The value added tax (VAT) is a type of tax that is charged to all goods and services traded on the Indian market. In July 2017, India introduced a new legislation, through which the local authorities modified the manner in which natural persons and legal entities are imposed with this tax. In that month, the VAT in India was changed into the Goods and Services Tax (GST), asimilar tax applicable to the supply of goods and services, which introduced a more efficient system.
Investors who want to register a company in India will be liable to GST and they will need to register with the local tax authorities. One of the main benefits of the GST legislation refers to the fact that it replaced several indirect taxes on the supply of goods and services, thus reducing the overall manufacturing and sale costs. Our team of specialists in company formation in India can offer assistance on the taxation of legal entities, including on the Indian GST.
VAT/GST registration for foreign companies in India
Any foreign company that operates without a fixed place of business or residency in India but provides goods and/or services to Indian consumers is required to register for GST.
The non-resident taxable person must also choose a representative in India to handle their GST duties. For overseas businesses, VAT registration in India must be completed 5 days before the start of the business.
All non-resident taxable entities requesting GST registration shall file Form GST REG-09 and all supporting paperwork, among which:
- a certificate of incorporation along with evidence of the business’s location;
- identity documents of the appointed fiscal representative;
- bank account details.
A reference number for the application for payment of the advance tax will be given after the GST registrations have been submitted.
The non-resident taxable person’s registration is good for three months. Before the initial registration’s validity period expires, a new form GST REG-11 must be electronically filled out in order to delay the GST status.
Any person who periodically engages in transactions involving the supply of goods or services, or both, whether as principal or agent or in any other role, but who does not have a fixed place of business or residence in India, is referred to as a “non-resident taxable person” in the GST Act. Additionally, non-resident taxable people making taxable supplies are required to register for VAT under Section 24 of the GST Law.
The duration specified in the successful application governs the validity of a foreign company’s GST registration. By submitting the necessary documents, foreign companies can easily extend the validity of their Indian GST registration. Before the registration certificate expires, non-resident taxable persons must submit their applications.
Our company formation agents in India can offer detailed information on the procedure for GST registration for foreign companies.
GST registration threshold for local companies in India
Local businesses operating in India are obligated to register for the Goods and Services Tax (GST) if their turnover exceeds specific threshold limits. These thresholds vary based on the category of the state in which the business operates. For instance, businesses in certain states must register if their turnover surpasses INR 1 million (approximately USD 12,000), while others may have thresholds of INR 2 million (approximately USD 24,000) or INR 4 million (approximately USD 48,000). However, businesses with turnovers below these thresholds have the option to voluntarily apply for GST registration, enabling them to avail of the associated benefits and comply with regulatory requirements.
Documents for VAT registration in India for local companies
Businessmen who want to open a company in India should verify the conditions that must be met when registering for VAT. During this procedure, it is legally required to provide a set of personal and company documents. As a business operating in this country, the following documents are necessary:
- the certificate of incorporation of the company that is applying for a VAT number in India;
- the company’s statutory documents (the articles of association and the memorandum, in the case of corporate entities);
- personal details of the owners of the company and its directors;
- the lease agreement where the company has set up its business address;
- information regarding the company (telephone number, trading name, the e-mail address, the type of activities carried out by the company).
Besides these, during the registration, the company’s representatives have to provide information on the company’s corporate bank account, the list of directors, details on the person who is authorized to act on behalf of the company and other relevant information. For a complete list of any other documents that can be required, you can address our team of specialists in company formation in India.
The procedure of obtaining a VAT number in India in 2024 is not complicated and is part of the company registration process where business owners want to avoid complications or additional procedures later.
Foreign companies must also register for VAT in India in 2024 if they supply VAT-payable goods or services and those who need assistance can rely on our company formation specialists.
Main purposes of the Indian GST legislation
The newly introduced legislation on the taxation of goods and services simplified the manner in which this tax is collected by the local authorities and our team of consultants in company registration in India can offer more information. It replaced approximately 20 taxes, including severalduties. The main purposes of the GST legislation are presented below:
- simplify the tax compliance applicable to companies operating in India;
- reduce the level of double taxation in the case of indirect taxes;
- increase the activities of themanufacturing sector in India;
- reduce the cascade effect on the taxes applied to goods or services sold in India.
GST rates in India
GST in India is slightly different than the VAT, in the sense that in this country VAT was available only for the sale of goods. However, GST is imposed to both goods and services and it benefits from a uniform pricing system. Our team of consultants in company registration in India can offer legal advice on the legislation in the field.
