Law committee calls for simplification of GST registration structure

As per GSTN data, more than 98 per cent of applicants for new registration under GST either do not pass on ITC or pass on ITC within a limit of Rs 500,000 per month

In a bid to simplify the goods and services tax (GST) registration process, the law committee has proposed to the GST Council to implement different categories of GST registrations based on risk assessment and aligning the registration process with passing on of input tax credit (ITC).

 

The law panel will be meeting in Jaisalmer on Saturday.

 

This is expected to help in fast-tracking registration of small businesses within three working days from around 30 working days at present for all businesses, while tightening the controls for registration of risky applicants.

 

According to GSTN data, more than 98 per cent of applicants for new registration under GST either do not pass on ITC or pass on ITC within a limit of Rs 5 lakh per month.

 

 

According to sources, under the proposed framework, a category labelled ‘New/Small Businesses’ will be introduced.

 

This category will cater to businesses that either do not intend to pass on ITC or wish to conduct ITC transfers within a specified limit per month.

 

The registration process for this category will be approved within three working days following successful OTP-based Aadhaar authentication.

 

Notably, applicants will not be required to visit GST offices for biometric authentication or undergo physical verification of their business premises. 

 

The committee also proposed a category for ‘Deemed Trusted Businesses’, which would include public sector undertakings, government entities, local bodies or private limited companies meeting specific compliance criteria related to GST, income tax, and other regulations.

 

Parameters for this classification may include business constitution, GST payment history, and income tax payments over the last three years.

 

This classification aims to identify risk-free entities, thereby streamlining the registration process further.

 

This category may also be granted registration within three working days without biometric Aadhaar authentication or physical verification at the time of GST registration.

 

They may also be allowed to pass on ITC without any limit. 

 

Meanwhile, for “emerging businesses”, the committee has proposed stricter regulations which intend to pass on ITC beyond the specified limit. So, the registration process for this category will become more stringent. According to the recommendations, this includes introduction of a non-refundable application fee, fixed deposit/security at the time of registration, and assurance from deemed trusted businesses.

 

Furthermore, these businesses will be required to deposit a specified percentage of the excess ITC in their electronic cash ledger before filing their GSTR-1/1A. This will ensure that the passing on of the ITC is backed by a cash payment. 

 

The recommendations also provide options for businesses wishing to change their registration categories.

 

New/Small Businesses can opt to transition to the Emerging category by meeting additional deposit requirements or apply for a category change directly.

 

Additionally, Emerging businesses will have the opportunity to move to the Deemed Trusted category through a detailed verification process conducted by a jurisdictional tax officer. 

 

“The law committee will discuss the detailed guidelines, parameters, and necessary changes to the GST Act and rules after getting preliminary approval from the council. They will also look into the processes needed for the GSTN system,” a source privy to the matter said. 

 

“The current proposal or recommendation would help in streamlining the registrations and making the process faster. From a small business perspective, apart from the registration, the number of compliances to be done would also have to be reduced for bringing in more businesses under the GST regime,” said Shashi Mathews, partner with INDUSLAW. 

 

Vivek Jalan, partner with Tax Connect Advisory Services said this would certainly help MSME businesses, especially those dealers on e-commerce portals and who are looking to sell their goods or services across India.

 

“Say an artisan based out of Maharashtra wishes to sell products through Amazon in other cities and wishes to store his goods in the cities for quick delivery to customers. In such a case, he would require a GST registration in each state wherein he would not be passing on significant ITC. In such a case, the quick 3-day registration would help such MSME dealers,” he added.