GST REGISTRATION FOR FOREIGNERS

In India, the Goods and Services Tax (GST) is imposed indirectly on the provision of goods and services. As of July 1, 2017, GST has replaced several other indirect taxes such as Value Added Tax (VAT), Central Excise Duty, and Service Tax. The tax is based on where the goods and services are consumed. To carry out business activities in India, foreigners may be legally required to register for GST, depending on specific criteria. This article will outline the process of registering for GST for foreigners.

WHO IS A FOREIGNER?

A foreigner refers to an individual or a company that is neither a citizen of India nor fulfills the standards of a Resident Indian according to the Indian Income Tax Act.

WHO IS REQUIRED TO REGISTER FOR GST?

Individuals from other countries involved in business operations in India may have to enroll for GST if they satisfy any of the subsequent conditions:

If a non-Indian is providing goods or services in India, they might need to enroll for GST. The enrollment threshold is INR 20 lakhs for most states and INR 10 lakhs for specific unique category states. If the foreigner’s sales go over this limit, they need to sign up for GST.
Those who operate e-commerce businesses and are not Indian citizens must register for GST if they are assisting with the provision of goods or services between Indian buyers and sellers. The e-commerce operators must collect and pay the GST on behalf of the sellers.
If a non-Indian entity functions as an Input Service Distributor (ISD) and is providing goods or services to their Indian-based division, they might need to register themselves under the Goods and Services Tax (GST) system. An ISD refers to a unit that receives invoices for input services and shares the credit for tax paid on such services to its various branches.
A foreign individual who provides goods or services intermittently or temporarily in India and lacks a permanent business location in India may have to register for GST as a Casual Taxable Person.
In situations where the reverse charge mechanism applies, a foreign individual who receives goods or services may need to register for GST. The reverse charge mechanism comes into play when the supplier is not GST registered in India.

Various forms of GST registration are available for foreigners:

In India, non-residents have two options for registering for GST.

Foreigners who engage in business operations in India and meet any of the aforementioned standards are obliged to register for GST under the regular plan.
Foreigners who provide goods or services to people in India, but do not conduct any business activities in India, need to apply for GST registration under the non-resident program.

GST REGISTRATION PROCESS FOR FOREIGNERS:

The procedure for foreigners to register for GST is comparable to that of Indian citizens. The GST registration procedure involves the following steps:

Step 1: Obtain a PAN Card

To enroll for GST in India, non-nationals must acquire a PAN card that serves as their exclusive identification number authorized by the Indian tax department. This card is essential for all tax-related activities, including GST registration, across the country.

. Step 2 involves acquiring a Digital Signature Certificate (DSC)

In order for non-Indian individuals to enroll in GST, they need to acquire a Digital Signature Certificate (DSC), which functions as an electronic signature to verify and validate electronic forms. GST return submission, along with other tax forms, necessitate the use of this Digital Signature Certificate.

Step three entails acquiring a TIN:

Individuals from outside India who want to enroll for GST in the country need to gain a Taxpayer Identification Number (TIN). This is an exceptional identifying number granted by the GST Department and is a must-have for any GST-linked dealings within India.

Instruct someone to act as a designated signatory:

Foreign organizations need to assign an individual who is a resident of India with a PAN card and a DSC as an authorized signatory. This individual will be responsible for all dealings related to GST on behalf of the foreign organization.

Step number five involves gathering all the necessary documents:

In order for overseas organizations to comply, they must gather and present the subsequent paperwork:

Passport of the authorized signatory
Proof of business address in India
A document known as the certificate of incorporation or registration is required by law to be issued to companies in order to legally establish and recognize their existence. It serves as proof that the company is officially registered and recognized by the government, and contains important details such as the company name, address, and date of incorporation.
Bank statement of the foreign entity
The MOA and AOA refer to significant legal documents that specify the fundamental principles and regulations of a company. These documents detail the company’s purpose, objectives, and scope of activities, as well as the guidelines for its internal management and governance. They function as a contract between the company, its members, and the outside world, outlining the rights and responsibilities of each party involved.
The foreign entity’s authorized signatory has signed a letter authorizing the action requested.

Step 6: Submit Application:

The individual who is authorized to sign must apply for GST registration through the GST portal by using their digital signature.

Step 7: Verification:

The application and accompanying documents will undergo verification by the GST department. Upon confirmation of their validity, the department will grant a GST registration certificate.

COST AND TIME INVOLVED:

The expense and duration of registering for the Goods and Services Tax (GST) in India for non-residents differ depending on the kind of registration and the magnitude of the organization. It costs approximately INR 2,000-3,000 to acquire a PAN card and DSC, and it takes roughly 1-2 weeks to obtain these documents.

The duration of the GST registration procedure can differ from several days to a few weeks, based on the degree of detail and precision of the provided paperwork. The cost for registering for GST is INR 5,000.

Benefits of registering under GST for non-residents:

Following Indian tax laws and regulations is mandatory for foreign entities, and a GST registration helps to ensure that compliance.
GST registration enables foreign entities to avail input tax credit for the taxes they have paid on goods and services procured within India.
Enhanced Trustworthiness: Registering for GST enhances the reliability of overseas businesses operating in India.

The downsides of obtaining GST registration for non-residents:

Foreign companies operating in India must incur extra expenses related to administrative and accounting tasks to comply with GST regulations.

The process of registering for GST can take a lot of time, especially if the necessary documents are not filled in correctly or are incomplete.
If a foreign entity registers for GST, they will be responsible for paying taxes on their business operations in India.

LEGAL REQUIREMENTS AND RULES:

In order to conduct business in India, overseas organizations must adhere to the GST regulations and statutes set out by the government.

Foreign entities are required to submit GST returns either monthly, quarterly, or annually based on their turnover.
Foreign organizations are required to make GST payments every month.
Foreign entities are required to produce invoices that comply with GST regulations when providing goods and services in India.
Foreign entities are required to keep accurate records of all GST transactions for a minimum of 6 years.

LEGAL CONSEQUENCES FOR NON-COMPLIANCE:

If foreigners fail to register for GST in India, they may face legal consequences, which could include:

If one does not comply with registering for GST, they may be penalized with up to 10% of the tax amount owed, with a minimum penalty of INR 10,000.
If the Goods and Services Tax (GST) is not paid within the specified time frame, an interest of 18% per year will be charged on the remaining tax balance.
If foreign entities deliberately avoid paying taxes or engage in fraudulent activities, they may be charged under the GST Act and could face imprisonment and be required to pay a penalty.
In case a foreign entity does not adhere to the rules and regulations of GST, the department of GST reserves the right to nullify their registration.
The failure to comply with GST registration could affect the business operations of foreign companies in India. This includes their capacity to secure government contracts and export their products and services.

To prevent facing any legal repercussions, it is crucial for overseas companies conducting business within India to adhere to the GST laws and accurately maintain records of all transactions. Seeking guidance from experts is advised to guarantee compliance with the country’s GST regulations.