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A Guide to the Reverse Charge Mechanism in GST
02 Aug, 2025
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By Online Legal India
Published On 02 Aug 2025
Category GST
If you are running a business in India, GST registration is not just a formality; it’s your ticket to legal compliance and business growth. Whether you cross the mandatory turnover limit or want to boost your brand credibility, getting a GSTIN (Goods and Services Tax Identification Number) opens doors to multiple advantages.
In this guide, we’ll simplify everything about GST registration in India—who needs it, how to apply, what documents you need, and why it can transform your business operations.
The latest update on GST registration are listed below:
The Central Board of Indirect Taxes and Customs (CBIC) issued Central Tax Instruction No. 03/2025-GST to streamline the processing of GST registration applications. The instructions focus on strict adherence to the prescribed document list, elimination of unnecessary queries, and faster approval timelines. They also specify clear guidelines for verifying business premises, including procedures for physical verification.
The GST Network (GSTN) released an advisory introducing new Aadhaar and biometric authentication norms for GST registration. Applicants are now classified into three categories based on their authentication method:
Goods and Services Tax (GST) is a unified indirect tax levied on the supply of goods and services across India. It subsumes multiple state and central taxes, creating a single tax structure. GST is destination-based, collected at the point of consumption, and ensures seamless input tax credit, reducing the overall tax burden on businesses and consumers.
The persons who need to register for GST are listed below:
Businesses supplying goods must register if their annual turnover exceeds Rs 40 lakh, Rs 20 lakh for special states, and Rs 10 lakh for specified Northeastern states.
Service providers must register when their annual revenue crosses Rs 20 lakh, while providers in special category states need registration after exceeding Rs 10 lakh.
Small businesses under the Composition Scheme must register if turnover exceeds Rs 1.5 crore for goods or Rs 50 lakh for services, ensuring compliance with GST regulations.
Operators managing online marketplaces, as well as sellers on these platforms, must register under GST regardless of their turnover to facilitate proper tax collection.
Any business supplying goods or services across state borders must obtain GST registration, even when their turnover is below the specified threshold.
Individuals or businesses making occasional taxable supplies in a state where they have no fixed place of business must register as casual taxable persons.
Foreign individuals or entities supplying goods or services in India must register under GST, even if they do not have a permanent establishment in the country.
Businesses required to pay tax under the reverse charge mechanism must register to ensure proper tax payment, irrespective of their turnover.
Companies distributing input tax credit across branches, along with agents supplying goods or services on behalf of taxable persons, must register under GST.
The different types of GST registration are listed below:
This type applies to businesses and service providers that cross the turnover limit set under GST law. It allows them to collect GST from customers and claim input tax credit on purchases. Regular registration is essential for maintaining compliance and smooth business operations under the GST system.
This option is available for small taxpayers who have a turnover up to Rs 1.5 crore for goods and Rs 50 lakh for services. Businesses under this scheme pay tax at a lower rate on their turnover. They cannot collect GST from customers or claim input tax credit. It simplifies tax compliance for small-scale businesses.
A casual taxable person operates temporarily in a state where no permanent business place exists. This type requires advance tax payment equal to the estimated GST liability. The registration remains valid for 90 days and can be extended once on request. It suits businesses participating in exhibitions, fairs, or seasonal markets.
Foreign businesses that supply goods or services in India without any permanent office must register under this category. The applicant must pay advance tax equal to the expected GST liability. The registration remains valid for 90 days and can be extended. It ensures that non-resident suppliers follow Indian tax laws.
An Input Service Distributor is an office that receives invoices for services used across multiple branches of the same company. The ISD distributes the input tax credit to these branches through a proper mechanism. This registration ensures the correct allocation of tax credit without any misuse or confusion.
The documents required for GST registration are listed below:
The step by step process for GTS registration is listed below:
Step 1: Start the Registration Process
You begin the process by initiating a new GST registration application. Select the ‘Register Now’ option under the taxpayer section to proceed further.
Step 2: Generate a Temporary Reference Number (TRN)
You provide your PAN, mobile number, and email address. OTPs are sent to your mobile and email for verification. After successful verification, the system issues a Temporary Reference Number (TRN) that allows you to continue the process at any time.
Step 3: Complete Part-B of the Application
You log in with your TRN to access Part-B of the application. This section requires details about your business structure, promoters, authorised signatory, and business locations. Enter accurate information to ensure smooth processing.
