Goods and Service Tax is a tax to be levied on supply of goods and services in India and it is in discussion for almost a decade now. In the current taxation we have different laws for supply of goods and services this gives lot of room for confusion and high cost in compliance from a business house perspective and from government perspective also. Across the globe in about 160+ counties GST has been introduced and it is also known as Value Added Tax in some countries.
During the last one year on wards there is lot of buzz or activity on the GST front in India. In the second week of October 2015, the joint committee has released documents on business process
- Payment Process
- Refund Process
This blog covers on all the above topics in different sections. First we will review the business process document on the Registration titled by empowered committee as “GST Registration”.
Registration Number is key to any taxation as it helps in tracking of all the supplies i.e sales of goods or services, helps in taking the input tax credit, helps the tax authorities in determining the tax collection to sales, reconciliation between the tax collected and input tax claimed by the business houses. In the current tax regime, the business house is required to have registration numbers from multiple tax authorities like ECC number from the Central Excise, Service Tax Registration Number from the Service Tax Department, TIN and CST Registration number from the State Tax Authorities, IEC number from the Director General of Foreign Trade etc. This is tedious process and more over the thresholds for obtaining these registration numbers is also different. This adds to the complexity and the compliance cost. In the proposed GST, there will be only one number replacing most of the registration numbers. In the proposed GST regime, GST registration number will be termed as GSTIN i.e Goods and Service Taxpayer Identification Number.
Who has to obtain GSTIN
- Any person who supplies goods and services and has turnover above the threshold limit
- Who wants to collect and take credit of the GST
- Who has interstate supply of goods or services
- It is also called UID any buyer wants to refund of the taxes paid like UN Bodies / Government authorities / PSU’s
If an organization has breached / crossed the prescribed threshold, the person has to file for GSTIN registration number within 30 days. The applicant or the person who is filing for the registration number is eligible for claiming the input tax credit from the date of filing of the application for GSTIN.
A person can have GSTIN if he opts for compounding scheme, the threshold limit for the compounding scheme will be in the GST Law and the tax payer will not be allowed to take credit or collect GST.
A person can take GSTIN voluntarily and this will ensure that the tax payers is in credit chain even before he crosses the prescribed turnover limit.
Format of GSTIN
According to the Business Process document issued for GST on registration, the registration number is based on PAN similar to the current Excise Control Code ( ECC ) or Service Tax Registration Number. It is being proposed to be 15 digit number.
The first two digits, determine the state in which the GSTIN in being obtained, the list of the states is based on 2011 Indian Census. Under this each state will be allocated a two digit number.
Next 10 digits are PAN number of the entity issued by the Income Tax Department.
Thirteenth digit is alpaha numeric and it is based on the users requirement to get registration based on the business vertical. There can be 35 sequences maximum for this 1-9 numbers and alphabets a – z . If the tax payer is going for a single registration then it will be 1 in the thirteenth field but if he goes for more than one registration like one two business vertical say for example one for consumer durables and another for automobiles then the second one will be having 2 in the thirteenth number and the third registration number will be having 3 in the thirteenth field.
14th digit is a being reserved by the GSTN for the future use and the 15th digit is check digit.
How to get GSTIN
GSTIN can be obtained in the following manner
- Directly applying from the GST Common Portal
- Tax Return Preparer (TRP)
- Facilitation Center
The GST Common Portal will be setup by the Goods and Service Tax Network (GSTN) and it will be integrated with the IT Systems of the State and Central Governments. The final decision will be taken by the GST Law drafting committee on the TRP and FC centers.
There is no restriction on the number of applications being submitted by the taxable person, this facility is being provided so that if any taxable person has presence in more than on state, can file the application for registration numbers in one go.
The process of obtaining registration number is simple, the tax payer has to submit all the documents along with the application form. Scanned copies of the documents have to be submitted along with application online. Once the documents are submitted a confirmation mail is sent and based on the confirmation Acknowledgement number will be generated. Once the application is approved, GSTIN will be issued along with the login credentials to the mail id of the authorized person.
