GST for Company vs GST for Individual

In India, the Goods and Services Tax (GST) imposes an indirect tax on the supply of goods and services. Introduced in 2017, GST replaced indirect taxes such as VAT, service tax, excise duty, etc. The tax simplifies the indirect tax system by being applicable nationwide.

Under the GST regulations, businesses and individuals are required to register if their annual turnover exceeds the specified threshold limit. However, there are notable differences in the implications, compliance, and requirements that companies and individuals must consider with GST. This blog provides a comprehensive breakdown of these differences and covers all the necessary information about GST registration for companies and individuals.

1. Overview: GST for Companies vs. GST for Individuals

GST for Individuals

Individuals or sole proprietors who meet specific turnover thresholds are eligible for GST registration. For services, the threshold is ₹20 lakh (₹10 lakh for specific states), while for goods, it is ₹40 lakh (₹20 lakh for specific states). Individuals registering for GST may include consultants, freelancers, or sole traders. They need to adhere to GST regulations, which involve fulfilling tax obligations, submitting returns, and keeping correct records.

GST for Companies

Companies, regardless of their legal structure, must register for GST if their annual turnover exceeds the specified threshold limits. Due to their size and operational complexity, compliance requirements for companies are more stringent. Companies must follow procedural and legal norms, maintain detailed records, and submit various returns regularly.

2. Benefits of GST for Companies and Individuals

Benefits for Individuals

• Efficiency in Business Operations: Individuals, especially small enterprises or freelancers, experience smoother compliance with GST regulations thanks to simplified procedures.
• Input Tax Credit (ITC): Businesses have the opportunity to claim ITC on inputs, which helps them lower their tax liability.
• Expanding Market Reach: GST registration enables businesses to enter new markets by eliminating state-wise barriers.
• Emphasizing Transparency: Those who adhere to GST regulations can significantly boost their business credibility and promote trust among their clients and customers.

Benefits for Companies

• Standardized Tax System: Companies can enjoy the benefits of a standardized tax system throughout the country, which helps to simplify matters and reduce complexity.
• Improving Supply Chain Efficiency: The efficient flow of goods and services across states, free from unnecessary tax burdens, contributes to the smooth operation of the supply chain.
• Input Tax Credit: Companies can claim input tax credits on their purchases, capital goods, and other expenses, effectively reducing their overall tax liability.
• Ensuring Compliance: To fulfill their legal obligations, companies must adhere to GST compliance, avoid penalties, and maintain a favorable relationship with tax authorities.

3. Procedure for Company vs. Individual GST Registration

Steps for Individuals

1. Visit the GST Portal: Start by visiting the official GST portal and selecting ‘New Registration.’
2. Fill out the form: Enter basic details like your legal name, PAN, email, and phone number. You’ll receive an OTP for verification.
3. Create TRN: You will receive a Temporary Reference Number (TRN) to proceed after verification.
4. Provide the necessary information: Provide details about your business, such as your trade name, address, business activity, and bank account information.
5. Upload Documents: Submit the required documents (discussed later).
6. Verification: The GST authorities verify the application and process the registration.
7. Obtain your GSTIN: Upon approval of your application, you will receive your GSTIN along with the required login details.

Company Procedure

1. Start the registration process: Visit the GST portal and choose the 'New Registration' option.
2. Provide essential information: Input the necessary details of your company, including the name, PAN, and communication information.
3. TRN Generation: Similar to individual registration, you’ll get a TRN for further steps.
4. Detailed Information Submission: Provide detailed company information, including type, directors/partners, authorized signatory, principal place of business, and additional places of business.
5. Document Submission: Companies are required to upload detailed documents (more comprehensive than individual registration).
6. Verification and GSTIN Generation: You will receive the GSTIN and your login credentials after verification.

4. Documents Needed for GST Registration

For Individuals

• PAN Card: For GST registration, it is necessary to have a PAN.
• Aadhaar Card: Useful for identity and address verification.
• Photograph: Up-to-date passport-sized photograph.
• Bank Account Details: Provide a bank statement or cancelled cheque.
• Proof of Address: Lease agreement, electricity bill, or other proof.

For Companies

• PAN of the Company: PAN of the registered company.
• Certificate of Incorporation: Proof of business registration.
• MOA/AOA: Memorandums and Articles of Association for corporate governance.
• PAN and Aadhaar of Directors/Partners: Proof of identity and address for company stakeholders.
• Board Resolution/Authorization Letter: Authorization of an individual as the authorized signatory.
• Proof of Address: Documentation is required for both the main business location and any additional locations.
• Bank Account Details: Provide the company’s bank statement or cancelled cheque.
• Photographs: Directors or partners are required to provide passport-sized photographs.

5. Frequently Asked Questions about GST for Companies vs. Individuals

1. Who requires GST registration—an individual or a company?

If the government determines the threshold limit for turnover, both individuals and companies must register for GST. The turnover limit can vary depending on the nature of the goods or services provided.

2. Is there a difference in the compliance requirements for companies and individuals?

Yes, companies typically have more complex compliance requirements due to their operational scale. They need to file multiple returns, maintain comprehensive records, and adhere to more stringent regulations.

3. Can an individual choose the composition scheme?

Yes, individuals involved in small businesses have the option to choose the composition scheme if their turnover falls within the specified limit (up to ₹1.5 crores). This scheme offers streamlined returns and a reduced tax rate, although it does limit the ability to claim input tax credit.

4. Is the GSTIN different for companies and individuals?

The structure of GSTIN is consistent for both companies and individuals. This 15-digit number is generated from the PAN and state code.

5. What are the consequences of not complying with GST regulations?

Failure to comply with GST regulations can result in penalties for both individuals and companies. Consequences for non-compliance can involve financial penalties, interest on late payments, and, in more serious situations, legal action.