Ultimate Guide: Who is Eligible for GST Registration?

The Goods and Services Tax (GST) is one of the most significant tax reforms in India, aimed at creating a single unified market. It replaced a variety of taxes levied by the central and state governments, streamlining taxation across the country. Under the Central Goods and Services Tax (CGST) Act, GST registration is mandatory for certain individuals and businesses. This article will explore who is eligible for GST registration as per the CGST Act, providing detailed insights for businesses and individuals.

What is GST?

Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST has simplified the indirect taxation system by subsuming multiple taxes such as VAT, service tax, excise duty, etc., into a single tax. It is categorized into:

CGST: Central Goods and Services Tax, levied by the central government.
SGST: State Goods and Services Tax, levied by state governments.
IGST: Integrated Goods and Services Tax, levied on inter-state transactions.

Why GST Registration is Important?

GST registration is a legal obligation for businesses whose turnover exceeds a specified threshold or who engage in particular types of transactions. Once registered, a taxpayer receives a GST Identification Number (GSTIN), which is required for filing returns, claiming input tax credits, and conducting business smoothly across India.

Failure to register under GST when eligible can result in penalties, making it essential for businesses to understand their obligations under the CGST Act.

Who Needs to Register Under the CGST Act?

Mandatory Registration

The CGST Act mandates GST registration for certain categories of taxpayers. If your business falls under any of the following criteria, you are required to register for GST:

1. Turnover Threshold in GST

Businesses with an aggregate turnover exceeding the specified limit must register for GST. The turnover limits are:

For service providers: If the aggregate turnover exceeds ₹20 lakhs in most states (₹10 lakhs for special category states like the North Eastern States, J&K, Himachal Pradesh, and Uttarakhand).
For goods suppliers: If the turnover exceeds ₹40 lakhs in most states (₹20 lakhs for special category states).

These limits apply to the aggregate turnover of all businesses owned by a person, across the country.

2. Inter-State Supply of Goods and Services

If a business is involved in inter-state supply of goods or services (i.e., selling goods or providing services from one state to another), GST registration is mandatory, irrespective of the turnover limit.

3. E-Commerce Operators

Businesses operating through e-commerce platforms such as Amazon, Flipkart, or other online marketplaces must register for GST, regardless of their turnover. This applies to both the e-commerce operators themselves and the businesses using these platforms.

4. Casual Taxable Persons

A casual taxable person is someone who occasionally undertakes supply of goods or services in a taxable territory where they do not have a fixed place of business. For example, if a trader from Mumbai participates in a trade fair in Delhi, they are required to obtain temporary GST registration as a casual taxable person, even if their turnover does not exceed the threshold limit.

5. Non-Resident Taxable Persons

Non-resident individuals or entities that supply goods or services in India need to register for GST, regardless of their turnover. This applies to foreign businesses operating in India without a physical presence.

6. Agents of a Supplier

If you act as an agent or distributor of a supplier of goods or services, you are required to register for GST. This includes commission agents or brokers who supply goods or services on behalf of other businesses.

7. Reverse Charge Mechanism

Businesses required to pay tax under the reverse charge mechanism must register for GST. The reverse charge mechanism applies to specific goods and services where the recipient of the goods or services is liable to pay the tax, instead of the supplier.

8. Input Service Distributors (ISD)

If your business operates as an Input Service Distributor (ISD), you must register under GST. ISDs are entities that receive input services and distribute the input tax credit (ITC) to their branches or units.

9. TDS Deductors

Government bodies or other organizations required to deduct Tax Deducted at Source (TDS) under GST must also register.

Voluntary Registration

Apart from mandatory registration, businesses can also opt for voluntary GST registration, even if they are below the prescribed turnover threshold. Voluntary registration offers several advantages, such as the ability to claim input tax credits, making the business more compliant, and creating a more transparent image for potential customers and clients.

Special Categories

In addition to the categories mentioned above, the following entities must also register under the CGST Act:

Taxable Person Under Section 24 of the CGST Act: Any person required to pay tax under sub-section (3) or (4) of section 9, or section 5 of the IGST Act.
Businesses Involved in Export: Businesses engaged in exports of goods or services must register for GST, irrespective of turnover, to claim refunds under the IGST framework.
E-Commerce Aggregators: Online marketplaces that aggregate and sell goods or services must also register.

Exemptions from GST Registration

While many businesses and individuals are required to register for GST, the CGST Act also provides certain exemptions. If your business falls under any of these categories, you may not need to register:

1. Small Businesses Below the Threshold Limit

If your business turnover is below the threshold limit (₹40 lakhs for goods suppliers or ₹20 lakhs for service providers), you are exempt from GST registration. However, businesses in special category states have lower exemption limits.

2. Agriculturists

Farmers or agriculturists involved in the cultivation and sale of crops are exempt from GST registration. However, if they supply processed agricultural products, they may need to register.

3. Goods and Services Exempted from GST

Businesses dealing exclusively in goods and services that are exempt from GST, or not taxable under GST, are not required to register.

4. Certain Services Below a Specific Threshold

Businesses providing services where the value does not exceed ₹20 lakhs annually are exempt. This exemption is reduced to ₹10 lakhs for special category states.

How to Register for GST?

GST registration is a completely online process, and businesses can register through the GST portal. Follow these steps:

Visit the GST portal: Go to the official GST website (https://www.gst.gov.in/).
Click on ‘New Registration’: Under the services tab, click on ‘Registration’ and then select ‘New Registration’.
Fill in the details: Provide the required details such as your PAN, email ID, mobile number, and business details.
Receive OTP: Once the details are submitted, you will receive an OTP on your mobile and email for verification.
Provide Business Details: Enter additional business information such as the type of business, place of business, and details of goods/services supplied.
Upload Documents: Upload scanned copies of required documents such as PAN, Aadhaar card, proof of business address, and bank account details.
Submit Application: Once all details are filled, submit your application. You will receive an Application Reference Number (ARN) for tracking the status.
GSTIN Issuance: Upon successful verification, you will receive your GST Identification Number (GSTIN).

Documents Required for GST Registration

To register for GST, the following documents are required:

PAN Card of the applicant.
Aadhaar Card for identity verification.
Proof of business registration or incorporation certificate.
Address proof of the place of business.
Bank account statement or a cancelled cheque.
Digital Signature for authentication (for companies and LLPs).
Photographs of the business owner or directors.

Penalties for Not Registering Under GST

Failure to register for GST when it is mandatory can lead to severe penalties:

A business that fails to register is liable to pay a penalty of 10% of the tax amount due, subject to a minimum of ₹10,000.
If the tax evasion is deliberate, the penalty may be increased to 100% of the tax due.

Additionally, businesses operating without proper registration cannot legally collect GST or claim input tax credits, which can lead to further financial and legal complications.

Conclusion

GST registration is a critical aspect of conducting business in India. Understanding who is eligible for GST registration under the CGST Act is essential to ensure compliance and avoid penalties. Whether your business is large or small, involved in inter-state trade, or operating through e-commerce, it’s crucial to assess your eligibility and complete the registration process if required. Proper registration not only ensures legal compliance but also offers benefits like input tax credits and ease of doing business.