Documents to be submitted
The following documents have to be submitted along with the filing of the application online
- Constitution of business
- Details of principal place of business
- Details of bank accounts
- Details of authorized signatory
- Photographs of authorized signatory
Type of Registration forms
There are different application forms for the GSTIN based on the nature of activity.
- Application for Registration under Goods and Service Tax
- Application for surrender of Registration under Goods and Service Tax
- Application to opt out of composition scheme
- Application for withdrawal from Composition Scheme
- Application for amendments after registration
- State Code for Registration Number – This does not have any direct impact on the end user but on the tax distribution between the center and the states. As per the business process document, the list of states to be considered is from the 2011 Census data. By that time there was no bifurcation of the Combined State of Andhra Pradesh, then how the fund distribution is going to take between the states Telangana and AP as we are talking about destination principle for GST.
- State Code for Registration Number – business impact – If a registered person sells goods from Hyderabad to Vijayawada which are falling under two different states, as per the GST Registration document the state code is same, is IGST applicable on this transaction or not?
- AS 17 for registration number – There is point in the registration number which says based on the line of business registration number can be obtained with a maximum combination of 35. But what is the real usage of it when it comes to the registration number? Such process is not available across the globe even in EU where we call it is as VAT, which is in place for more than 20 years? How is the same going to be mapped or configured in the accounting softwares? What are the guide lines for this? Another question is as per AS 17, in segment reporting if the turnover is more than 10% then only it has to be reported. Assuming the turnover falls below 10% after two years, still the registration number by segment is applicable or not? Can it be merged with other registration numbers?
- Registration Numbers for different states – As per the document if the entity is having presence in multiple states, registration number has to be obtained in the state where the goods or services being sold. Say for Example if Company A is selling goods from Hyderabad to Mumbai, Delhi, Bangalore etc A tax invoice has to be issued and which must be accompanied along with the goods. Now on the tax invoice which registration number of the Company A is to be printed is it State from where the shipment is taking place or of the state where the goods are being shipped? Or is it that when I have dispatches from those states, then i need to print the registration number of the state along with the generic registration number?
- Date of application of Registration – In the document it is mentioned that the date of filing of the application for registration should be considered for the Input Tax Credit. Logically or legally how can the credit be availed when there is no registration number? Is the returns software capable of handling such requirements, how will the system know about the date of application for registration? I feel it would create more complexity in the whole process. Assume a buyer take the credit based on the date of application of the seller but latter the registration is rejected by the tax authorities, what happens to the credit taken by the buyer? Assuming that the returns software is prepared in such an intelligent way, will the credit gets rejected in the subsequent month?
- Date on which liability to pay tax arises – If we see the registration form given in the Annexure III, the point # 8 talks about this? Under this does the user has a flexibility to determine the date on his own? If yes how can the matching of records happen for the credit to be availed only based on the sellers payment? Or is it a common date, if it is common date, then why do we need to capture and show this? Or are we talking about for SGST, which is state specific, there can be different dates? If yes is not contradicting the basic principle of having common tax structure and process?
- Input Service Distributor – Say for example Company A is located in Pune and it is doing centralized procurement for all its offices in India and bills are raised on Pune Office. The Services are delivered in Hyderabad, Chennai & Delhi etc. The service provider is based in Mumbai, since Pune and Mumbai are in the same state, there will be no IGST applicable but the services are delivered in different parts of the country? How input service is to be transferred to other offices as they are outside the State of Maharashtra? Is IGST applicable as services being delivered in different states? The place of supply rules must address all such requirements.
- Migration of the existing registration numbers – Is this required as i see lot of difference in the data elements captured between the states for VAT and Excise or Service Tax? Can data be migrated from different servers to a single databases? How pratical is this as the document itself says some data is missing? This is going to open a can of worms. The government should desist for such a process as it is a onetime activity and they should ask for fresh applications and can validate the new applications with existing data available to see all entities have been registered under GST.
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