Investors interested in starting a company in India must know that both services and goods benefit from the same categories of VAT rates. India provides a higher VAT rate, charged for specific categories of goods and services, two types of standard VAT, and several reduced VAT rates. Under the new law, the tax is imposed at the following rates:
- 28% – it represents a higher VAT rate charged for goods such as automobiles, air conditioning, chocolate, accommodation (where the cost of a room per night is above RS 7,500) and other consumer goods;
- 18% – the standard VAT rate in India, charged for goods and products such as: telephone services, banking, restaurants, cultural events, entertainment events, accommodation (where the cost per night is of RS 2,500 to RS 7,499) and others;
- 12% – the other standard VAT rate, applicable to goods and services such as: accommodation with a cost of RS 1,000 to RS 2,499, business air travel, restaurants which do not offer air conditioning systems and others;
- 5% – the reduced VAT rate is applicable to advertising services, tea, sugar, coffee, medical products;
- 0% – applied to basic food products (cereals, milk, salt), vegetables and fish, accommodation with a price below RS 999 per night, books, newspapers and other similar goods.
If you need information on Indian GST rates in 2024, our specialists can offer it to you. We also invite you to watch the infographic below:
What are the basic steps involved in registering for VAT in India in 2024?
The procedure for registering for VAT purposes is comprised of several steps. The procedure itself is not very complicated but involves a wide range of documents and this is why we highly recommend you address local specialists, who have expertise in this field. Besides the above-mentioned documents, the applicants must also complete specific forms requested by the local tax authorities.
The procedure for VAT registration number in India in 2024 can be done using the online platform of the local tax institutions and, besides the forms that have to be correctly completed, the company’s representatives should also inform of the company’s PAN number. The Permanent Account Number (PAN) is issued by the Indian Income Tax Department to any person that falls under the supervision of this institution.
The PAN number must be used on all the income returns required by the Income Tax Department and it is also necessary when applying for VAT registration in India. The PAN number is allocated to local businesses at the beginning of the procedure for company formation in India. Please note that the issuance of a VAT number in India can be concluded online, but also at the local tax offices in the region where the business is incorporated. As a general rule, the following steps have to be performed:
- address to the tax office operating in the city/region where the company is located;
- request the necessary forms that must be submitted along with the company’s documents;
- once these steps are concluded, the local authorities have the right to perform a verification of the company’s premises;
- pay the required fees, which vary based on the estimated turnover of the company;
- obtain the VAT registration certificate, which will state the VAT number in India.
Please note that the procedure must be concluded by most of the entities that offer goods or services on the local market. Thus, the VAT registration in India should be also be done by associations, clubs, cooperatives, insurance companies, and banking institutions. More information regarding the tax procedures that must be followed by VAT payers throughout the financial year can be offered by our team of consultants in company registration in India.
VAT filing requirements for foreign entities in India
Form GSTR-5 must be submitted via the GST Common Portal by all overseas businesses that have registered for GST.
The VAT return submitted by foreign businesses must include information about both inbound and outbound supplies, just like it does for other taxpayers registered under GST. The 20th of every month, or 7 days after the last day the GST registration, whichever comes first, is when overseas businesses must file their GST returns and pay their GST liabilities.
You can also come to India with our help and then rely on us for assistance in obtaining a VAT number in 2024. We offer a variety of services, including assistance with completing your papers and suggestions on which form you need to file for registration. You may count on us to help you with the formalities you need to finish after arriving here in order to enjoy the benefits of having a company in India.
You can rely on our accountants in India for support in complying with tax regulations. Our services also imply providing businesses with safe access to workforce in real time. It is tailored to a company’s specific needs and provides an actionable workforce and pertinent measures to aid managers in concentrating only on crucial business matters. If you need support in payroll in India, do not hesitate to get in touch with us for an offer.
Any questions you might have on Indian VAT registration in 2024, please send them to our consultants. You can also watch our video below:
Invoicing requirements in India
The invoice is necessary for the VAT to be implemented effectively. Here are the elements that must be found on an invoice:
- the seller’s name, address, and phone number should be included in the tax invoice’s contents.
- the date when the invoice was issued;
- the tax invoice number;
- the name and address of the buyer;
- quantity, description, price per unit, value, and buyer’s VAT registration number, if applicable;
- the total amount due and the seller’s signature.
The digital signature of the invoice and the provision of an Invoice Registration Number by the Invoice Registration Portal (IRP) are requirements for the invoice’s legal validity (IRN). An invoice is not legally valid if the IRN is not included in it.
An invoice will be deemed unissued if it is not recorded on the IRP, and there will be fines of at least 10,000 Rupees for each incident of noncompliance. Interest will be added to the penalties assessed under the various GST sections.
Certain categories of services are also exempt from taxation, as follows: education, healthcare and residential accommodation. Businessmen are invited to address to our team of consultants in company formation in India for consultancy services on the Indian taxes. Our representatives can offer more information on how to register for VAT purposes in this country.
All of the common financial reports that can be produced by an in-house accounting software which can be quite expensive can be available with our accountant in India. He can draft and file the trial balance, the balance sheet accounts for Profit and Loss Payables and Receivables. Do not hesitate to get in touch with us for more information on our services.