GST Registration for Special Category States

Center has notified certain states which are facing geographical and socio-economic disadvantages and they need special attention and support from the central government for the purpose of development. The central government also assists in development in Special category states.

Introduction

A state is classified as a special category state on various parameters such as Hilly terrain, Low Population Density, Infrastructure backwardness, etc. We provide assistance to these states in the following manners:

1. 90% of funds required for centrally-sponsored schemes are also paid by the central government.
2. Significant concessions are provided in terms of excise duty, custom duties, and also Income Tax.
3. Complete tax exemptions are provided to the industries established in special category states, etc.

Similar to the Income tax, Customs, etc., differential treatment is also given to special category states under GST, such as a lower threshold limit for GST registration, a lower threshold limit for opting of the composition scheme, etc. Moreover, this article makes a detailed discussion of GST Registration for Special category states.

1. What are the special category states?

As per Explanation (iii) to Section 22 of CGST Act, the expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution. However, it does not include the State of Jammu and Kashmir and includes the States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand.

2. Which states are notified as special category states in India?

So far, the following twelve States are notified as “Special category states” in India:

1. Arunachal pradesh
2. Assam
3. Jammu & kashmir
4. Manipur
5. Meghalaya
6. Mizoram
7. Nagaland
8. Sikkim
9. Tripura
10. Himachal Pradesh
11. Uttarakhand

Telengana is also the most recent state to get the status of special category states as it separated out of Andhra Pradesh.

Also Read: List of Special Category States Under GST

3. What is the Threshold limit for special categories states?

The GST law establishes a lower threshold limit for dealers to obtain registration in special category states based on whether they engage in the supply of goods or the supply of services. However, every state is given an option to opt for a threshold limit applicable to regular states.

Accordingly, the following are the threshold limits for obtaining GST registration:

4. What benefits does the central government give to Special States Categories?

The Central government has given the following benefits to special category states for the purpose of development:

1. The central Government allot 30 % of plan expenditure to these states and the remaining 70% allot to the other states.

2. The (CSS) Centrally Sponsored Scheme and external aid Special categories States get 90 percent allot and 10 per cent as loan.

3. In the case of special category states, authorities do not let unspent funds lapse and carry them forward.

4. The Central Government provides various tax benefits to the newly setup businesses in special category states.  They include subsidy, Interest subsidy, comprehensive insurance subsidy, and also transport Subsidy.

Also Read: Top 7 Benefits of GST Registration in Special Category States

5. How to compute the threshold limit for GST registration when a person is operating in both Special Category state and Regular states?

As per GST law, “aggregate turnover” is the aggregate value of following supplies:

1. all taxable supplies (excluding the value of inward supplies on which tax is payable on reverse charge basis);
2. exempt supplies;
3. Exports;
4. All inter-state supplies

The authorities will compute aggregate turnover based on the Permanent Account Number on a PAN India basis. While computing aggregate turnover, one shall not consider Central tax, State tax, Union territory tax, Integrated tax, and cess.

If a person is dealing in both regular states and Special category states, then the requirement to obtaining GST registration can be understood with the following examples:

6. What is the process of the GST registration for Special Category States?

Following is the GST registration process for special category states which is similar to the regular GST registration. 

1. For the purpose of registration, the taxable person is required to create a profile on Gst portal https://services.gst.gov.in/services/login by filing Part-A of GST registration Form GST REG-01. 
2. You must furnish the following information in Part-A of GST REG-01:
   • Under the First tab “I am”, the taxpayer has to select the type of GST registration from the dropdown list. In case of regular GST registration, “Taxpayer” has to be selected,
   • State
   • Legal Name (As mentioned in PAN). System will crosscheck the same name available in the PAN database.
   • Permanent Account Number  (PAN)
   • Email Address
   • Mobile Number
3. After submitting the above mentioned information, the GST portal will display the list of GST registrations already done, pending for processing, or rejected under the same PAN in all states across India.
4. Upon proceeding, the GST portal will also ask to verify the mobile number and email ID with OTPs.
5. Moreover, Tax authorities suggest that taxpayers furnish an active and accessible email ID and phone number as OTPs are the essence of the entire GST process. Any action on the GST portal such as return, reply of notices, amendments etc. can be authenticated through OTPs only. Further, all communication from GST authorities are received on phone number and email id registered on GST portal.
6. Post verification of mobile number and email id, The system will generate a Temporary Reference Number (TRN) which will be used till application for GST registration is filed. We will communicate the TRN over your e-mail address as well as your mobile number.
7. Using TRN, the dealer must fill Part-B of GST REG-01 and furnish information under the following heads along with relevant documents:
   • Business Details
   • Partners’ or promoters details
   • Authorised Signatory
   • Authorized Representative
   • Principal Place of Business
   • Additional Place of Business
   • Goods and Services
   • State Specific Information
   • Aadhar authentication
   • Verification
8. The detailed process of GST registration and all the documents that you need to upload to complete the registration process are the same as regular GST registration.

Also Read: Special GST Registration Rules For Special Category States

Deepika Jain Partner

FCA| +10 years experience | Practitioner| Ex-KPMG| GST Expert| Trainer

See Full Bio

Finance GST Income Tax