With the introduction of the new GST scheme, once again the definition of a taxable person has undergone re-defining. A taxable person post the implementation of GST is anyone who conducts business across any location in India. A “person” under GST is defined as an individual, HUF, company, firm, government organization, LLP, anyone incorporated under foreign laws, etc.
A taxable person is defined under GST as “a person who is registered or liable to be registered under section 22 or section 24”
Section 2 of CGST Act defines the “taxable person” as below:
A person who has obtained registration or is liable to register as per section 22 and 24 of CGST Act. Here the Section 22 provides a liability to register when the tax payer’s turnover exceeds the limit as determined in certain cases. Whereas Section 24 provides certain categories of persons who are compulsorily required to register themselves irrespective of any turnover limit.
For anyone belonging to the following categories, GST registration is compulsory:
Casual Taxable Person
Under GST, a Casual Taxable Person is someone who occasionally conducts business in a place but does not have a fixed business location in that area. For example, a person living in Hyderabad who provides goods occasionally to a person living in Kolkata.
Non-resident Taxable Person
A Non-resident Taxable Person, is the same as a Casual Taxable Person, except that he/she resides outside India and occasionally conducts business in India.
Reverse Charge Taxable Person
Under certain circumstances, the recipient of goods/services is liable to pay taxes instead of the supplier, known as reverse charge. Therefore, any individual or business falling under this category must register for GST.
Input Service Distributor
Branches falling under the same PAN, receiving services/goods from head office, which issues invoices for tax purposes to the respective branches for the services rendered or goods delivered. Only the credit of CGST/SGST/IGST can be distributed and not on actual goods/services.
E-commerce is the supply of all types of goods/services across a digital platform. An e-commerce operator is the owner of an online marketplace, where sellers use the digital platform to sell goods/services, such as Amazon. However, Amazon, for example, would not be considered an e-commerce operator on the goods/services which they produce themselves. Similarly, HP selling its laptops through their own website would not be considered an e-commerce operator.
The e-commerce operator and its suppliers would be liable to register, regardless of whether their annual turnover falls within the exemption limit.
Under GST, there are two categories under which a person is not liable to register
A person must apply for GST registration for every state he/she conducts business in and where he/she is liable for registration. A casual or non-resident tax person must apply for registration at least five days before beginning their business. Additionally, as GST registration is PAN-based, the individual must be in possession of his/her PAN, as a prerequisite.
Under the GST regime, any business can voluntarily register themselves, even if their annual turnover is under 20 lakhs (10 lakh for northeastern states). So, for example, a retailer whose turnover is 15 lakhs, can opt for voluntary registration.
As a registered SME, any dealer with whom you have dealings with will prefer to do business with a registered supplier, as this will allow the dealer to avail of input tax credits, which is available only for registered businesses. By registering yourself voluntarily inter-state transactions will also become easier, enabling SME’s to increase their client base and even set up an online presence. Lastly, you can avail of compliance ratings, which conveys to other businesses you are compliant and therefore preferable to do business with.
With every positive side, there exists a negative side. By becoming a voluntarily registered business owner, you will have to file returns more frequently, consuming time and money. If you fail to file your returns then not only do you face penalties but your dealers would also be unable to avail of input credits. Moreover, if you conduct business in several states, then you will have to register and file in every state, thereby increasing costs again.
So, before opting for voluntary registration, a SME must evaluate and determine whether it would be more beneficial for them and then proceed accordingly.
A registered taxable person can collect the GST from the customer by issuing a GST tax invoice. The GST amount is expected to be shown clearly on the tax invoices issued by him.
As per the GST law, a normal GST tax payer is required to file three monthly returns (GSTR 1, 2 & 3) and one annual return. However, due to procedural difficulties faced by the industry, two out of the three returns have been suspended currently and a regular taxpayer is required to file only GSTR 3B (Summary return) and GSTR 1 (Details of outward supplies) on a monthly basis.
Business owners will find themselves with additional responsibilities under the new GST regime, but with time become accustomed to the new practices of this regime. With the help of GST experts at H&R Block India, business owners can focus more on conducting business as usual and less about the new GST laws, procedures, filings etc.