on GST liability to end customer (i.e authority to collect GST)

·         Eligibility to transact inter-state

(*Threshold would be Gross Annual Turnover including exports and exempt supplies)

Who has to register?

The following type of businesses need to register under GST:

·         Any business crossing the threshold limit

·         Existing businesses registered with central (Excise / Service Tax) or state (VAT) authorities

·         Taxable person carrying on interstate supply

·         Businesses liable under reverse charge in GST

·         Businesses wanting to collect GST or claim input (despite being below threshold) can take voluntary registration

Registration can be ‘Regular’ or ‘Compounding’ or ‘Casual’

Dealers falling below a higher threshold level of turnover called Compounding Turnover, can opt for compounding scheme and pay tax at fixed percentage of turnover without entering the GST input tax credit chain. They cannot collect GST from customers.

Supplier considering conducting of business in a state on temporary basis may obtain casual dealer registration for a limited period and will be eligible for ITC.

Salient Features:

·         Businesses operating in multiple states would need multiple registrations

·         Multiple registrations are permitted for those operating in multiple business verticals within the state

·         Bodies of United Nations would be issued unique identification number or UID

·         Government departments to be also issued unique department identification number

Registration process for new dealer

A dealer has to file registration application within 30 days of crossing the prescribed threshold* or starting of a business and the date of application would be considered the effective date of registration for obtaining Input Tax Credit (ITC).

Registration Process for existing dealer

All dealers registered with central or state tax authorities would be migrated to GST by default and allotted Goods and Service Tax Identification Number (GSTIN). Dealers below the GST threshold may continue to be registered and get benefits of GST credit chain or opt out voluntarily.

GSTIN:

GSTIN will be a 15 digit PAN based number with state code and business vertical details as depicted below:

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

State Code: To be based on India census 2011. Ex: 27 for Maharashtra and 29 for Karnataka

Entity Code: Alphanumeric 1 to 9 and A to Z based on number of business verticals in a state for the same PAN (i.e 9 digits plus 26 characters, a total of 35 business verticals per state is possible)

Blank: For future use

All registrations to be done through GST common portal which in the backend would be integrated with central and state systems.

Registration can be amended, surrendered or closed by following pre-defined process.

1.8 Impact of GST Registration on Business Segments

New and existing dealers with pan-India presence are likely to be most affected by the new GST registration process. Some of the key impacts are as follows:

Pure service sector companies (Ex: Banks, Telecom, Insurance, IT, Logistics etc.) under the present indirect tax regime have a single centralized registration and accounting setup for their pan-India operations. Billing is centralized, accounting and auditing also happen at head office. However under the destination based-consumption concept of GST it becomes imperative to identify the point of supply of service such that the SGST component of IGST needs to be reallocated to respective states. This would necessitate pan-India service providers to obtain registration in each of the 37 state and Union Territory and file 37 monthly returns.

Banks:

Banks provide services to customers who are mobile not only pan-India but international as well. Ex: Credit cards issued by Bank from central location to a customer may be swiped anywhere. With advent of net banking the address of customer in account is not where he necessarily stays and obtains banking services (Ex: Cheque book, Loans, Statements etc.) A customer having his account in Bengaluru may during his vacation in J&K transfer funds by mobile/net banking to somebody in Hyderabad. Determining point of supply for services would add significantly to compliance costs. Under such circumstance a bank having presence in only 10-15 states will have to take registration for 37 states/UT.

Several services by bank to a customer are centralized (Ex: Demat Account, Wealth Management services, bigger home loans etc.) while several others are localized (Ex: Savings account, Personal loan, OD etc.). As is evident these complexities add to compliance costs due to multiple assessments and audits. Clarity on the requirement of single/multiple ISD registration for distributing inputs across multiple states is needed.

Telecom:

Telecom operations and accounting are carried out at circle level as determined by TRAI and services are provided at pan-India basis with single registration. Many such circles are across multiple states (Ex: WB circle excludes Kolkata but includes Andaman-Nicobar and Sikkim). Under GST, state wise registration is required which is different from circle thus adding to significant changes to IT systems for accounting, determining point of supply etc. ISD registration may also be required state wise unless clarity is provided that single ISD registration across nation is sufficient.

Registration requirements for additional place of business would be arduous as all towers / cell sites (lakhs of them across geographies) and all distributor/retailer locations (few thousands who sell SIM cards and currency recharge vouchers) will have to be registered.

E-Commerce:

Ecommerce companies like Amazon and Flipkart operate under the market place model, wherein they store the goods from sellers at their warehouse and supply to end users upon receiving orders. These warehouses are registered as additional place of business under local VAT by sellers and e-commerce companies do not register under VAT.

Under GST both ecommerce companies and sellers would have to simultaneously register these warehouses as Principal and Additional Place of Business, respectively. This would be challenging as these warehouses do not have dealer wise physically segregated or designated areas within the warehouse. 

Disclaimer: The views expressed in this blog post are strictly personal and do not in any way represent my employer.