Goods and Services Tax (GST) is an indirect tax that was implemented in India on 1st July 2017. The main objective of GST is to bring uniformity in the tax structure and simplify the tax system. GST has replaced the various indirect taxes that were earlier levied on goods and services, such as excise duty, service tax, VAT, etc. Under GST, all the registered taxpayers are required to collect and pay the tax as per the applicable rates.
In this article, we will discuss the difference between a GST registered party and an unregistered party, their rights, and responsibilities, and the benefits of being registered under GST.
GST Registered Party:
A GST registered party is a person who has obtained the GST registration number from the concerned authority. Any person who is involved in the supply of goods and services and has a turnover exceeding Rs. 20 lakhs (Rs. 10 lakhs for special category states) is required to obtain the GST registration. A registered taxpayer is liable to collect the tax from the customers and pay the same to the government as per the applicable rates.
Rights and Responsibilities of a GST Registered Party:
A GST registered party has various rights and responsibilities under the GST regime. Some of them are as follows:
1. Right to collect and avail input tax credit: A registered taxpayer has the right to collect the tax from the customers and avail the input tax credit (ITC) on the tax paid on the inward supplies. The ITC can be claimed against the output tax liability, thereby reducing the overall tax liability.
2. Compliance with the GST law: A registered taxpayer is required to comply with the various provisions of the GST law, such as timely filing of returns, payment of tax, etc.
3. Issuance of tax invoice: A registered taxpayer is required to issue a tax invoice to the customers for the supply of goods and services. The tax invoice should contain the details of the tax charged, such as GSTIN, tax amount, etc.
4. Maintenance of books of accounts: A registered taxpayer is required to maintain the books of accounts and other records as per the provisions of the GST law.
5. Payment of tax: A registered taxpayer is required to pay the tax as per the applicable rates within the prescribed time limit.
Benefits of being a GST registered party:
1. Legitimacy: GST registration provides legitimacy to the business and enhances the credibility of the business in the eyes of the customers.
2. Input tax credit: A registered taxpayer can avail the input tax credit on the tax paid on the inward supplies, thereby reducing the overall tax liability.
3. Expansion of business: GST registration enables the business to expand its operations across the country as it provides a uniform tax structure across the country.
4. Compliance with the law: GST registration ensures compliance with the various provisions of the GST law, thereby avoiding any penalty or interest for non-compliance.
5. Better supplier and customer relationships: GST registration ensures timely filing of returns and payment of tax, thereby enhancing the relationships with the suppliers and customers.
GST Unregistered Party:
An unregistered party is a person who has not obtained the GST registration number from the concerned authority. An unregistered party is not liable to collect the tax from the customers and pay the same to the government. However, an unregistered party is liable to pay the tax on the purchases made by him/her.
Rights and Responsibilities of a GST Unregistered Party:
An unregistered party has certain rights and responsibilities under the GST regime. Some of them are as follows:
1. Right to purchase goods and services: An unregistered party has the right to purchase goods and services from the registered taxpayers.
2. Payment of tax: An unregistered party is required to pay the tax on the purchases made by him
3. Maintenance of records: An unregistered party is required to maintain the records of the purchases made and the tax paid on such purchases.
4. Compliance with the law: An unregistered party is required to comply with the various provisions of the GST law, such as payment of tax, maintenance of records, etc.
5. No right to collect tax: An unregistered party is not entitled to collect the tax from the customers, as they are not registered under the GST regime.
Benefits of being a GST Unregistered Party:
1. No compliance burden: An unregistered party is not required to comply with the various provisions of the GST law, such as filing of returns, payment of tax, etc.
2. Lower tax liability: An unregistered party is not liable to pay the tax on the sales made by them, but only on the purchases made by them. Hence, the overall tax liability of an unregistered party is lower than that of a registered party.
3. No requirement of GST registration: An unregistered party is not required to obtain the GST registration number from the concerned authority, which reduces the compliance burden and administrative costs.
4. Cash transactions: An unregistered party can carry out cash transactions without any restrictions as they are not registered under the GST regime.
Conclusion:
In conclusion, GST registration is mandatory for all the taxpayers whose turnover exceeds the threshold limit. A registered party has various rights and responsibilities under the GST regime, such as collecting tax from the customers, availing input tax credit, filing returns, payment of tax, etc. On the other hand, an unregistered party is not entitled to collect tax from the customers but is required to pay the tax on the purchases made by them. Both registered and unregistered parties have their own benefits and drawbacks, and the choice depends on the individual circumstances of each business. It is advisable for the businesses to evaluate their requirements and opt for the appropriate registration status to comply with the GST law and enjoy the benefits offered by it.
