What are the different types of GST registration?

Table of Contents

• Types of GST registration
  1. Register as Normal taxpayer
  2. Registration under Composition scheme
  3. Casual taxable person
  4. Non-Resident taxable person
  5. Input Service Distributor (ISD)
  6. Special Economic Zone (SEZ) developer/unit
  7. E-Commerce operators
  8. Tax Deduction at Source (TDS)
  9. TCS collector
• Challenges and Common Issues
• Concluding Statement

The Goods and Services Tax (GST) has reformed the Indian taxation landscape, simplifying the tax structure and promoting transparency. For businesses, understanding the importance of GST registration is crucial. Not only does it ensure compliance, but it also offers legal benefits and enhances business credibility. It’s vital to know whether you need to register under GST and which type of registration suits your operations best if you’re a business owner in India.

Registering for GST brings numerous advantages to the business owner, some of which are as follows:

• Legal Compliance: It ensures that your business adheres to the tax laws, avoiding penalties.
• Input Tax Credit: Registered businesses can claim input tax credit on purchases, reducing their tax liability.
• Business Credibility: GST registration boosts the credibility of your business, making it easier to secure loans and attract clients.
• Expansion Opportunities: With GST, interstate sales become simpler, facilitating business expansion across India.

Types of Registration under GST

Businesses need to register under different categories depending on their turnover, nature of business, and other specific criteria under the GST regime. Understanding the types of GST registrations available is crucial for compliance and taking advantage of the tax benefits offered by the government. Here’s an overview of the different types of GST registrations:

1. Normal Taxpayer

The Normal Taxpayer registration is the most common type and applies to businesses whose annual turnover exceeds the threshold limit set by the government. This limit varies depending on the nature and location of the business:

• ₹40 Lakhs: For goods providers in most states.
• ₹20 Lakhs: For service providers and goods providers in special category states.
• ₹10 Lakhs: For businesses in special category states like those in the North-East.

Key Features:

• Businesses registered as a Normal Taxpayer do not have an expiry date for their registration.
• They are required to file monthly, quarterly, and annual returns based on their turnover.
• Input tax credit can be availed for the tax paid on purchases.

2. Composition Scheme

The Composition Scheme is designed for small businesses to ease their tax compliance burden. Under this scheme, taxpayers can pay GST at a lower rate, but they cannot claim input tax credit. Businesses with an annual turnover of up to ₹1.5 crore (₹75 lakhs for certain special category states) can register under the Composition Taxpayer option.

The Tax Rate specified for businesses which fall under the Composition Scheme are as follows:

• 1%: For traders (both goods and services).
• 5%: For manufacturers.
• 6%: For service providers under the new scheme introduced in 2019.

Key Features:

• Businesses under this scheme must file quarterly returns instead of monthly returns.
• Composition taxpayers cannot issue tax invoices; they can only issue a bill of supply.
• The scheme is not applicable to businesses engaged in inter-state supplies or supplying through e-commerce operators.

3. Casual Taxable Person

A Casual Taxable Person is someone who occasionally supplies goods or services in a taxable territory where they do not have a fixed place of business. For example, a person setting up a stall at a trade fair in another state would need to register as a Casual Taxable Person.

Key Features:

• The registration is temporary and valid for a period of 90 days, with the option to extend for an additional 90 days.
• Casual Taxable Persons are required to make an advance deposit of the estimated tax liability for the registration period.
• They can claim input tax credit and must file returns based on the actual supplies made during the registration period.

4. Non-Resident Taxable Person

A Non-Resident Taxable Person (NRTP) is similar to a Casual Taxable Person but applies to individuals or businesses located outside India who occasionally supply goods or services in India.

Key Features:

• NRTPs are also required to make an advance deposit of the estimated tax liability before registration.
• The registration is temporary, valid for 90 days, and can be extended for another 90 days.
• NRTPs must file GST returns and can claim input tax credit on the goods and services supplied in India.

