GST, introduced in 2017 was implemented after long battles in both houses of the parliament. The law itself is very simple and useful for Businessmen and the economy as a whole as it does away with Complexities and double taxation.
In this article, we will tell you when GST registration is required for a Businessman and when it is not compulsory to take a GST Registration.
You can contact Business Guru here to apply for a GST Registration!
When is it compulsory to take a GST Registration?
Every Businessman shall be liable to be registered if ‘aggregate turnover’ in a financial year exceeds 40 lakh rupees. (Before Fy 19-20 the limit was 20 Lakh rupees but from 1st April 2019 the limit has been revised). The 40 Lakh Limit is for Sale of Goods, for sale of services, it is 20 lakhs. For Special category states, the limit is 10 Lakhs for the States of Manipur, Mizoram, Nagaland, and Tripura and 20 lakhs for the States of Jammu and Kashmir, Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim, and Uttarakhand.
We have explained these limits in a tabular form for better understanding.
|Nature of Supply
|Limit for GST Registration
|For Sale of Goods
|For Sale of Services
|For Special Category States (Irrespective of Goods/Services)
|20 Lakhs or 10 Lakhs as mentioned above
Every person shall apply for registration in every such State or Union territory in which he is so liable within thirty days from the date his turnover exceeds the above-mentioned limits.
However, Irrespective of Turnover a Businessman can take Registration voluntary i.e. on his own if he so wishes to.
Why would a sane person apply for GST Registration voluntarily?
As GST is compliance heavy, a question may come to your mind, why will a sane businessman opt for registration voluntary? The answer is simple, Input tax credit.
A Person registered under GST can take the input tax credit on the Purchase of Goods & Expenses.
A Person registered under GSTpurchases goods of Rs. 10 lakh and pays GST of Rs.50, 000. Thus, the total cost is Rs 10,50,000. He can take Rs.50,000 as input tax credit and set it off against the GST he has collected on the sale of goods. Thus, the GST he pays of Rs 50,000 does not form part of his cost and can be used to pay off his liability.
Thus, for a businessman registered under GST, the net cost of this transaction is Rs 10,00,000.
But, for a Person not registered under GST, hecannot claim any input tax credit. Thus, for him the net cost is Rs.10,50,000 instead of Rs 10,00,000.
Thus, Some businessmen Opt for Voluntary Registration under GST.
It is important to note that, if you are doing a B2B business, it makes sense for you to take a voluntary registration from Day 1 to be competitive in the market.
What does Aggregate Turnover mean under GST?
Aggregate Turnover Includes all Supplies i.e. Sales made by Businessman including Exempt Supplies.
But, if a person is making only exempt supplies then he is not required to take GST registration.
For example, If a Businessman makes a sale of electronic items of Rs. 39 lakhs and also makes the sale of agricultural produce of Rs. 5 lakhs. Then his Total turnover is 39 lakhs+5 lakhs = 44 Lakhs. As his turnover exceeds 40 Lakhs, GST registration is Mandatory.
Example 2- If a Businessman makes a sale of agricultural produce of Rs. 5 Crore. In this case, even though the turnover exceeds 40 Lakhs, GST registration is not required as the sale of agricultural produce is an exempt supply.
You need to understand that the calculation of Aggregate Turnover is PAN based and NOT State-based. Thus, the turnover of all the states is to be considered while determining the threshold limit for GST Registration.
Example: – Turnover in Maharashtra is Rs 35,00,000, Turnover of Tamil Nadu is Rs 7,00,000. Since aggregate turnover is Rs 42,00,000, GST registration is required to be taken for both states.
Persons not liable for registration
(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under GST act. This includes supplier of exempt goods/services and Nil rated goods and services (Yes, both mean different things in GST!)
(b) an agriculturist to the extent of supply of produce out of cultivation of land.
Limit for Businessman Supplying Goods as well as services.
The new ‘extended exemption threshold’ for registration (from 1 Apr 2019) to Rs.40 lakhs is applicable only for those persons, who are engaged in an exclusive supply of goods. Therefore, in case a person engaged supplying goods but also earns a nominal amount of service income (whether taxable or not) such as commission income, , then he shall be liable to obtain registration on the cross the exemption threshold of Rs.20 lakhs.
When do you have to Compulsory Register for GST?
The Following Persons are required to take Compulsory Registration irrespective of their Turnover.
- persons making any inter-State taxable supply of Goods (Not services) ( Sale not within state) casual taxable persons making taxable supply
- persons who are required to pay tax under reverse charge;
- non-resident taxable persons making taxable supply;
- persons who are required to deduct tax under section 51, whether or not separately registered under this Act;
- persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;
- Input Service Distributor, whether or not separately registered under this Act;
- persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52;
- every electronic commerce operator [who is required to collect tax at source under section 52];
- every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person;
Example – If a Non-resident is Providing online information and database access services to an unregistered person in India then that Non-resident person has to take a GST registration. However, if the same Non-resident provides services to Registered Persons ONLY then he need NOT take GST Registration.
Apart from this although not compulsory, you need a GST registration if you are selling taxable goods on online platforms like Amazon, Flipkart, Paytm, etc. These marketplaces insist on a GST Registration although by law it is not compulsory to do so. Also, as specified by us earlier, it is smart to get a GST Registration if you are engaged in a B2B business to remain competitive.
In terms of concepts, GST is a great indirect tax which has replaced a lot of incumbent taxes. However, faulty implementation and continuous changes have unneccesarily made the easy law complex to use. It is expected that with time (Don’t know how much more!), the law will get easier and the compliance burden will go down making it very taxpayer-friendly.