Step 4: Upload Required Documents
You upload the necessary documents, including proof of identity, business registration certificates, address proof, bank account details, and an authorisation letter where needed. Valid and clear documents help avoid delays.
Step 5: Submit the Application with Verification
After filling out the form and attaching the required documents, you submit the application. You verify it using an Electronic Verification Code (EVC) if you are a proprietor, or a Digital Signature Certificate (DSC) if you are registering a company or LLP. This verification confirms the authenticity of your application.
Step 6: Receive the Application Reference Number (ARN)
Once submitted, the system generates an Application Reference Number (ARN). This number serves as proof of submission and enables you to track the progress of your application.
Step 7: Application Review and Approval
A GST officer reviews your application and examines the uploaded documents. Physical verification of your business premises may also take place if required. If the officer needs more information, you receive a query which you must respond to promptly.
Step 8: Obtain Your GSTIN
After successful verification and approval, you receive your Goods and Services Tax Identification Number (GSTIN) along with the registration certificate. This marks the completion of your GST registration process.
The post registration compliance for GST are listed below:
You must place your GST Identification Number at every business location where you operate. The number must also appear on all invoices, bills, and other tax-related documents to confirm your GST-registered status.
You must issue invoices that follow GST rules. Each invoice must have details such as GSTIN, invoice number, date, place of supply, HSN or SAC codes, and the exact tax amount charged. Correct invoicing ensures smooth tax credit flow for your buyers.
You must file periodic returns within the prescribed due dates. These include GSTR-1 for outward supplies, GSTR-3B for summary returns, and an annual return that consolidates yearly transactions. Timely filing avoids penalties and keeps your compliance record clean.
You must maintain proper records of all business transactions, including invoices, purchase bills, debit notes, and credit notes. These records must be preserved for six years from the due date of the annual return to support audits or investigations.
You must calculate and pay the correct GST amount on your taxable supplies within the deadlines. Timely payment prevents interest and ensures that your tax liability stays clear with the authorities.
If you receive supplies covered under the reverse charge mechanism, you must pay GST directly to the government. This tax cannot be collected from the supplier and must be paid and reported in your GST returns.
You must update your GST registration when there is any change in business details such as address, trade name, ownership, or nature of supply. Timely amendments keep your registration accurate and avoid future legal complications.
The penalties for not registering under GST are listed below:
If you fail to register under GST to avoid tax, you must pay a penalty equal to 100% of the tax amount due or Rs 10,000, whichever is higher. This penalty applies because the authorities treat tax evasion as a serious offence. It ensures strict compliance and discourages businesses from bypassing registration.
When you do not pay the full tax amount due to an error or delay without any intention to evade, you face a lower penalty. In this case, you must pay 10% of the tax amount due or Rs 10,000, whichever is higher. This provision distinguishes unintentional mistakes from deliberate fraud.
If you continue to stay non-compliant after the penalty, you must also pay interest on the unpaid tax. The interest amount increases with time until you clear the entire liability. This measure ensures that businesses settle their dues quickly.
Apart from financial penalties, non-registration restricts you from issuing valid tax invoices. You also lose the benefit of claiming input tax credit on purchases. These restrictions can damage business relationships and reduce profit margins, making compliance essential.
To sum up, understanding GST registration is crucial for seamless business operations and legal compliance. GST registration ensures tax transparency, boosts business credibility, and enables access to input tax credit. Each step, from application to GSTIN issuance, requires accuracy and adherence to prescribed rules.
Though the process appears detailed, expert support simplifies it. Online Legal India offers professional assistance with document preparation, application submission, and timely approval. Their expertise ensures that your business stays compliant with GST regulations without hassle.
You must register for GST if your annual turnover exceeds Rs 40 lakh for goods, Rs 20 lakh for services, and Rs 10 lakh for special category states. Certain businesses require registration regardless of turnover.
Yes, you can opt for voluntary registration. This allows you to issue GST invoices, claim input tax credit, and enhance business credibility with customers and suppliers.
You usually receive the GSTIN within 7 working days if your documents and details are accurate. In case of queries or physical verification, the process may take longer.
No, the government does not charge any fee for GST registration. However, if you take professional help for the process, service charges may apply.
Failure to register attracts a penalty of 100% of the tax due or Rs 10,000, whichever is higher. You also face interest on unpaid tax and restrictions on claiming input tax credit.
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