5. Input Service Distributor (ISD)

An Input Service Distributor (ISD) is a business that distributes the credit of GST paid on input services to its branches or units that are separately registered under the same PAN.

Key Features:

• The ISD must be a registered office or headquarters of a business.
• The input tax credit can be distributed to branches based on their proportionate turnover.
• ISD registration is mandatory for businesses with multiple branches or units that receive centralized services.

6. Special Economic Zone (SEZ) Developer/Unit

Businesses located within a Special Economic Zone (SEZ) are required to register under GST as an SEZ Developer or SEZ Unit. These entities enjoy various tax benefits and exemptions.

Key Features:

• SEZs are considered foreign territories for trade operations, so supplies to and from SEZs are treated as exports and imports.
• SEZ developers and units can avail themselves of zero-rated supplies without payment of tax, subject to conditions.
• They must maintain separate records for SEZ and non-SEZ operations and file regular GST returns.

7. E-Commerce Operators

E-Commerce Operators are platforms or websites that facilitate the supply of goods and services. These operators are required to register under GST regardless of their turnover, as they are responsible for collecting tax at source (TCS) from sellers using their platform.

Key Features:

• E-commerce operators must deduct TCS at 1% of the net value of taxable supplies made through their platform.
• They need to file monthly and annual returns and deposit the TCS collected with the government.
• Sellers using e-commerce platforms also need to be registered under GST, even if their turnover is below the threshold limit.

8. Tax Deduction at Source (TDS)

Certain entities, such as government departments and agencies, are required to deduct tax at source under GST, when making payments to suppliers. This is known as Tax Deduction at Source (TDS).

Key Features:

• TDS is deducted at 2% (1% CGST and 1% SGST) on payments exceeding ₹2.5 lakhs to a supplier.
• The deductor must deposit the TDS with the government and file monthly returns.
• The supplier can claim the TDS as input tax credit in their GST returns.

9. TCS Collector

A TCS (Tax Collected at Source) Collector refers to e-commerce operators responsible for collecting tax at the source when facilitating sales made through their platform.

Key Features:

• E-commerce operators must collect 1% tax (TCS) on the net value of taxable supplies made through their platform by other suppliers.
• The collected TCS must be deposited with the government, and the operator must file a TCS return monthly (GSTR-8).
• Suppliers on the e-commerce platform can claim the TCS collected as input tax credit.
• TCS Collectors are also responsible for generating a TCS certificate for suppliers showing the tax collected.

Process of GST Registration

Registering for GST is a straightforward process. Here’s a step-by-step GST registration guide to help you. It’s essential to have all the required documents in place to ensure a smooth and successful application process.  The documents you need may vary depending on the type of business entity and the nature of your business. Explore the list of documents required for GST registration cited in a separate article.

Main Challenges and Common Issues

Despite the benefits, GST registration can present challenges:

• Complexity: The process can be daunting for first-time applicants, especially for complex businesses.
• Documentation: Incomplete or incorrect documentation can lead to delays or rejections.
• Compliance: Regular taxpayers face stringent compliance requirements, with monthly returns and audits.

It is of utmost importance to ensure all documents are in order and seeking professional assistance is advised to prevent facing such issues.

Concluding Statement

Choosing the right type of GST registration is essential for your business’s success. Whether you’re a small startup or an established enterprise, understanding the different registration types ensures compliance and optimizes your tax strategy. As GST continues to evolve, staying informed about updates and amendments will keep your business ahead of the curve. GST registration not only ensures legal compliance but also offers significant benefits, from tax savings to enhanced credibility. Take the time to evaluate your business needs and select the appropriate GST registration type to unlock these advantages.

Visit: https://gst.gov.in for more information.

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Author: Anirban Sinha

A product manager with a writer’s heart, Anirban leverages his 6 years of experience to empower MSMEs in the business and technology sectors. His time at Tata nexarc honed his skills in crafting informative content tailored to MSME needs. Whether wielding words for business or developing innovative products for both Tata Nexarc and MSMEs, his passion for clear communication and a deep understanding of their challenges shine through.