The fast pace of growth of the Indian economy, overtaking United Kingdom to become the fifth largest economy as per IMF projections has attracted lot of foreign businesses to transact in India. The GSTR 5 applicability is for these businesses that come under the purview of the Indian tax system and GST registration is mandatory for them before the commencement of their business. The provisions for registration, returns, refunds, etc., are different for non-resident taxable persons (NRTPs)
GSTR 5 applicability for Non-resident taxable persons
A person who does not have a permanent business establishment in India but supplies goods or services or both occasionally is considered as a non-resident taxable person as per Indian GST Law. Such transactions can be done by persons authorized by the businesses residing in India. NRTPs must register under GST in India and follow the rules and procedures mentioned in it.
Registration for Non-Resident Taxable Persons
Section 24 of CGST Act, 2017. It is compulsory for non-resident foreign taxable persons who wish to supply goods or services or both in India, to register in GST and follow the rules and file the applicable returns as per GST law of our country.
Under section 27 of the GST Act, a special certificate of registration is issued to a non-resident taxable person who wishes to transact in India for a short period. The registration is temporary and is valid for the period specified in the application, or 90 days from the date of registration, whichever is earlier.
Important Points to Consider for Registration
Non-resident taxable persons making supplies in India must comply with certain conditions to register under the GST regime. They are:
- Turnover Limit: Registration under GST is mandatory for all non-resident taxable persons, irrespective of the amount of turnover involved, and it should be done at least five days before commencement of their business in India.
- Temporary Business: Non-resident taxpayers can register under GST temporarily for a particular period. The taxpayers do not have a permanent business place in India and visit the country for occasional supplies.
- Certificate of Registration: Non-resident taxpayers can make taxable supplies only after the certificate of registration is issued. This certificate is valid for 90 days unless a shorter duration is mentioned while applying for the registration. The registration officer can extend the duration by another 90 days.
- Register with Valid Passport: Businesses can apply for registration using valid passport. They do not need to have a Permanent Account Number (PAN) in India.
- Authorized Resident for Tax Compliance: An authorized person who is a resident in India, has to be appointed by the business to manage operations and carry out tax compliance on behalf of the firm. He should have a valid PAN and he should sign the application for registration.
- Registration under GST Composition Scheme is not allowed for non-resident taxable persons.
- Businesses Incorporated Outside India must submit their tax identification number or unique identification number along with the registration application.
- Advance Deposit: It is mandatory for them to pay advance tax at the time of registration, equal to the approximate tax liability of the non-resident taxable person for the period for which such a registration is sought. In case of extension an additional amount of tax equivalent to the estimated tax for the extended period must be deposited.
- Electronic Cash Ledger: The amount deposited during the time of registration is available in the electronic cash ledger of the NRTP. The electronic cash ledger is an electronic ledger available on the GST portal reflecting the deposits and GST payments made by the taxpayer.
- Issue of Registration Certificate: The registration certificate will be issued only after the approximate tax is paid and the amount reflected in the electronic cash ledger of the non-resident tax payer.
- Commencement of Business: The non-resident taxpayer can make taxable supplies only after the certificate of registration is issued.
- Validity of Certificate of Registration: The certificate of registration is valid for the period specified in the application for registration or ninety days from the effective date of registration whichever is earlier.
Input Tax Credit
Input tax credit is an integral and essential part of GST where by the supplier can claim credit for the taxes paid on his purchase that are used for the manufacture of his supplies against the output tax payable by him. this process of claiming input tax credit eliminates the cascading effect of taxes on the consumers. But there are certain conditions to avail this benefit. One of the conditions is that the taxpayer should not be a non-resident taxable person. This is one of the important factors to be noted by the non-resident taxpayer. They are not eligible to avail the input tax credit for the tax paid by them on the procurement of goods or services used in the supplies except for goods imported by them. The taxes paid by the non-resident taxable person is available as credit to the respective recipients. Further unlike normal taxpayers, the NRTPs cannot avail input tax credit under reverse charge mechanism.
Return in Form GSTR-5
Non-residents taxable persons registered under the GST laws of India are required to file return in form GSTR-5 for the period for which they have obtained registration. It can be filed electronically on the GST portal or from a tax facilitation center. It is a summarized return comprising of outward supplies made and inward supplies received during the tax period.
Due Dates for Filing GSTR-5
This return has to be submitted on or before the 20th of the month succeeding a particular tax period or within seven days after the end of the validity period of registration whichever is earlier. The required amount of tax, interest, penalty and fees also have to be paid while submitting the GSTR-5.
Refund of Excess Deposit
The non-resident tax payer can avail refund of the excess advance tax deposited by him during registration/extension of registration only after he has furnished all the returns required in respect of the entire period of registration. The taxpayer can apply for the refund by filling the required details in form GSTR-5 on the GST portal.
Frequently Asked Questions regarding GSTR 5 applicability
- How can a non-resident taxpayer claim refund of his deposit amount?
Answer: The NRTP can apply for refund in the portal under the category ‘Refund of excess balance in electronic cash ledger’ after discharging his liabilities.
- Is the offline tool for filing GSTR-5 available on the portal?
No, there is not offline tool available on the portal for filing GSTR-5
GSTR 5 applicability: Conclusion
Non-resident taxable persons aiming to do business in India have to compulsorily register in GST and file returns. GSTR-5 is an important return that must be filed by non-resident taxpayers registered under GST. It is a summarized return containing inward, outward supplies made and received by the taxpayer, the tax liability, tax paid, penalty, interest, fees, etc. The return has to be filed within the due date to be tax compliant and avoid legal hassles. NRTPs should be aware of the registration process and the rules and procedures for filing GSTR-5 before starting their business in India. Taking the help of professional tax experts is advisable for new entrants, for registration and filing the returns to avoid hassles and penalties.
Related Reports
Overview and purpose of GSTR-5
The introduction of GST is a milestone in the history of the indirect tax system in India. GST replaced the complicated web of Central and State taxes with a unified single tax that made compliance easier thereby reducing tax evasion.
Filing frequency and due dates for GSTR-5
The introduction of GST in India streamlined the indirect tax system, integrating a variety of taxes into one single unit, making compliance easier, lessening the burden of tax on the consumers.
