GST registration for small businesses in India just got easier
What's the story
The Central Board of Indirect Taxes and Customs (CBIC) has made the Goods and Services Tax (GST) registration process easier for micro, small, and medium enterprises (MSMEs).
The decision is aimed at increasing the number of MSMEs with GST registration. MSMEs currently contribute around 30% of India's GDP.
The move comes after MSMEs raised concerns over excessive scrutiny in the registration process during discussions with CBIC and the MSME ministry.
Streamlined process
CBIC issues guidelines to simplify registration
The CBIC has asked its registration officials to minimize physical verification and complete the process within seven days if the business is considered low-risk during common analysis.
According to a CBIC order dated April 17, which Mint has reviewed, GST officers were found asking for additional documents other than those required with the GST REG-01 form.
The order observed inconsistent practices by officers regarding document verification in GST REG-01 form and unnecessary clarifications sought by them, delaying or rejecting applications.
Simplified requirements
Minimum documents required for GST registration
The CBIC order stressed on preventing fraudulent registrations but not harassing genuine applicants unnecessarily.
Officers have been directed to seek only the necessary documents for GST registration.
For example, an entrepreneur can establish their business ownership with just one document: either a recent property tax receipt, municipal khata copy, or electricity bill copy.
If working from rented premises, a rent agreement and one of the above-mentioned documents suffice as proof.
Revenue impact
GST officers' response time and contribution to revenue
If a GST officer asks for clarification on an applicant's registration, the applicant has seven days to respond. The officer has to accept or reject the application within another week.
Data from June 2024 revealed that publicly listed companies contributed over 34% of GST revenue despite being only 0.5% of taxpayers.
Meanwhile, proprietorships (80% of taxpayers) contributed just 13.3%, and partnerships (10% of taxpayers) only 7.31%.
Increased participation
Streamlined GST registration to boost MSME contribution
Vinod Kumar, president of India SME Forum, an industry association, said streamlining GST registration is likely to boost MSMEs' contribution to GST revenue.
He stressed on the need for comprehensive implementation across states, considering the interstate challenges MSMEs face while selling goods and services.
Kumar also noted that complementary circulars from state GST authorities would further strengthen the impact of this initiative.