Is GST registration required for each State?
As you might be aware, a new tax regime known as the GST Act was implemented across India on 1 July, 2017 by Prime Minister Modi. This tax reform has been in the works ever since the early 2000s but was stuck in legislation for a long time. This tax reform was much needed to remove the incessant number of taxes that existed and to do away with the problem of cascading effects of taxes.
The GST has 3 components, namely: CGST, SGST and IGST. CGST and SGST are applicable in Intra State trade (within the state) while IGST is applicable in the case of Interstate trade.
For example if your product/service falls in an 18% tax bracket-
- For transactions within a state you will charge: CGST- 9%, SGST- 9%
- For transactions between different states you will charge: IGST- 18%
However, this is not as simple as it sounds! There is also a function of “place of supply”. While for transactions (services) it is as simple as above, in case of goods/ real estate based services there is a slight complication.
If you are keeping your goods in the state / utilizing real estate / providing a service linked with a real estate, then you can only charge CGST and SGST. The basic logic being that you are utilizing the state’s resources.
Sample Business Cases on GST
The following examples will illustrate when should a person/firm apply CGST, SGST and IGST in their invoicing :
- A supplier who is using warehousing in different states for faster delivery of goods, will have to register the business in those states as well and charge CGST, SGST from the state where the inventory is being held.
- A real estate owner who has a property in a state and is leasing that out as coworking / workspace / house- can only charge CGST, SGST from that state for the invoicing
- Let’s say a dealer in Mumbai supplies goods to a dealer in Delhi and the GST % is 5, then in this case 5% IGST will be applicable since this will be a case of Interstate Trade.
There are exceptions here as well. The following categories of businesses do not need to register for GST in different states where they supply services or goods:
- In instance of Exclusive Supply of Goods : Independent ventures having total turnover not surpassing Rs 40 Lakh (Rs 20 lakh if business is in the notified special category states)
- In case of supply of services or mixed service supplies: Independent companies having total turnover not surpassing Rs 20 lakhs (Rs 10 lakh if business is in the notified special category states)
Please note: A person/entity registered in one state is considered to be unregistered in the other state. So it is crucial you register in that state to ensure you are able to get an input on your taxes.
Still confused whether you need to register for GST in different states? Consult your CA and he/she will certainly help out. It is better to take an informed decision and not err to avoid paying a penalty for it. Tax penalties can sometimes go as high as 10% of the tax amount!
Get the GST aspect sorted fast and ensure your business is on the right side of the law. Although registering for GST and the subsequent compliances may seem complicated or troublesome, it has its set of advantages such as legal recognition as supplier of goods/services, availment of ITC, legal authorisation to collect tax from customers etc. Get it done. To register, follow the process as laid down by the virtual office website.
Best of luck! Running a business in India is no easy task, but we know you will kill it.We are there to help!
On another note, do you need to register for GST in a state? We can be of help!
Now, if you need to register for GST in a different state where you do not have any office, technically one would require to rent an office / space to operate the business, which is super expensive usually, however there is also another cost effective approach. You can register for a virtual office with a coworking space.
Coworking spaces provide space by the seat and hence are able to provide you an address without actually leasing out a property. Most common use cases for a virtual office are entrepreneurs who are setting up ventures in a city, online consumer brands / retailers who plan to keep stock in warehouses across the country. Also if you need to register as an Amazon or Flipkart seller or if you require an APOB/PPOB address, one needs to have an office address in that particular state.
If you fit the bill for any such business needs, you can get a virtual office in prime locations anywhere in the country for rents as low as INR 499/- per month, visit: Virtual Office at myHQ or reach us out at email@example.com