By Altamush Zafar, CA at PL Tandon & Co.
Registration is a very important aspect in any tax law. It affects our procedural compliances and how we are assessed. Therefore, it is very important at the time of registration to determine under which category registration should be taken or whether registration should be taken or not where an option is involved.
Goods and Services Tax is finally becoming a reality in our country. Though it is still in its drafting stage it is worth understanding its provisions and implications. The following are provisions relating to Registration under the Revised Model GST Law.
Transitional Provisions
Transitional provisions means provisions regarding migration from one tax system to another. In the context of GST, transitional provisions mean migration from tax systems subsumed by GST into GST. Tax systems subsumed by GST are Excise, Service Tax, Value Added Tax (VAT) of respective States, Luxury Tax, Entry Tax, Entertainment Tax and Duty of Excise on Medicinal and Toilet Preparation Act.
On the day when GST becomes effective, every person who was registered under the respective Acts of taxes subsumed by GST and having a valid PAN will be issued a certificate of registration which will be provisional. Such provisional registration will be valid for six months.
Such provisional registration will be converted into permanent registration after providing specified information within the period of validity of provisional registration, i.e. six months. It has also been provided that a person who is eligible for composition scheme may opt for it within specified time and manner under the rules.
It is also provided that where a person has been issued a certificate of registration provisionally, it may be deemed that such registration was not issued if the said registration is cancelled due to an application filed by the person that he was not liable to be registered under Section 23.
It is worth mentioning that Section 23 does not provide as to who is liable for registration; Schedule V does. Voluntary registration is also available under Section 23. However, under rules the word ‘Act’ is specified in place of Section 23. These rules had been drafted for the original Model GST Law; rules for the revised law are yet to come.
The registration number provided will be PAN-based; therefore PAN is essential for GST Registration.
Recently, the window for data migration has been opened by the Government. This should not be confused with registration. This is only data migration; a person cannot get registered under a law which has not yet come into effect. It is being done for smooth transition when GST comes into effect.
Every assessee registered under previous tax laws has to fill data on the GSTN (Goods and Services Tax Network) by the specified time. This data migration has to be done in phases and different times have been specified for each phase.
Many queries were being raised, such as what will be the consequences if such data was not filled by taxable persons on GSTN. To be very clear, such data migration has no legal backing; therefore there will be no consequences if such data were not uploaded on GSTN. However, from the appointed day, that is the day GST comes into effect, every taxable person under previous laws subsumed by GST has to provide specified information within six months to get final registration.
Schedule V
As per Model GST Law, every person who is liable to be registered under Schedule V shall apply for registration. Therefore it is important to understand the requirements of Schedule V. According to Schedule V, the following persons are required to register themselves under the GST Law:
- Any person having turnover in a financial year exceeding Rupees 20 Lakhs. This limit shall be reduced to Rs. 10 Lakhs if the person is making taxable supplies from the States of Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
- Person making inter-state taxable supply irrespective of any threshold limit.
- Casual Taxable Person (a casual taxable person is a person not having any fixed place of business in the taxable territory and conducts transactions involving supply of goods and services occasionally in furtherance of business).
- Persons who are liable to pay tax under reverse charge mechanism.
- Electronic Commerce Operators functioning as Tax Aggregator (Tax Aggregator is not used in GST law; however the nature described is similar).
- Non-Resident Taxable Persons.
- Persons who are liable to deduct tax (similar to TDS in Income Tax Act, however only specified persons come under the ambit of this point).
- Electronic Commerce operator which is liable to collect tax of suppliers supplying through such e-commerce operator (somewhat similar to TCS).
- Persons supplying on behalf of other taxable person as agent or otherwise.
- Input Service Distributor (Input Service Distributor is a person who distributes credits of common services to multiple branches).
- Persons who supply goods or services through e-commerce operator. Even if the turnover of a shoe manufacturer supplying through any e-commerce operator, e.g. Flipkart or Amazon, is only 1 lakh, even then he has to get registered.
- Every e-commerce operator. This point in the Schedule is more of clarificatory; the intention is to cover every supplier related to e-commerce.
- Every person supplying online information and database access or retrieval services (Cloud) from outside India to a person in India who is not registered.
There is one important aspect which has been left unexplained. The law states the limit of turnover in a financial year. The financial year cannot be determined whether it is previous financial year or current financial year. This is one of the cases of poor drafting of law. Such issues will be clarified once the Final GST Law comes.
Registration (Chapter VI of Model GST Law)
Chapter VI of Model GST Law deals with Registration, Amendments of Registration, Cancellation and Revocation of Cancellation of Registration. Here we will discuss the first aspect, Registration.
The GST Registration number is a PAN-based registration number named GSTIN having the following format: 22 AAAAAOOOOA 1 Z 5.
Every person who is liable to get registered as explained in Schedule V above shall apply for registration within 30 days from the day he becomes liable. The registration will be done for each State where the taxable person has a place of business.
But in case the person is having different business verticals in one State, registration for each business vertical may be taken. Business Vertical means different components but dealing in related products and services.
Specialized agencies of the United Nations Organisation or any Multilateral Financial Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulates or Embassies of foreign countries shall be granted Unique Identity Number which will be different from normal GSTIN.
There is a special provision for Casual Taxable Person and Non-Resident Taxable Person that they will have to apply for registration five days prior to commencing business. Such registration cannot be taken for more than ninety days.
Voluntary registration is also allowed. But it should be noted, as mentioned earlier, once registered GST shall be levied on taxable supply of goods and services.
As evident, the coverage is quite wide and the procedures are in place. It is also worth noting that the threshold limit specified is only for the purpose of registration and not taxability.
As per current service tax laws and excise laws the limit is 10 Lakhs and 150 Lakhs respectively irrespective of getting registered at a lesser turnover. But in GST, the person will have to pay GST once he gets himself registered, whether voluntarily or becoming liable to registration as per the Schedule.
Therefore we can see that registration is very important. It will affect our taxability because there is no threshold in paying of taxes. Once registered the person has to pay GST and file monthly/quarterly returns. For filing returns the system of accounting will also need some modification.
It will be a little difficult for manufacturers, traders and service providers to align with GST provisions, but GST will surely benefit in the long run.