Introduction
The introduction of Goods and Services Tax (GST) marked a fundamental shift in India’s indirect tax system. By subsuming multiple indirect taxes such as VAT, Service Tax, Excise Duty, and others into a single tax framework, GST aimed to simplify taxation, eliminate cascading effect of taxes, and create a unified national market.
Despite several years since its implementation, GST continues to be an area of confusion for many businesses and professionals, particularly with respect to its applicability and registration requirements. A common misconception is that GST applies to everyone carrying on business, which is not legally correct. Understanding what GST is and who is required to take GST registration is essential to ensure compliance and avoid unnecessary penalties.
What Is GST?
Goods and Services Tax is a destination-based indirect tax levied on the supply of goods and services in India. It is charged at each stage of the supply chain but ultimately borne by the final consumer. Businesses act as collecting agents for the government by charging GST on outward supplies and claiming credit of GST paid on inward supplies, subject to conditions.
GST operates on the principle of Input Tax Credit (ITC), which ensures that tax is levied only on the value addition at each stage. This mechanism significantly reduces tax cascading and improves transparency in taxation.
Structure of GST in India
GST in India is divided based on the nature of supply and the location of supplier and recipient.
CGST (Central GST) is levied by the Central Government on intra-state supplies
SGST (State GST) is levied by the State Government on intra-state supplies
IGST (Integrated GST) is levied on inter-state supplies and imports
UTGST applies in Union Territories without legislature
This dual GST model ensures that both Centre and States have taxation powers within a uniform framework.
What Is GST Registration?
GST registration is the process by which a supplier of goods or services is recognised as a taxable person under GST law. Once registered, the person is legally authorised to collect GST from customers, claim input tax credit, and file GST returns.
Registration creates statutory obligations as well as legal rights. Therefore, it should be taken only when required under law or when it offers a strategic business advantage
Who Is Required to Take GST Registration?
GST registration is mandatory only for certain categories of persons specified under the Central Goods and Services Tax Act. The requirement depends on factors such as turnover, nature of supply, and place of business.
In general, a supplier is required to register if the aggregate turnover exceeds the prescribed threshold limit. For most states, the threshold is ₹40 lakh for suppliers of goods and ₹20 lakh for suppliers of services. In special category states, lower limits apply.
However, turnover is not the sole criterion. In several cases, GST registration is mandatory irrespective of turnover.
Persons Required to Take Mandatory GST Registration
The following categories of persons are required to obtain GST registration even if their turnover is below the threshold:
In such cases, registration is compulsory and non-compliance attracts penalties.
Who Is Not Required to Take GST Registration?
Not every business or professional is required to take GST registration. Persons exclusively engaged in the supply of exempt goods or services are not liable for registration. Similarly, individuals carrying on business below the threshold limit and making only intra-state supplies may remain outside the GST net.
Agriculturists supplying produce out of cultivation of land are also exempt from GST registration, subject to conditions.
Voluntary GST Registration
GST law also allows persons to take voluntary registration, even if they are not mandatorily required to register. Voluntary registration is often opted by businesses to claim input tax credit, deal with registered clients, or establish business credibility.
However, once registered voluntarily, all GST compliance provisions apply in full, including return filing and tax payment obligations.
Consequences of Not Taking GST Registration When Required
Failure to obtain GST registration when legally required can lead to serious consequences. The department may levy penalties, demand tax along with interest, and initiate recovery proceedings. Additionally, the person may lose the ability to collect GST or claim input tax credit.
In certain cases, continued non-registration may also attract prosecution provisions under GST law.
Practical Considerations Before Taking GST Registration
Incorrect or premature registration may create unnecessary compliance burden, while delayed registration can result in penal consequences.
Conclusion
GST is a comprehensive and transformative tax system that impacts businesses at every stage of supply. While its objective is simplification and transparency, compliance under GST begins with correctly understanding whether registration is required in the first place.
Not every person carrying on business is required to register under GST, but for those who fall within mandatory categories, registration is not optional. Equally, voluntary registration should be a conscious and well-informed decision, considering long-term compliance obligations.
In conclusion, correct assessment of GST applicability and registration requirement is the foundation of lawful GST compliance. A clear understanding at this stage prevents future disputes, penalties, and unnecessary litigation.
