As a first-time business owner in India, you’re likely familiar with GST (Goods and Services Tax), a system designed to simplify tax payments on goods and services. Understanding GST registration is crucial for your business, as it offers key GST benefits such as legal recognition, input tax credits, and wider market access.
In this blog, we will explain the different types of GST registration in simple words so that you can easily understand what you need for your business.
What is GST Registration?
GST registration is the process by which a business acquires recognition under the Goods and Services Tax law. After being registered, a business can collect tax from customers and recover any tax already paid on goods or services procured.
Depending on the nature and size of the business, there are varied types of GST registration. But each one of these types requires different needs, eligibility, and benefits. Now, let’s discuss the most common types.
Regular GST Registration
The Regular GST Registration is for companies dealing with taxable goods and services that have a turnover higher than the GST exemption limit, currently ₹40 lakhs for goods and ₹20 lakhs for services.
Once you have registered your business, you are liable to file the return irrespective of whether you have earned any profits or not. This type is ideal for larger businesses with steady transactions.
Key Points:
- Applicable to businesses having turnover of more than ₹40 lakhs (goods) or ₹20 lakhs (services).
- It demands regular filing of GST returns.
- Eligible for input tax credit that reduces one’s tax liability.
Composition Scheme Registration
If your business has a turnover small in size, you may be eligible for the composition scheme under GST. The scheme is for small businesses, and they charge tax at a lower rate. Businesses under this scheme have to file quarterly returns rather than monthly returns, and they don’t have to maintain complex books of accounts.
Key Points:
- For businesses with turnover up to ₹1.5 crore (₹75 lakhs for some states).
- Pay tax at a flat rate-mostly 1% for manufacturers, and 5% for restaurants.
- Can’t charge GST on goods/services sold to customers.
- Simple process for tax returns.
Input Service Distributor (ISD) Registration
ISD registration, or Input Service Distributor registration, is essential for businesses that form part of an organization and are required to distribute credit paid for GST on input services. For example, big companies that own branches in different locations can use ISD registration in order to allocate GST credits for services like advertisements or lawyers’ fees to their various branches.
Key Points:
- For organizations based in several locations.
- Provide GST credits across different branches.
- Only applicable to services and not to goods.
Casual Taxable Person Registration
One category of taxpayers is the Casual Taxable Person, who occasionally does business in India but whose operations are not permanent. A stallholder at a fair or a one-time event falls under this category and requires this type of registration. Registration under this category usually is temporary and valid for three months.
Key Points:
- Appropriate for startups or one-time businesses.
- It is valid for up to 90 days but can be extended.
- Require GST registration even if the business is not permanent.
Non-Resident Taxable Person Registration
A Non-Resident Taxable Person is a firm or entity from outside India that carries on a business in India occasionally. If you are a foreign business selling goods or services in India, this kind of registration is required to comply with GST.
Key Points:
- For overseas companies doing business in India.
- This process requires advance registration for residents who are not Indian.
- Required to undertake specific goods and services transactions in India.
Zero Rated GST Registration
Zero-rated GST Registration is also available to some businesses, especially those engaged in exporting goods and services. Therefore, while exporting, you don’t pay any GST on your products, but you still have to register and file returns to claim a refund of any tax paid on inputs used in the exported products.
Key Points:
- Applicable to export businesses.
- Exempt from paying GST on exports.
- Refund claims for taxes paid on inputs used on exports.
Why Should You Register for GST?
The following are the advantages of GST registration:
- Input tax credit: You can recover the tax you paid while buying goods or services from another.
- Legal Recognition: GST registration makes the firm professional, and it gets legal recognition.
- Access to wider markets: GST registration will enable businesses to sell anywhere in India without any hindrance.
- Avoid Penalties: Non-registration would attract a fine and penalty under the GST Act.
Conclusion
As a new business person, it is important to know about the different types of GST registration. It will help you select the right type of GST registration for your business, ensuring full compliance with the law and helping you manage your taxes better. Be a small business owner or a large company, there exists a GST registration suitable for your business needs. Always make sure to consult with a tax expert or financial advisor to select the best registration type based on your business size, structure, and plans.
Frequently Asked Questions
The threshold limit under GST for registration is ₹40 lakhs for goods and ₹20 lakhs for services.
You can voluntarily apply for GST registration if your turnover falls below the threshold.
It depends on the type of registration made. The regular concern files a return monthly, whereas the composition scheme files a return quarterly.
Yes, you can apply for the cancellation of your registration under GST if you stop meeting the criteria set forth for registration or if you’re shutting down.
